City of Detroit v. Murray Corporation City of Detroit v. Murray Corporation United States v. City of Detroit United States v. Township of Muskegon Continental Motors Corporation v. Township of Muskegon

Decision Date03 March 1958
Docket Number37,36,Nos. 18,38,26,s. 18
Citation78 S.Ct. 458,355 U.S. 489,2 L.Ed.2d 460
PartiesCITY OF DETROIT et al., Appellants, v. The MURRAY CORPORATION and the United States. CITY OF DETROIT et al., Petitioners, v. The MURRAY CORPORATION and the United States. UNITED STATES and Borg-Warner Corporation, Appellants, v. CITY OF DETROIT. UNITED STATES, Appellant, v. TOWNSHIP OF MUSKEGON et al. CONTINENTAL MOTORS CORPORATION, Etc., Appellant, v. TOWNSHIP OF MUSKEGON et al
CourtU.S. Supreme Court

Mr. Hobart Taylor, Jr., Detroit, Mich., for appellant-petitioner, Wayne County.

Mr. Vance G. Ingalls, Detroit, Mich., for appellant-petitioner, City of Detroit.

Mr. Victor W. Klein, Detroit, Mich., for appellee-respondent, Murray Corp. of America.

Mr. Roger Fisher, Washington, D.C., for appellee-respondent, United States of America.

Mr. Justice BLACK delivered the opinion of the Court.

This is the third in a series of cases from the State of Michigan decided today involving a claim of constitutional tax immunity.

In 1952 Murray Corporation was acting as a subcontractor under a prime contract for the manufacture of airplane parts between two other private companies and the United States. From time to time Murray received partial payments from the two prime contractors as it performed its obligations under the subcontract. By agreement, title to all parts, materials and work in process acquired by Murray in performance of the subcontract vested in the United States upon any such partial payment, even though Murray retained possession.

On January 1, 1952, the City of Detroit and the County of Wayne, Michigan, each assessed a tax against Murray which in part was based on the value of materials and work in process in its possession to which the United States held legal title under the title-vesting provisions of the subcontract.1 Murray paid this part of each tax under protest and then sued in a Federal District Court for a refund from the city and county. It contended that full title to the property was in the United States and that the taxes infringed the Federal Government's immunity from state taxation to the extent they were based on such property. The Government intervened on Murray's behalf. On motion for summary judgment the District Court entered judgment for Murray and the Court of Appeals for the Sixth Circuit affirmed. 234 F.2d 380. From this decision the city and county both appealed and petitioned for certiorari. We granted certiorari and postponed the question of jurisdiction on appeal to the hearing on the merits. 352 U.S. 963, 77 S.Ct. 357, 1 L.Ed.2d 320; 352 U.S. 960, 77 S.Ct. 351, 1 L.Ed.2d 319. The appeal was proper. 28 U.S.C. § 1254(2), 28 U.S.C.A. § 1254(2).

We believe that this case is also controlled by the principles expressed in our opinions in No. 26, United States v. City of Detroit, 355 U.S. 466, 78 S.Ct. 474 and No. 37, United States v. Township of Muskegon, 355 U.S. 484, 78 S.Ct. 483, and that the taxes challenged here do not violate the Constitution. 2 These taxes were not, levied directly against the United States or its property. To the contrary they were imposed on Murray, a private corporation and there was no effort to hold the United States or its property accountable. In fact Michigan expressly exempts from taxation all public property belonging to the United States, 6 Mich.Stat.Ann., 1950, § 7.7, Pub.Acts 1893, No. 206, § 7 as amended, Pub.Acts 1949, No. 55, and these taxes were assessed from the beginning 'subject to prior rights of the Federal Government.' Cf. S.R.A. v. Minnesota, 327 U.S. 558, 66 S.Ct. 749, City of New Brunswick v. United States, 276 U.S. 547, 48 S.Ct. 371, 72 L.Ed. 693.

The taxes imposed on Murray were styled a personal property tax by the Michigan statutes and it relies upon this to support its contention that they were actually laid against government property. However in passing on the constitutionality of a state tax 'we are concerned only with its practical operation, not its definition or the precise form of descriptive words which may be applied to it.' Lawrence v. State Tax Commission, 286 U.S. 276, 280, 52 S.Ct. 556, 557, 76 L.Ed. 1102. Consequently in determining whether these taxes violate the Government's constitutional immunity we must look through form and behind labels to substance. This is at least as true to uphold a state tax as to strike one down. Cf. Wisconsin v. J. C. Penney Co., 311 U.S. 435, 443—445, 61 S.Ct. 246, 249—250, 85 L.Ed. 267; Capitol Greyhound Lines v. Brice, 339 U.S. 542, 70 S.Ct. 806, 94 L.Ed. 1053. Due regard for the State's power to tax requires no less. As applied—and of course that is the way they must be judged the taxes involved here imposed a levy on a private party possessing government property which it was using or processing in the course of its own business. It is not disputed that Michigan law authorizes the taxation of the party in possession under such circumstances. Cf. Detroit Shipbuilding Co. v. Detroit, 228 Mich. 145, 199 N.W. 645; City of Detroit v. Gray, 314 Mich. 516, 22 N.W.2d 771.

In their practical operation and effect the taxes in question are identical to those which we upheld in Nos. 26 and 37 on persons using exempt real property. We see no essential difference so far as constitutional tax immunity is concerned between taxing a person for using property he possesses and taxing him for possessing property he uses when in both instances he uses the property for his own private ends. Nor have we been pointed to anything else which would bar a State from taxing possession in such circumstances. Cf. Carstairs v. Cochran, 193 U.S. 10, 24 S.Ct. 318, 48 L.Ed. 596. Lawful possession of property is a valuable right when the possessor can use it for his own personal benefit.

It is true that the particular Michigan Taxing statutes involved here do not expressly state that the person in possession is taxed 'for the privilege of using or possessing' personal property, but to strike down a tax on the possessor because of such verbal omission would only prove a victory for empty formalisms. And empty formalisms are too shadowy a basis for invalidating state tax laws. Cf. Henneford v. Silas Mason Co., 300 U.S. 577, 582, 57 S.Ct. 524, 526, 81 L.Ed. 814. In the circumstances of this case the State could obviate such grounds for invalidity by merely adding a few words to its statutes. Yet their operation and practical effect would remain precisely the same.

There is no claim that the challenged taxes discriminate against persons holding government property. To the contrary the tax is a general tax which applies and has been applied throughout the State. If anything the economic burden on the United States is more remote and less certain than in other cases where this Court has upheld taxes on private parties. Of course the Government will eventually feel the financial burden of at least some of the tax but the one principle in this area which has heretofore been clearly settled is that the imposition of an increased financial burden on the Government does not by itself invalidate a state tax.

The respondents rely heavily on United States v. Allegheny County, 322 U.S. 174, 64 S.Ct. 908, 915, 88 L.Ed. 1209. Petitioners on the other hand contend that the decision in Allegheny is inconsistent with the general trend of our decisions in this field, that it has already been distinguished to the point where it retains no meaningful vitality and that it is erroneous. However that may be, we do not think that case is controlling, essentially for the reasons set forth in United States v. City of Detroit, 355 U.S. 466, 78 S.Ct. 474. In Allegheny the Court emphasized that the tax against Mesta Machine Company was, in its view, a general property tax laid on government property as such. The Court pointed out that the State had 'made no effort to segregate Mesta's interest and tax it.' The question was expressly reserved whether the State could tax a person possessing government property for the possession and use of such property in connection with his own profit-making activities. Here, however, state law specifically authorizes assessment against the person in possession. And the taxing authorities were careful not to attempt to tax the Government's interest in the property.

In all important particulars the taxes imposed here are very similar to that upheld in Esso Standard Oil Co. v. Evans, 345 U.S. 495, 73 S.Ct. 800, 97 L.Ed. 1174, on the storage of gasoline for the United States. A tax on storage is not intrinsically different from a tax on possession, at least where in both instances the private party is holding the property for his own gain. The tax in Esso was measured by the quantity of government gasoline stored while the taxes here are measured by the value of government property possessed but such technical distinction is of no significance in determining whether the Constitution bars this tax and is completely unrelated to any rational basis for governmental tax immunity.

We find nothing in the Constitution which compels us to strike down these state taxes. There was no discrimination against the Federal Government, its property or those with whom it does business. There was no crippling obstruction of any of the Government's functions, no sinister effort to hamstring its power, not even the slightest interference with its property. Cf. M'Culloch v. Maryland, 4 Wheat. 316, 4 L.Ed. 579. In such circumstances the Congress is the proper agency, as we pointed out in United States v. City of Detroit, to make the difficult policy decisions necessarily involved in determining whether and to what extent private parties who do business with the Government should be given immunity from state taxes.

The judgment of the Court of Appeals is reversed and the cause is remanded for further proceedings not inconsistent with this opinion. It is so ordered.

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