Case: PANHANDLE OIL COMPANY v. MISSISSIPPI ex rel. KNOX, ATTORNEY GENERAL
Abbreviation: Panhandle Oil Co. v. Mississippi ex rel. Knox
Decision Date: 1928-05-14
Docket Number: No. 288
Citation: 277 U.S. 218
Volume: 277
Reporter: United States Reports
Court: Supreme Court of the United States
Jurisdiction: United States
Parties: PANHANDLE OIL COMPANY v. MISSISSIPPI ex rel. KNOX, ATTORNEY GENERAL.
Judges: Mr. Justice Brandéis and Mr. Justice Stone agree with this opinion.
Pages: 218–226

Head Matter:
PANHANDLE OIL COMPANY v. MISSISSIPPI ex rel. KNOX, ATTORNEY GENERAL.
No. 288.
Argued March 5, 1928.
Decided May 14, 1928.
Mr. George Butler for plaintiff in error.
The Acts in question, as construed, are void in that they impose a direct burden and tax upon the activities and instrumentalities of the Federal Government. McCulloch v. Maryland, 4 Wheat. 316; Dobbins v. Erie County, 16 Pet. 435; Osborn v. Bank, 9 Wheat. 138; Ohio v. Thomas, 173 U. S. 276; Johnson v. Maryland, 254 U. S. 51; Gillespie v. Oklahoma, 257 U. S. 501; Metcalf v. Mitchell, 269 U. S. 514; Crandall v. Nevada, 6 Wall. 35; Crutcher v. Kentucky, 141 U. S. 47; Western Union v. Kansas, 216 U. S. 1; Western Union v. Texas, 105 U. S. 460; Philadelphia, etc., Steamship Co. v. Pennsylvania, 122 U. S. 326; Galveston, etc., R. R. Co. v. Texas, 210 U. S. 217; Standard Oil Co. v. Graves, 249
U. S. 389; Askren v. Continental Oil Co., 252 U. S. 444; Bowman v. Continental Oil Co., 256 U. S. 642; Indian Territory Oil Co. v. Oklahoma, 240 U. S. 522; Wagner v. Covington, 251 U. S. 95; St. Louis R. R. Co. v. Arkansas, 235 U. S. 230; Fidelity & Deposit Co. v. Pennsylvania, 240 U. S. 319. .
Mr. J. L. Byrd, Assistant Attorney General of Mississippi,, with whom Mr. Rush H. Knox, Attorney General, was on the brief, for defendant in error.
The mere fact that a private individual does business with an instrumentality of the Federal Government, does not clothe him with immunity from taxation which is given to the Federal Government, and its instrumentalities; and the fact that such a person is required to pay the tax for engaging in business does not and cannot hamper or burden- any instrumentality of the Federal Government. Fidelity <& beposit Co. v. Pennsylvania, 240 U. S. 319; Baltimore Ship Bldg. Co. v. Mayor of Baltimore, 195 U. S. 375; Choctaw, O. & G. R. R. Co. v. Mackey, 256 U. S. 531; Gromer v. Standard Dredging Co., 224 U. S. 362; Metcalf v. Mitchell, 269 U(. S. 514.'
It is admitted by the demurrer, that the tax was not collected from the United States Government. Therefore, we say if the collection of the tax from the Government, or the collection of an amount for the gasoline sufficient to include the tax, would be void, we do not have that question here for the reason that th'e Government has-not paid any tax and the State is not demanding a tax from' the Government, but is demanding.a tax from the distributor of dealer in gasoline for the fight to engage in the business. ■
Plaintiff in erfor has no right to raise the question. No pretense is made that it is a part of the United States Government or an instrumentality of the Government. Therefore, the question as to whether or not the Govern- merit will1 pay an amount sufficient to yield a, reasonable profit plus the tax, is a matter of private contract, and it is not mandatory on the Government to purchase this gasoline at a stipulated price, but it can drive any bargain it desires, and neither is it mandatory on the plaintiff in error to sell to the Government with the tax added or without the -tax added, it all being a matter of contract.
A person who would strike down a state statute as'being violative of the Federal Constitution, must show that he is within the class of persons with respect to whom the Act is unconstitutional, and'that the alleged unconstitutional feature injures, him. Heald, Executor; v. District of Columbia, 254 U. S. 20.

Opinion:
Me. Justice Butler
delivered the opinion of the Court.
Chapter 116 of the Laws of Mississippi of 1922 provided that " any person engaged in the business of distributing gasoline, or retail dealer in gasoline, shall pay for the privilege of engaging in such business, an excise tax of 14 [one cent] per gallon upon the sale of gasoline . . . ," except that sold in interstate commerce or purchased outside the State and brought in by the consumer for his own use. Chapter 115, Laws of 1924, increased the tax to three cents and c. 119, Laws of 1926, made it four, cents per gallon. Since some time in 1925 petitioner has been engaged in that business. The State sued to recover taxes claimed on account of sales made by petitioner to •the United States for the use of its Coast Guard Fleet in service in the Gulf of Mexico and its Veterans' Hospital at Gulfport. Some of the sales were made while the Act of 1924 was in force and some after the rate had been increased by the Act of 1926. Accordingly the demand was for three cents a gallon on some and four cents on the rest. Petitioner defended on the ground that these sthtutes, if construed to impose taxes on such sales, are repugnant to the federal Constitution. The court of first instance sustained that contention and the State appealed. The Supreme Court held the exaction a valid privilege tax measured by the number of gallons sold; that it was not a tax upon instrumentalities of the federal government and that the United States was not entitled to buy such gasoline without payment of the taxes charged dealers. 147 Miss. 663.
The United States is empowered by the Constitution to maintain, and operate the fleet and hospital. Art. I, § 8. That authorization and laws enacted pursuant thereto are supreme (Art. VI); and, in case of conflict, they control state enactments. The Státes may not burden or interfere with the exertion of national power or make it a source of revenue or take the funds raised or tax the means used for the performance of federal functions. McCulloch v. Maryland, 4 Wheat. 316, 425, et seq. Dobbins v. The Commissioners of Erie County, 16 Pet. 435, 448. Ohio v. Thomas, 173 U. S. 276. Choctaw & Gulf R. R. v. Harrison, 235 U. S. 292. Indian Oil Co. v. Oklahoma, 240 U. S. 522. Johnson v. Maryland, 254 U. S. 51. Clallam County v. United States, 263 U. S. 341, 344. Northwestern Mutual Life Ins. Co. v. Wisconsin, 275 U. S. 136. New Brunswick v. United States, 276 U. S. 547. The strictness of that rule was emphasized in Gillespie v. Oklahoma, 257 U. S. 501, 505. The right of the United States to make such purchases is derived from the Constitution. The petitioner's right to make sales to the United States was not given by the State and does not depend on state laws; it results from the authority of the national government under the Constitution to choose its own means and sources of supply. While Mississippi may-impose charges upon petitioner for the privilege of carrying on trade that is subject to the power of the State, it may not lay any tax upon transactions by which the United States secures the things desired for its governmental purposes,
- The validity of the taxes claimed is to be determined by the practical effect of enforcement in respect of sales to the government. Wagner v. City of Covington, 251 U. S. 95, 102. A charge at the prescribed rate is made on account of every gallon acquired by the United States. It is immaterial that the seller and not the purchaser is required to report and make payment to the State. Sale and purchase constitute a transaction by which the tax is measured and on which the burden rests. The amount of money claimed by the State rises and, falls precisely as does the quantity of gasoline so secured by the Government. ' It depends immediately upon the number of gallons. The necessary operation of these enactments when so construed is directly to retard, impede and burden the exertion by the United States of its constitutional powers to operate the fleet and hospital. McCulloch v. Maryland, supra, 436. Gillespie v. Oklahoma, supra, 505. Jaybird Mining Co. v. Weir, 271 U. S. 609, 613. To use the number of gallons sold the United States as a measure of the privilege tax is in substance and legal effect to tax the sale. Telegraph Co. v. Texas, 105 U. S. 460. Frick v. Pennsylvania, 268 U. S. 473, 494. And that is to tax the United States — to exact tribute on its transactions and apply thé same to the support of the State.
The exactions demanded from petitioner infringe its right to have the constitutional independence of the United States in respept of such purchases remain untrammeled. Osborn v. United States Bank, 9 Wheat. 738, 867. Telegraph Co. v. Texas, supra. Cf. Terrace v. Thompson, 263 U. S. 197, 216. Petitioner is not liable for the taxes claimed.
Judgment reversed.