314 U.S. 95 (1941), 76, Federal Land Bank v. Bismarck Co. of St. Paul

Docket Nº:No. 76
Citation:314 U.S. 95, 62 S.Ct. 1, 86 L.Ed. 65
Party Name:Federal Land Bank v. Bismarck Co. of St. Paul
Case Date:November 10, 1941
Court:United States Supreme Court

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314 U.S. 95 (1941)

62 S.Ct. 1, 86 L.Ed. 65

Federal Land Bank


Bismarck Co. of St. Paul

No. 76

United States Supreme Court

Nov. 10, 1941

Argued October 23, 1941



1. As construed by the highest court of the State, the purchaser is liable for the sales tax imposed by North Dakota Laws of 1937, c. 249, and this construction is controlling. P. 99.

2. Section 26 of the Federal Farm Loan Act of 1916 exempts a federal land bank from the tax imposed by North Dakota Laws of 1937, c. 249, in respect of purchases, made by the bank from a retail dealer, of materials for the improvement of property theretofore acquired by the bank in the course of its operations. P. 99.

3. In the provision of § 26 that every federal land bank, "including the capital and reserve or surplus therein and the income derived therefrom," shall be exempt from state taxation, the words quoted do not delimit the scope of the exemption. P. 99.

4. Nothing in the legislative history of § 26, nor of similar exemption clauses in other statutes, requires a result contrary to that here reached. P. 100.

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5. A tax upon the sale of materials to be used in improving real estate is not a tax upon the real estate, and therefore the tax here involved is not within the exception from the exemption. P. 101.

6. The exercise by the Federal Government of a power delegated to it by the Constitution is governmental, and, when Congress constitutionally creates a corporation through which the Federal Government lawfully acts, the activities of such corporation are governmental. P. 102.

7. Federal land banks are created constitutionally; they are federal instrumentalities engaged in the performance of an important governmental function. P. 102.

8. Congress constitutionally may immunize from state taxation the lending functions (or activities incidental thereto) of federal land banks. P. 103.

9. It is for Congress to determine whether immunity from one type of tax, rather than another, is wise. P. 104.

70 N.D. 607; 297 N.W. 42, reversed.

Certiorari, 313 U.S. 556, to review the affirmance of a judgment against the bank for the amount of a state sales tax.

MURPHY, J., lead opinion

MR. JUSTICE MURPHY delivered the opinion of the Court.

We are asked to decide whether, in view of § 26 of the Federal Farm Loan Act of July 17, 1916 (c. 245, 39 Stat. 360, 380, 12 U.S.C. §§ 931-933),1 petitioner is subject to

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the Sales Tax Act of North Dakota,2 the pertinent sections of which are set forth in the margin.3

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[62 S.Ct. 3] Petitioner, the Federal Land Bank of St. Paul, was created pursuant to the Federal Farm Loan Act, supra. In the course of its operations, it acquired by foreclosure proceedings certain farm properties in Burleigh County, North Dakota.4 To effect necessary repairs and improvements to the buildings and fences on these properties, petitioner purchased lumber and other building materials of an aggregate value of $408.26 from the Bismarck Lumber Company, a retail dealer. The Lumber Company demanded the sum of $8.02 from petitioner, representing the total amount of the state sales tax on the various purchases. This petitioner refused to pay. On March 9, 1938, petitioner filed a complaint in the District Court of Burleigh County against the Lumber Company and the State Tax Commissioner,5 alleging the foregoing facts and praying for an adjudication of nonliability for the sales tax on the ground that petitioner is exempt under § 26 of the Federal Farm Loan Act, supra, and the federal Constitution. To this complaint respondents demurred. In sustaining the demurrer, the trial court held that the sales to petitioner were subject to the tax, that the Lumber Company was required to collect the tax, and that petitioner was under a legal duty to pay it. Accordingly,

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judgment was entered against petitioner in the amount of the tax. The Supreme Court of North Dakota affirmed the judgment of the trial court. Federal Land Bank of St. Paul v. Bismarck Lumber Co., 70 N.D. 607, 297 N.W. 42. The case is here because it presents a question of importance in the administration of the Federal Farm Loan Act.

We are confronted with two questions:

First. Does § 26 include within its ban a state sales tax such as this? We hold that it does.

Second. Can Congress constitutionally immunize from state taxation activities in furtherance of the lending functions of federal land banks? We hold that it can.

I. It is clear that the North Dakota statute makes the purchaser, petitioner here, liable for the sales tax. Section 6 of the Act requires the retailer to add the tax to the sales price, and declares the tax to be a debt from the consumer to the retailer. Section 7 makes it unlawful for the retailer to hold out that he will absorb or refund the tax in whole or in part. The Supreme Court of North Dakota has held that the sales tax is laid upon the purchaser. Jewel Tea Company v. State Tax Commissioner, 70 N.D. 229, 293 N.W. 386. This holding was reaffirmed in the decision below. These determinations of the incidence of the tax by the state court are controlling, and respondents concede the point.

The unqualified term "taxation" used in § 26 clearly encompasses within its scope a sales tax such as the instant one, and this...

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