United States v. Query

• Decision Date: 31 March 1941
• Citation: 37 F. Supp. 972
• Court: U.S. District Court — District of South Carolina
• Parties: UNITED STATES et al. v. QUERY et al.

37 F. Supp. 972

UNITED STATES et al. v. QUERY et al.

District Court, E. D. South Carolina, Columbia Division.

March 31, 1941.

Claud N. Sapp, U. S. Atty., of Columbia, S. C. (Louis M. Shimel, Asst. U. S. Atty., of Charleston, S. C., Samuel O. Clark, Jr., Asst. Atty. Gen., and Sewall Key, Andrew D. Sharpe, and Berryman Green, Sp. Assts. to the Atty. Gen., on the brief), for plaintiffs.

John M. Daniel, Atty. Gen. for South Carolina, and Claude K. Wingate, of Columbia, S. C., Gen. Counsel, South Carolina Tax Commission, for defendants.

Before PARKER, Circuit Judge, and HAYES and LUMPKIN, District Judges.

LUMPKIN, District Judge.

This is an action brought by the United States, and the Commanding General and Post Exchange Officer of Fort Jackson, South Carolina, for a declaratory judgment and to enjoin the members of the South Carolina Tax Commission from enforcing the provisions of Act No. 574, Acts of 1928 of the General Assembly of the State of South Carolina, Act March 10, 1928, 35 St. at Large, p. 1089, as amended, with respect to the activities of the United States Army Post Exchange at Fort Jackson.

By stipulation of the parties, it was agreed that if the complainants should prevail with respect to Post Exchanges, the relief granted by the court is to be applicable to the Marine Corps Post Exchanges, ships' stores, officers' clubs and non-commissioned officers' clubs described in the amended bill of complaint.

A District Court of three judges heard the case on complainants' application for interlocutory and permanent relief, and it was agreed that the hearing should be on the merits for a final decree.

The action is brought under Section 274d of the Judicial Code, as amended, 28 U.S. C.A. § 400, and under Section 266 of the Judicial Code, 28 U.S.C.A. § 380, interlocutory and permanent injunctions being sought by the complainants.

The question involved is whether under the provisions of Public Act No. 819, 76th Cong., 3d Sess., 4 U.S.C.A. § 12 et seq., hereinafter referred to as the federal act, the taxes imposed by Act No. 574 of the Acts of 1928 of the General Assembly of the State of South Carolina, as amended, hereinafter referred to as the state statute, are applicable to and collectible from the United States Army Post Exchange at Fort Jackson, Richland County, South Carolina.

The material facts as they appear in the pleadings and stipulation of the parties are as follows:

As set forth in the findings of fact this day filed herein, the Post Exchange at Fort Jackson is created and functions under United States Army Regulations No. 210-65, C-1, and C-3, promulgated by the Secretary of War, under the authority given him by Congress. By these regulations the commanding officer of each post is directed to establish and maintain a Post Exchange whenever there is need for it, membership in which is limited to companies, troops, batteries, aero squadrons, or other similarly organized units and detachments. The commanding officer of each army post has complete jurisdiction over the conduct of all Post Exchanges within his command, subject to the general supervision of superior authority, and is held strictly responsible for their efficient operation and for the enforcement of army regulations applicable to Post Exchanges. Under these regulations sales are made only to officers and enlisted men of the regular army, army nurses, contract surgeons, members of the Reserve Corps while on active duty, officers and enlisted men of the National Guard when in federal service, civilian employees authorized for service abroad, having a status recognized by the War Department as part of an expeditionary force, and civilians employed or serving at military posts.

The primary purposes of an exchange are to supply troops at the lowest possible prices with articles of ordinary use, wear and consumption not supplied by the Government, to afford them means of rational recreation and amusement, and through exchange profits to provide, when necessary, the means for improving the company messes. The commanding officer of each army post is charged with the maintenance of recreational athletics, entertainments, service clubs, libraries, and community co-operation which are to be centered about the Post Exchange which provides the financial support necessary for their maintenance. The Post Exchange is governed by a council consisting of a Post Exchange officer and commanding officer of each company, troop, battery, hospital detachment, or similar organization participating therein. The Post Exchange officer is detailed by the commanding officer and receives no compensation for his services other than his regular Army pay.

Under the Regulations of the Secretary of War the duties imposed upon officers in the management of exchange affairs are as binding upon them as any duty to which they may be assigned under competent military authority. Five per cent. of Post Exchange profits, if any, are set aside as a fund which is divided among the organizations which constitute the membership of the exchange, that is, the companies, troops, batteries, squadrons or units and detachments, and not individuals, and the balance is set aside as a portion of the recreation fund for the laying out, preparing and cultivating gardens, for the purchase of books, newspapers, periodicals, stationery, and similar articles for the exchange library, gymnastic appliances, and prizes for athletic sports. These funds belong to no particular individual and those portions which are set aside for the participating organizations having membership in the Post Exchange are held by such member organizations in trust, subject to the orders of the Secretary of War or congressional command. Where Post Exchange buildings have not been provided for from funds otherwise available, the commanding officer is authorized to construct temporary buildings by the labor of troops and the use of necessary teams and such tools, windows, sashes, doors and other material as can be spared by the Quartermaster Corps of the Army. The Post Quartermaster is authorized to sell to the exchange at cost any subsistence stores except exceptional articles, to furnish heating and suitable apparatus therefor for Post Exchange rooms and buildings, and to provide supplies for interior and exterior illumination. Messages on Post Exchange business over telegraph, radio, and cable lines owned and operated by the War Department may be transmitted without charge, and penalty envelopes may be used in the mails in conducting Post Exchange correspondence. United States Army Regulations specify what books and records shall be kept by Post Exchanges and the manner of auditing them.

The state statute imposes a license tax upon every person for the exercise of the privilege of engaging in selling within the State certain articles among them being beer, wine, tobacco products, soft drinks, playing cards, and candy. In addition to the license tax graduated in accordance with the volume of the sales, that statute necessitates the procurement by the licensee of a license for each place of business operated by him. The statute is implemented by a power of revocation of license and of seizure of the alleged illicit product together with the seizure of vehicles, not common carriers, bearing such product. A broad regulatory power is vested in the Commission whereunder it is privileged to enter upon the premises of a vendor, whether a licensee or not, and examine his books and records. The Commission is further empowered to promulgate rules and regulations under the statute, governing its enforcement, the violation of which will result in fine or imprisonment. In addition those persons procuring licenses are required to maintain extensive files recording minutely the transactions allegedly embraced within the statute. In the instance of the sale of soft drinks the licensee is required to maintain records of all such transactions for a period of not less than two years from the date of each such transaction.

Subsection (a) of Section 1 of the federal act, 4 U.S.C.A. § 13(a), provides that no person shall be relieved from liability for payment of any sales or use tax levied by any State on the ground that the sale or use, with respect to which such tax is levied, occurred in whole or in part within a federal area. The act further provides as follows:

"Sec. 3. (a) The provisions of sections 1 13 and 2 14 of this Act title shall not be deemed to authorize the levy or collection of any tax on or from the United States or any instrumentality thereof, or the levy or collection of any tax with respect to sale, purchase, storage, or use of tangible personal property sold by the United States or any instrumentality thereof to any authorized purchaser.

"(b) A person shall be deemed to be an authorized purchaser under this section only with respect to purchases which he is permitted to make from commissaries, ship's stores, or voluntary unincorporated organizations of Army or Navy personnel, under regulations promulgated by the Secretary of War or the Secretary of the Navy." 4 U.S. C.A. § 15.

The defendants have since January 1, 1941, the effective date of the federal act, insisted that the activities of the Post Exchange in reference to the articles enumerated in the state statute are subject to the provisions of that statute, and have threatened to enforce the provisions of that statute with...