Arizona Dept. Revenue v. Blaze Constr.

• Decision Date: 02 March 1999
• Docket Number: 971536
• Citation: 143 L.Ed.2d 27,526 U.S. 32,119 S.Ct. 957
• Parties: Syllabus NOTE: Where it is feasible, a syllabus (headnote) will be released, as is being done in connection with this case, at the time the opinion is issued. The syllabus constitutes no part of the opinion of the Court but has been prepared by the Reporter of Decisions for the convenience of the reader. See United States v. Detroit Timber & Lumber Co., 200 U.S. 321, 337. SUPREME COURT OF THE UNITED STATES ARIZONA DEPARTMENT OF REVENUE v. BLAZE CONSTRUCTION CO., INC. CERTIORARI TO THE COURT OF APPEALS OF ARIZONA1536
• Court: U.S. Supreme Court

526 U.S. 32

119 S.Ct. 957

143 L.Ed.2d 27

Syllabus

NOTE: Where it is feasible, a syllabus (headnote) will be released, as is being done in connection with this case, at the time the opinion is issued. The syllabus constitutes no part of the opinion of the Court but has been prepared by the Reporter of Decisions for the convenience of the reader. See United States v. Detroit Timber & Lumber Co., 200 U.S. 321, 337.

SUPREME COURT OF THE UNITED STATES

ARIZONA DEPARTMENT OF REVENUE

v.

BLAZE CONSTRUCTION CO., INC.

CERTIORARI TO THE COURT OF APPEALS OF ARIZONA

No. 97 1536.

Argued December 8, 1998 Decided March 2, 1999

Over several years, the Bureau of Indian Affairs contracted with respondent Blaze Construction Company to build, repair, and improve roads on several Indian reservations located in Arizona. At the end of the contracting period, petitioner Arizona Department of Revenue (Department) issued a tax deficiency assessment against Blaze for its failure to pay Arizona's transaction privilege tax on the proceeds from its contracts with the Bureau; that tax is levied on the gross receipts of companies doing business in the State. Blaze protested the assessment and prevailed in administrative proceedings, but the Arizona Tax Court granted the Department summary judgment. The Arizona Court of Appeals reversed, rejecting the Department's argument that United States v. New Mexico, 455 U.S. 720, controlled, and holding that federal law pre-empted the tax's application to Blaze.

Held: A State generally may impose a nondiscriminatory tax upon a private company's proceeds from contracts with the Federal Government, regardless of whether the federal contractor renders its services on an Indian reservation. In New Mexico, supra, the Court announced a clear rule that tax immunity is appropriate only when the levy falls on the United States itself, or on its agency or closely connected instrumentality. Id., at 733. To expand that immunity beyond these narrow constitutional limits, Congress must expressly so provide. Id., at 737. Thus, absent a constitutional immunity or congressional exemption, federal law does not shield Blaze from Arizona's transaction privilege tax. The incidence of the tax falls on Blaze, not the Government; nor has Congress exempted these contracts from taxation. Nevertheless, the Arizona Court of Appeals employed a balancing test weighing state, federal, and tribal interests, and held that a congressional intent to pre-empt the tax could be inferred from federal laws regulating Indian welfare. In cases involving taxation of on-reservation activity, this Court has undertaken such a particularized examination where the tax's legal incidence fell on a nontribal entity engaged in a transaction with tribes or tribal members. See, e.g., Cotton Petroleum Corp. v. New Mexico, 490 U.S. 163. But the Court has never employed this balancing test where a State seeks to tax a transaction between the Government and a non-Indian private contractor, and declines to do so now. The need to avoid litigation and to ensure efficient tax administration counsels in favor of a bright-line standard for taxing federal contracts, regardless of whether the contracted-for activity takes place on Indian reservations. Moreover, the political process is uniquely adapted to accommodating the interests implicated by state taxation of federal contractors. New Mexico, supra, at 738. The decision whether to exempt Blaze from the tax rests with Arizona and Congress, not this Court. Pp. 2 6.

190 Ariz. 262, 947 P.2d 836, reversed and remanded.

Thomas, J., delivered the opinion for a unanimous Court. Opinion of the Court

NOTICE: This opinion is subject to formal revision before publication in the preliminary print of the United States Reports. Readers are requested to notify the Reporter of Decisions, Supreme Court of the United States, Washington, D. C. 20543, of any typographical or other formal errors, in order that corrections may be made before the preliminary print goes to press.

SUPREME COURT OF THE UNITED STATES

No. 97 1536

ARIZONA DEPARTMENT OF REVENUE, PETITIONER

v.

BLAZE CONSTRUCTION COMPANY, INC.

ON WRIT OF CERTIORARI TO THE COURT OF APPEALS OF ARIZONA, DIVISION ONE

[March 2, 1999]

Justice Thomas delivered the opinion of the Court.

In United States v. New Mexico, 455 U.S. 720 (1982), we held that a State generally may impose a nondiscriminatory tax upon a private company's proceeds from contracts with the Federal Government. This case asks us to determine whether that same rule applies when the federal contractor renders its services on an Indian reservation. We hold that it does.

I

Under the Federal Lands Highways Program, 23 U.S.C. § 204 the Federal Government finances road construction and improvement projects on federal public roads, including Indian reservation roads. Various federal agencies oversee the planning of particular projects and the allocation of funding to them. §§202(d), 204. The Commissioner of Indian Affairs has the responsibility to "plan, survey, design and construct" Indian reservation roads. 25 CFR § 170.3 (1998).

Over a several-year period, the Bureau of Indian Affairs contracted with Blaze Construction Company to build, repair, and improve roads on the Navajo, Hopi, Fort Apache, Colorado River, Tohono O'Odham, and San Carlos Apache Indian Reservations in Arizona. Blaze is incorporated under the laws of the Blackfeet Tribe of Montana and is owned by a member of that Tribe. But, as the company concedes, Blaze is the equivalent of a non-Indian for purposes of this case because none of its work occurred on the Blackfeet Reservation. Brief in Opposition 2, n. 1; see Washington v. Confederated Tribes of Colville Reservation, 447 U.S. 134, 160 161 (1980).

At the end of the contracting period, the Arizona Department of Revenue (Department) issued a tax deficiency assessment against Blaze for its failure to pay Arizona's transaction privilege tax on the proceeds from its contracts with the Bureau; that tax is levied on the gross receipts of companies doing business in the State.1 See Ariz. Rev. Stat. Ann. §§42 1306, 42 1310.16 (1991). Blaze protested the assessment and prevailed at the end of administrative proceedings, but, on review, the Arizona Tax Court granted summary judgment in the Department's favor. The Arizona Court of Appeals reversed. 190 Ariz. 262, 947 P.2d 836 (1997). It rejected the Department's argument that our decision in New Mexico, supra, controlled the case and held that federal law pre-empted the application of Arizona's transaction privilege tax to Blaze. The Arizona Supreme Court denied the Department's petition for review, with one justice voting to grant the petition. We granted certiorari, 523 U.S. ___ (1998), and now reverse.

II

In New Mexico, we considered whether a State could impose gross receipts and use taxes on the property, income, and purchases of private federal contractors. To remedy "the confusing nature of our precedents" in this area, 455 U.S., at 733, we announced a clear rule:

"[T]ax immunity is appropriate in only one circumstance: when the levy falls on the United States itself, or on an agency or instrumentality so closely connected to the Government that the two cannot realistically be viewed as separate entities, at least insofar as the activity being taxed is concerned." Id., at 735.

We reasoned that this "narrow approach" to the scope of governmental tax immunity "accord[ed] with competing constitutional imperatives, by giving full range to each sovereign's taxing authority." Id., at 735 736 (citing Graves v. New York ex rel. O'Keefe, 306 U.S. 466, 483 (1939)). For that immunity to be expanded beyond these "narrow constitutional limits," we explained that Congress must "take responsibility for the decision, by so expressly providing as respects contracts in a particular form, or contracts under particular programs." 455 U.S., at 737 (emphasis added); see also Carson v. Roane-Anderson Co., 342 U.S. 232, 234 (1952). Applying those principles, we upheld each of the taxes at issue in that case because the legal incidence of the taxes fell on the contractors, not the Federal Government; the contractors could not be considered agencies or instrumentalities of the Federal Government; and Congress had not expressly exempted the contractors' activities from taxation but, rather, had expressly repealed a pre-existing statutory exemption. See New Mexico, 455 U.S., at 743 744.

These principles control the resolution of this case. Absent a constitutional immunity or congressional exemption, federal law does not shield Blaze from Arizona's transaction privilege tax. See id., at 737; James v. Dravo Contracting Co., 302 U.S. 134, 161 (1937). The incidence of Arizona's transaction privilege tax falls on Blaze, not the Federal Government. Blaze does not argue that it is an agency or instrumentality of the Federal Government, and New Mexico's clear rule would have foreclosed any such argument under these circumstances. Nor has Congress exempted these contracts from taxation. Cf. Carson, supra, at 234.

Nevertheless, the ...