United States v. STATE TAX COM'N OF STATE OF MISSISSIPPI

• Decision Date: 24 March 1972
• Docket Number: Civ. A. No. 4554.
• Citation: 340 F. Supp. 903
• Parties: UNITED STATES of America, Plaintiff, v. STATE TAX COMMISSION OF the STATE OF MISSISSIPPI et al., Defendants.
• Court: U.S. District Court — Southern District of Mississippi

340 F. Supp. 903

UNITED STATES of America, Plaintiff, v. STATE TAX COMMISSION OF the STATE OF MISSISSIPPI et al., Defendants.

Civ. A. No. 4554.

United States District Court, S. D. Mississippi, Jackson Division.

March 24, 1972.

Robert E. Hauberg, U. S. Atty., Jackson, Miss., for plaintiff.

Guy N. Rogers, Asst. Atty. Gen., Taylor Carlisle, James E. Williams, State Tax Commission, Jackson, Miss., for defendants.

Before CLARK, Circuit Judge, RUSSELL, Chief District Judge, and COX, District Judge.

CLARK, Circuit Judge:

This court must harmonize the constitutional grant of power, on the one hand, to Congress to make rules for the government and regulation of the Armed Services and to legislate with regard to lands purchased for military bases with the prohibition on power, on the other hand, contained in the XXI Amendment, to transport or import intoxicating liquors into a state for delivery or use therein in violation of state law. Since both the affirmative and negative provisos are parts of the supreme law of the land, the relative status of the two sovereigns involved in this collision of claimed authority becomes immaterial. Rather, we must reconcile the power granted with the power prohibited. Reduced to its simplest terms, our ultimate holding is that the general article I, § 8 and article IV, § 3, clause 2 grants to the Congress of legislative and regulatory powers are diminished by the express prohibition of the XXI Amendment as to all packaged liquor transactions which (1) are made on exclusively federal enclaves but without restriction upon use and consumption of such liquors outside the base, or (2) take place on military installations over which the state and federal government exercise concurrent jurisdiction.

The United States filed this action seeking declaratory and injunctive relief against enforcement of a statewide regulation requiring distillers and suppliers of alcoholic beverages to collect, over and above the purchase price, a percentage sum designated as a wholesale mark-up on their liquor sales to certain military organizations located on bases in the State of Mississippi. In addition, the United States sought to recover the total of all such payments made by these military purchasers. Jurisdiction of the action is founded on 28 U.S.C.A. §§ 1345 and 2281. The matter comes on for disposition on cross motions for summary judgment based upon interrogatories and answers and a stipulation of facts.

The State of Mississippi ceded and the United States acquired exclusive jurisdiction over lands within the state comprising Keesler Air Force Base and the United States Naval Construction Battalion Center. Mississippi also ceded and the United States accepted concurrent jurisdiction over lands comprising the Columbus Air Force Base and Meridian Naval Air Station. On the premises of each of these military installations authorized personnel operate clubs, post exchanges, package stores and other similar facilities which sell packaged liquors to classes of persons delineated by military directive. These alcoholic beverages are obtained directly from distillers and suppliers located outside the State of Mississippi who ship such goods into such bases. Not only is no contention made that the consumption or use of such beverages is restricted to the military installations where purchased, but the proof shows further that: numerous classes of non military persons are authorized to make purchases; and every selling facility exacts a promise from each purchaser that he will obey the laws of the state as to such of the liquor bought as may be taken off of the installation. All of these military post facilities are operated with funds derived from dues and profits and none depends upon funds appropriated by the government of the United States.

Prior to July 1, 1966, the laws of the State of Mississippi wholly prohibited the sale or possession of alcoholic beverages in that state. On that date Mississippi enacted a local option alcoholic beverage control law. Miss.Code Ann. § 10265-01 et seq. (1942). This enactment imposed regulatory control over the sale of alcoholic beverages within the state in such a manner as to require all liquor purchases to be made through a state-owned warehouse. The law vested the administration of its provisions in the Alcohol Beverage Control Division of the Mississippi State Tax Commission.

This ABC Division promulgated a regulation, numbered 22 (now renumbered 30), which provides that installations selling alcoholic beverages on military reservations are to be exempted from state taxes and are given an option to order alcoholic beverages direct from the distiller, in lieu of their right under the law to make purchases from the state warehouse, but providing that in the event of the exercise of such option the direct selling distiller should collect and remit to the state the same wholesale mark-up on whiskey of 17% and on wine of 20% as charged by the state-owned warehouse.

Subsequent to the promulgation of this regulation, all distillers and suppliers of alcoholic beverages to facilities on the Mississippi bases named above collected the wholesale mark-up specified by the regulation and remitted these collections to the ABC Division of the State Tax Commission.

The plaintiff asserts that Mississippi's regulation unconstitutionally interferes with the federal procurement policy authorized by Congress and embodied in an implementing Department of Defense directive. It takes the position that Congress has conferred upon the Secretary of Defense the power to regulate the purchase, sale and use of intoxicating liquors at or near military installations by the enactment of 50 U.S.C.A. App. § 473 which provides:

The Secretary of Defense is authorized to make such regulations as he may deem to be appropriate governing the sale, consumption, possession of or traffic in beer, wine, or any other intoxicating liquors to or by members of the Armed Forces or the National Security Training Corps at or near any camp, station, post, or other place primarily occupied by members of the Armed Forces or the National Security Training Corps.

and that the Secretary of Defense implemented this authorization by issuing Department of Defense directive 1330.15, (32 C.F.R. § 261.1-261.5). That directive establishes department policy governing the purchase, as well as the sale, of alcoholic beverages by all components of the Armed Services through on-base outlets. Under the heading "General Policy Statements," the directive contains a subdivision entitled "Cooperation," composed of the following paragraphs:

1. The Department of Defense will cooperate with all duly constituted regulatory officials (local, state and Federal) to the degree that the duties of such officials are related to the furtherance of the terms of this Directive. However, the purchase of all alcoholic beverages for resale at any camp, post, station, base or other place primarily occupied by members of the Armed Forces within the United States shall be in such a manner and under such conditions as shall obtain for the Government the most advantageous contract, price and other factors considered, without regard to prices locally established by state statute or otherwise.

2. This policy of cooperation is not to be construed or represented as an admission of any legal obligation to submit to state control. (Emphasis supplied).

On June 9, 1966, the directive was amended by deleting the italicized words in ¶ 1.

The defendants make the following contentions. Payment of the wholesale mark-up required by the ABC regulation does not unduly burden the military function. Since mark-ups were passed on to customers and no assignment has been obtained from these customers to the United States, no damage claim can be maintained by it. Congress, in enacting § 473, did not intend to confer upon the Department of Defense the right to create regulations for the purchase of packaged liquor contrary to state law, but rather intended only to authorize liquor sales and use regulation at or near bases. The 1966 amendment to the Department of Defense directive was intended to clarify the state's right to control prices. The federal government should not have the status of a sovereign to sell liquor since such sales are not a function of sovereignty. All federal interests were acquired at times when Mississippi law forbade the sale or possession of whiskey, and Mississippi's present regulatory statutes are merely different forms of this prohibitory enactment and still apply on all federal enclaves as to purchases by the type of organizations involved here, which operate with non-appropriated funds.

In reasoning our decision, we shall assume, without deciding, that the legislative powers vested in Congress by article I, § 8, clauses 14 & 17 and article IV, § 3, clause 2 have been exercised, through delegation to the Department of Defense, in language broad enough to preempt all state control of liquor sales prices. This assumption focuses our attention on whether the XXI Amendment forbids the exercise of this congressional power in such a manner as to authorize the sales involved in the case at bar to be consummated contrary to state law.

The procedure we are required to follow has been defined by the Supreme Court. Our analysis must give full play to each of the constitutional provisos "in the light of the other and in the context of the issues and interests at stake". Hostetter v. Idlewild Bon Voyage Liquor Corp., 377 U.S. 324, 84 S.Ct. 1293, 12 L. Ed.2d 350 (1964).

The pertinent parts of article I, § 8 of The Constitution provide that the Congress shall have power to make rules for the government and regulation of the land and naval forces and to exercise exclusive legislative authority over all territories purchased with the consent of a state for an armed forces base. Section 2 of the XXI Amendment is posed in these sparse and exact words: ...