Carbide & Carbon Chemicals Corp. v. Carson

• Decision Date: 09 March 1951
• Docket Number: WILSON-WEESNER-WILKINSON,ROANE-ANDERSON
• Citation: 192 Tenn. 150,239 S.W.2d 27,28 Beeler 150
• Parties: , 192 Tenn. 150 CARBIDE & CARBON CHEMICALS CORP. v. CARSON, Commissioner of Finance and Taxation.CO. v. CARSON, Commissioner of Finance and Taxation. DIAMOND COAL MINING CO. et al. v. CARSON, Commissioner of Finance and Taxation.CO. et al. v. CARSON, Commissioner of Finance and Taxation.
• Court: Tennessee Supreme Court

Page 27

239 S.W.2d 27

28 Beeler 150, 192 Tenn. 150

CARBIDE & CARBON CHEMICALS CORP. v. CARSON, Commissioner of Finance and Taxation.

ROANE-ANDERSON CO. v. CARSON, Commissioner of Finance and Taxation.

DIAMOND COAL MINING CO. et al. v. CARSON, Commissioner of Finance and Taxation.

WILSON-WEESNER-WILKINSON CO. et al. v. CARSON, Commissioner of Finance and Taxation.

Supreme Court of Tennessee.

March 9, 1951.

S. Frank Fowler, Knoxville, T. L. Caudle, Ellis N. Slack, Berryman Green, Joseph Volpe, Jr., Bennett Boskey, and Harold L. Price, all of Washington, D. C., J. Wallace Ould, Jr., Oak Ridge, Tennessee, for appellants.

Roy H. Beeler, Atty. Gen., William F. Barry, Solicitor Gen., Nashville, and Allison B. Humphreys, Jr., Advocate Gen., Lebanon, for appellees.

BURNETT, Justice.

The question for our decision in these consolidated cases is whether or not the appellants are liable for Sales taxes and Use taxes as applied by Chapter 3 of the Public Acts of 1947 as amended, Retail Sales Tax Statute.

Both of these taxes are privilege taxes and they have been defined by this Court as: 'The Sales Tax imposes upon the seller a tax for the privilege of selling tangible personal property and is required to be paid by the seller. Hooten v. Carson, 186 Tenn. 282, 283, 209 S.W.2d 273. The Use Tax is a tax upon the privilege of using, consuming, distributing or storing tangible personal property after it is brought into this State from without this State'. Madison Suburban Utility District v. Carson, Tenn.Sup., 232 S.W.2d 277, 280.

The present suits were brought as test cases. During the fall of 1947, the appellants paid under protest a sum of money slightly in excess of $5000 to the Commissioner of Finance and Taxation, and brought suit, as provided by Tennessee Code Section 1790 et seq., to recover such taxes. It was said in argument that about two million dollars is eventually involved. After suits were instituted and during the progress of the trial the United States government petitioned to and was allowed to intervene as an Intervenor herein. The position taken by the United States Government is identical in all respects with that of the appellants named above. It was stipulated during the progress of the trial that since the suits were instituted the Commissioner of Finance and Taxation was then James Clarence Evans and the suits were revived as to him.

The chancellor held that the taxes were properly collected by the Commissioner of Finance and Taxation and accordingly dismissed the suits. These suits have been consolidated, were argued together, and it was agreed that we could render one opinion applicable to all, as the questions raised were identical. These suits involve a typical transaction between the contractors and the vendors wherein the question of whether or not this Tennessee Sales tax and Use tax are applicable under the factual situation as very thoroughly developed in this large record.

There are numerous assignments of error. As a whole, though, these assignments go to the finding or the failure of the chancellor to find facts according to the contention of the appellants. There are two contentions made by the appellants, both of which were answered contrary to their contention by the chancellor, either of which if answered in the affirmative would sustain the suits in these cases. These contentions are: (1) that the Tennessee Sales Tax Statute as applied to purchases and procurements herein is invalid and an infringement of the Federal Constitutional immunity of the means and instrumentalities employed by the United States to carry on its functions and (2) that if there is no implied Federal Constitutional immunity under the facts developed in this case, that then under the terms of Section 9(b) of the Atomic Energy Act, 42 U.S.C.A. § 1809(b), creating this Federal agency, that Congress has exempted the property, income, and activities of the Commission from State or local taxation 'in any manner or form'.

Why these contentions?

Prior to our entering World War II in December, 1941, scientists were convinced that an atomic weapon could be made. These scientists with a group of other convinced the President of the United States and his advisers that this could be done. Accordingly the President appointed a committee who in turn further convinced him of the possibilities of such a weapon, and from this the government began the development of facilities to develop such a weapon. It was necessary in the development of atomic energy that great secrecy be kept; that the proceedings toward development of such energy be greatly separated, for security reasons and for reasons of health and safety of the people of the United States, because 'probably the largest calculated risk anyone ever took' (Smyth Report) was being undertaken. Thus rather isolated large areas of land were acquired in different sections of the United States, such as approximately 59,000 acres in Anderson and Roane Counties, Tennessee, on the Clinch River; Hanford, Washington, on the Columbia River and Los Alamos, New Mexico. Other places for research were acquired and used near the University of Chicago, etc.

As a part of this effort, the government in September, 1942, began to develop the Clinton Engineering Works, commonly called Oak Ridge, which was a unit of the Manhattan District established under the War Powers Act on executive orders of the President of the United States to carry on this research and development of the atomic bomb. The Manhattan District was under the direction of the United States Army Corps of Engineers; and the bomb was the immediate objective.

'A weapon has been developed that is potentially destructive beyond the wildest nightmares of the imagination; a weapon so ideally suited to sudden unannounced attack that a country's major cities might be destroyed overnight by an ostensibly friendly power. This weapon has been created not by the devilish inspiration of some warped genius but by the arduous labor of thousands of normal men and women working for the safety of their country.' Smyth Report, Page 163, released in August, 1945.

Because of the enormity of the problem that was involved and the fact that no individual or corporation had had any experience in this particular kind of a field it was necessary for the Army Engineers to employ various and sundry large corporations of America who had the 'know-how' in various and sundry scientific fields and other fields which were necessarily involved in the development of Atomic energy. Consequently the government entered into cost-plus-fixed-fee contracts with these corporations. To mention a few are: Carbon & Carbide Chemical Corporation; Monsanto Chemical Corporation; General Electric Corporation; Du Pont Company and many others. It soon developed that it would be necessary to construct housing facilities for the workers and employees and key personnel of these various companies who were to operate these enormous plants. For instance, at Clinton, Tennessee, an entire new city of some forty or fifty thousand people grew up almost over night. To operate this City for these people all of the facilities for a modern city were needed. The Army did not possess the 'know-how' to develop such a city but they had had experience with a construction company in New York who knew how to do such a thing, consequently, this construction company was contacted and they in turn formed the Roane-Anderson Company, a Tennessee corporation for the purpose of operating the Town of Oak Ridge. Roane-Anderson entered into a cost-plus-fixed-fee contract with the Army for this work. The Carbon & Carbide Chemical Corporation entered into a like contract with the government to operate certain plants at Oak Ridge.

This development under the Army Corps of Engineers was of course designed to achieve the maximum military result which it did as all of us now know. In the development of nuclear energy it became apparent to those connected with this development that it would be necessary for the government to maintain some sort of control in this field after the war. As a result of this feeling recommendations were made to the Congress of the United States who after a full debate passed an Act for the development and control of Atomic energy, August 1, 1946. This complete Act is carried in 42 U.S.C.A., §§ 1801 through 1819. By this Act the Atomic Energy Commission was created and they constitute a committee having a governmental monopoly in this field of Atomic energy. This Act among other things declares that 'the development and utilization of atomic energy shall, so far as practicable, be directed toward improving the public welfare, increasing the standard of living, strengthening free competition in private enterprize, and promoting world peace.'

The Atomic Energy Commission, having a right to do so under the Act, saw that their duties were so gigantic and complicated technically that it would be impossible for any one company to handle their undertakings. Accordingly the Commission has entered into various and sundry cost-plus-fixed-fee contracts with various and sundry contractors who possess the 'know-how' in their respective fields. The Commission in this way either directly or through these contractors, carries on a wide and extensive program for the United States government in the field of Atomic energy, including the production of materials for Atomic weapons, and the production of radioactive materials for the use and research and development activities relating to Atomic energy. The plants selected and established by the Army Corps of Engineers have been continued. The land and all facilities in the plant at Oak Ridge are wholly owned by the United States government.

The principle contractor of the Commission in Oak Ridge for the operation of its plants there, is the appellant Carbide & Carbon Chemical Corporation, (hereinafter for short referred to as...