Court Opinion

ID: 8303492
Source: CourtListenerOpinion
Date Created: 2022-10-17 11:19:56.378076+00
Date Added: 2024-06-11T16:44:26.726259
License: Public Domain

On Petition to Rehear
Neil, Chief Justice.
The appellee in these causes filed ,a petition to rehear on May 11, 1956, and a supplemental petition to rehear on May 14, 1956, complaining (1) that the Court overlooked the fact that the taxes involved herein accrued in 1944, 1945, and 1946, and was prior to the Federal Statute governing atomic energy production at Oak Ridge; (2) the taxes herein are privilege taxes, not property taxes; (3) the legal incidence of the tax is the determinative test when implied constitutional immunity is claimed.
The supplemental petition to rehear is filed by the Attorney General of the State on behalf of the appel-lee and complains that the effect of our original opinion “may seriously limit the taxing power of the State.” In response to the foregoing complaint we wish to emphasize that our original opinion limits the power of the State to its right to levy and collect a “gross receipts” tax from such persons, firms and corporations as may be exercising the privilege for and on behalf of themselves and must be distinguished from those who are exercising the privilege on behalf of the Federal Government.
*397At the outset we desire to say that we are mindful of the importance of this case to the State in the exercise of its sovereign power to levy and collect taxes.
These causes in no way involve the levying and collecting of an <£ad valorem tax” upon the property of the United States Government. We have never thought of this case as involving any kind of a tax other than the right of the State of Tennessee to collect a ‘'gross receipts” tax upon funds derived from the collection of revenue by Roane-Anderson upon property which belongs exclusively to the United States Government. We pointed out in the original opinion the fact that Roane-Anderson is the owner of no property in the Oak Ridge area of operations, and its acts do not amount to engaging in any business for profit to itself.
Big Government on a national level and Big Government on a local or State level, such as we have, and the conflict resulting from the need by each to collect sufficient revenue upon which to operate, poses the difficult question as to how far a State government may go in collecting its taxes without violating the Supremacy Clause of the United States Constitution. As we read the decisions they are in hopeless conflict. The Supreme Court at Washington undertook to dispel these conflicts in State of Alabama v. King & Boozer, 1941, 314 U.S. 1, 62 S. Ct. 43, 86 L.Ed. 3. But that case did not do very much toward laying down a positive rule as to when a State was operating within its own sovereign right to levy a privilege tax, as now appears in the recent cases of Mayo v. United States, 319 U.S. 441, 63 S.Ct. 1137, 87 L.Ed. 1504, and also Kern-Limerick, Inc., v. Scurlock, 347 U.S. 110, 74 S.Ct. 403, 98 L.Ed. 546, both of which were cited and relied on in our priginal opinion.
*398But first of all we will consider the complaint that the taxes here involved were for the years 1944, 1945 and 1946, which were prior to the creation of the Atomic Energy Commission. We may have erred in referring to the Atomic Energy Commission as being under contract with Roane-Anderson at that time. But it is not material. It can hardly be doubted that the contract here involved was between Roane-Anderson and the United States Government. Prior to the creation of the Atomic Energy Commission the operations at Oak Ridge were under the supervision and direction of what was known as “The Manhattan Engineering District”. The following statement by counsel on behalf of Roane-Anderson Company relating to operations at Oak Ridge is true as a historical fact: “During the war years and prior to January 1, 1947, the work at Oak Ridge was carried on under the authority of the President of the United States and the War Department pursuant to applicable laws and the Constitution of the United States.”
It cannot be denied that during this period, the sole activity at Oak Ridge was supplying the United States with atomic weapons. The same activities have since been carried on by the Atomic Energy Commission. In these circumstances we must adhere to our view, as formerly expressed in the original opinion, that Roane-Anderson was not engaged in any private business activity, but represented the Government in supervising and directing the use of governmental property in the Oak Ridge Area. In other words it was exercising a privilege on behalf of the Federal Government.
Able counsel for the State again insists that, “The Congress of the United States has consistently and flatly refused to grant an exemption from state taxation to *399government contractors”, and that where the contractor is exercising a taxable privilege on behalf of the government it “is not snch interference with the Federal Government as to render the taxation unconstitutional”, citing State of Alabama v. King & Boozer, supra. No doubt most of the States had hoped that the King & Boozer decision would stand up, but the Court’s ruling in the Mayo and Kern-Limerick cases, supra, made it inapplicable to the case at bar.
The counsel strongly rely on Buckstaff Bath House Co. v. McKinley, 308 U.S. 358, 60 S.Ct. 279, 281, 84 L.Ed. 322, as sustaining its position that the bare fact that the Government owns the property used in the exercise of the otherwise taxable privilege is not enough in itself to exempt from State taxation, and that privilege taxes could be collected.
In this case the taxpayer was operating a public bath house in Hot Springs, Arkansas, under the supervision of the United States Department of the Interior. The operator sought to enjoin the collection of a tax levied under a State Unemployment Compensatibn Law. The right of the State of Arkansas to collect this tax was upheld. This case differs from what we have here. The Buckstaif Bath House was conducting a private business for profit, not so in the instant case. As pointed out by Mr. Justice Douglas:
“Petitioner’s lease from the Secretary of the Interior did not convert it into such an instrumentality. Petitioner ‘is engaged, in its own behalf, not the government’s, in the conduct of a private business for profit’. See Federal Compress & Warehouse Co. v. McLean, 291 U.S. 17, 23, 54 S.Ct. 267, 269, 78 L.Ed. 622 [627]. Though it acts with the Government’s permis*400sion and has received a privilege from the Government, it does not exercise that privilege on behalf of the latter.” (Emphasis supplied.)
Finally it is urged upon ns: “In view of these principles and holdings, (see also Esso Standard Oil Co. v. Evans, 194 Tenn. 377, 250 S.W.2d 569) it is most difficult to understand why a private, profit-type corporation like Boane-Anderson can exercise taxable privileges in Tennessee, privileges for which all others must pay, and escape tax free.” To all of the foregoing we would readily agree if, and when, it can be pointed out in the record that Boane-Anderson is a “profit-type corporation”; in other words that it is, as said in the Buckstaff case, supra, “ ‘engaged in its own behalf, not the government’s, in the conduct of a private business for profit’ ”.
We do not consider the decision in the Esso case, supra, as controlling authority here because as said by Mr. Justice Gailor, it was engaged in a “very substantial and lucrative business”. [194 Tenn. 377, 250 S.W.2d 573.] It received a per cent on every gallon of gasoline as compensation for storage, etc. It was thus engaged in business for profit for itself.
We rested our original decision upon the fact that Boane-Anderson ivas not engaged in business on its own behalf for profit-, that its only property consisted of the monthly fee of $25,000 which it received for supervising and directing the operation of Government property at Oak Bidge.
We think we have made response to the first petition to rehear in dealing with the errors assigned herein by the Attorney General. The special counsel for the appel-lee has discussed issues that were dealt with at length in the original opinion. No new authority is cited that *401lias not been considered, and nothing new pointed out as having been overlooked by the Court.
We think we were on solid ground in holding that these “privilege” taxes (gross receipts) are indirectly exacted upon Government property, or the use of such property. As we construe the “Mesta” case, United States v. County of Allegheny, 322 U.S. 174, 64 S.Ct. 908, 88 L.Ed. 1209, and Mayo v. United States, supra, the question is whether the tax is on Government property, or against the activities of the Government. In our opinion, whether it is one or the other, the tax is in violation of the Federal Constitution.
Contention is made by special counsel for the State that the repeal by the Congress of Section 9(b), 60 Stat. 755, of the Act creating the Atomic Energy Commission was authority in support of the State’s right to exact the tax involved herein. We must disagree because the issue in these causes are entirely different from that made in Roane-Anderson Co. v. Carson, 192 Tenn. 150, 239 S.W. 2d 27. There is much commendation on the brief of counsel of the dissenting opinion. But this dissent, fine and logical as it was believed to be by the writer, as well as counsel, was rejected as not the law of the case. It was given “the evil eye”.
Counsel further refers to the “able dissenting opinion” in the present case wherein the majority is taken to task for certain language used in the opinion, as well as other reasons why the majority was in error. But we cannot, for this reason, recede from the view heretofore expressed.
With all deference to counsel, and the dissent of our Associate Justices, we still feel that they are in error and that the majority opinion was correct.
*402The issues involved in these causes have been ably discussed at the bar of this Court, and likewise the petitions to rehear have been upon the same high plane.
Upon a careful consideration of the questions made on this appeal, we reaffirm our holding in the original opinion. The petitions to rehear are accordingly denied.
Tomlinson and Burnett, Justices, concur.
Prewitt and Swepston, Justices, dissent.