Federal Land Bank of St. Paul v. Bismarck Lumber Company
| Decision Date | 17 March 1941 |
| Docket Number | 6549 |
| Court | North Dakota Supreme Court |
Writ of Certiorari Granted May 26, 1941.
See 61 S.Ct. 1105, 85 L.Ed. __ .
Syllabus by the Court.
1. The tax imposed by the State Sales Tax Act, Chapter 249, Session Laws 1937, is laid upon the buyer and not upon the seller. Jewel Tea Company v. State Tax Commissioner, 70 N.D __, 293 N.W. 386.
2. The entire power of taxation abides in the states and except as restrained by the Constitution of the United States, the power of the states to tax is absolute.
3. The test as to whether a tax laid on a federal instrumentality is constitutional and valid, is, does it hinder or embarrass the instrumentality in the performance of its governmental functions. If it does, it is unconstitutional. If it does not, it is valid.
4. The tax laid under the State Sales Tax Act, Chapter 249, Session Laws 1937, on sales to a federal land bank of lumber and other building material to be used in the conservation and repair of buildings and fences on farm lands acquired by the bank through the foreclosure of mortgages securing farm loans made pursuant to the Federal Farm Loan Act, Chapter 245, 39 Stats. 360, 12 U.S. C.A. § 641 et seq., and acts amendatory thereto, is, for reasons stated in the opinion, a valid and constitutional tax.
Appeal from District Court, Burleigh County; Fred Jansonius, Judge.
Action by the Federal Land Bank of St. Paul against the Bismarck Lumber Company, and Owen T. Owen, as Tax Commissioner of the State of North Dakota, to determine whether the plaintiff was subject to the North Dakota sales tax on purchases made under certain circumstances. From an adverse judgment, the plaintiff appeals.
Judgment affirmed.
George F. Shafer and John Thorpe (Peyton R. Evans, Gerald E. Lyons, and Robert J. Barry of counsel), for appellant.
A tax on the sale of goods, wares, and merchandise to Federal land banks is in effect a tax on the bank. Panhandle Oil Co. v. Mississippi, 277 U.S. 218, 72 L. ed. 857.
The term "exempt from taxation" means exempt from all burdens arising from taxation. Asplund v. Alarid, 29 N.M. 129, 219 P. 786.
Gasoline taxes may not be imposed upon dealers on account of sales to the Federal Government, since such an imposition would amount to an unconstitutional interference with the government. Graves v. Texas Co. 298 U.S. 393, 80 L. ed. 1236.
Federal land banks, like national banks, are not subject to taxation by a state or any political subdivision of a state, unless they are made so by a specific Federal statute granting the states or their political subdivisions permission to impose such taxation, and when such specific permission is granted, the taxation imposed by the states must be in strict conformity thereto, in order that it shall have any validity. Austin v. Boston, 7 Wall. (U.S.) 695, 19 L. ed. 224.
In the absence of any statutory enactment with regard to taxation of Federal land banks, the states would have no power to impose any form of taxation upon them. Owensboro Nat. Bank v. Owensboro, 173 U.S. 664, 43 L. ed. 850; Bank of California v. Richardson, 248 U.S. 476, 63 L. ed. 372; New York ex rel. Rogers v. Graves, 299 U.S. 401, 81 L.Ed 306.
Alvin C. Strutz, Attorney General, and T. A. Thompson and B. F. Tillotson, Assistant Attorneys General, for respondents.
The entire Sales Tax Act clearly evidences an intent to lay the tax upon the retailer or dealer. Texas Co. v. Wilkinson (D.C. La.) 21 F.Supp. 771; McLoughlin v. Commissioner of Internal Revenue, 89 F.2d 699; Kesbec, Inc. v. Taylor, 2 N.Y.S. (2d) 241; Re Television Co. 273 N.Y. 51, 6 N.E.2d 94; M.G. West Co. v. Johnson (Cal.) 66 P.2d 829.
Federal income tax is invalid as levied on state instrumentality only if imposed on governmentality directly or in such manner as to place direct burden on essential governmental functions. Collector v. Day, 11 Wall. (U.S.) 113, 20 L. ed. 122; Saxe v. Anderson, 19 F.Supp. 21; Sargent County v. North Dakota, 47 N.D. 561, 182 N.W. 270; North Dakota v. Olson, 33 F.2d 848; Clinton v. State Tax Commission (Kan.) 71 P. 857; Metcalf v. Mitchell, 269 U.S. 514, 70 L. ed. 384; Helvering v. Therrell, 82 L. ed. 537.
Nuessle, J. Burr, Ch. J., and Swenson and Grimson, Dist. JJ., concur. Burke and Morris, JJ., did not participate, Hon. P. G. Swenson, Judge of First Judicial District and Hon. G. Grimson, Judge of Second Judicial District, sitting in their stead. Christianson, (dissenting)
The question for determination in this case is as to whether the Federal Land Bank of St. Paul, hereinafter referred to as the appellant, is subject to the North Dakota Sales Tax on purchases made under the circumstances hereinafter disclosed.
The Sales Tax Act (Sess. Laws 1937, chap. 249) in force at the time this controversy arose, provides:
The appellant, the Federal Land Bank of St. Paul, a body corporate, created pursuant to the Act of Congress, approved July 17, 1916 (39 Stat. at L. 360, chap. 245, 12 U.S.C.A §§ 641 et seq.) and acts amendatory thereof, known and cited as the Federal Farm Loan Act, is engaged in the business of making loans to farmers in the state of North Dakota and states adjacent thereto. The respondent, The Bismarck Lumber Company, is engaged in the business of selling lumber and other building material as a retail dealer in Bismarck. In October, 1937, the appellant bought certain lumber and other building material from the respondent. This material was for use in repairing and improving the buildings and fences on certain farm lands owned by the appellant in North Dakota. These lands had been acquired by appellant through the foreclosure of mortgages taken to secure farm loans made in the course of its business. The respondent added to the regular sales price of the material so bought, 2 per cent thereof, the amount of the state sales tax, reckoned pursuant to the provisions of § 2 of the Sales Tax Act, supra. The appellant paid the sales price but refused to pay the tax, claiming that no tax could be collected from it for the reason that it was an agent and instrumentality of the Federal Government and, therefore, exempt from any state taxation. The respondent, on the other hand, contended that the material so sold by it was subject to such tax and that it was its duty to collect the same. Action was then brought by the appellant to determine the controversy thus arising and for a declaratory judgment adjudicating and determining the rights, liabilities, status, and legal relations of the parties, and whether the sales in question were subject to the tax. The State Tax Commissioner was joined as a party defendant. The controversy was submitted to the district court of Burleigh county and that court held that the sales made to the appellant Bank by the respondent Lumber Company were subject to the tax; that the Lumber Company was required to collect and pay over to the state the tax on such sales, and that the appellant Bank was under legal obligation to pay the same. Judgment was entered accordingly. Thereupon the Bank perfected the instant appeal.
The tax here in question is imposed on retail sales. It is general in its operation. It is required to be paid by the buyer. Jewel Tea Co. v. State Tax Commissioner, ante, 229, 293 N.W. 386.
The appellant contends it is wholly exempt from the tax pursuant to § 3a of the Sales Tax Act, supra, since it is an instrumentality of the United States and, as such, is not liable for the payment of any state sales tax without the consent of Congress; that such consent has not only not been given, but on the contrary, by § 26 of the Farm Loan Act, the appellant has been expressly exempted from the payment of such tax. The appellant further contends that as it is an instrumentality of the Federal Government, the State Sales Tax Act, supra, is, as attempted to be applied in this case, null and void and in conflict with the Constitution of the United States in that it violates § 8 of Article 1 of the Constitution, which provides: "The Congress shall have power . . . to make all laws which shall be necessary and proper for carrying into execution the foregoing powers, and all other powers vested by this Constitution in the Government of the United States, or in any department or officer thereof," and clause 2 of Article 6 of the Constitution, which provides: "This Constitution, and the laws of the United States which shall be made in pursuant thereof . . . shall be the supreme law of the land; . . . anything in the Constitution or the laws of any state to the contrary notwithstanding."
The issues thus made are so important and their solution so difficult, that we deem it necessary to consider somewhat at length the powers and rights of the Federal and state governments with respect to the matter of taxation.
As we read the authorities they establish beyond question that the fact that ...
To continue reading
Request your trial