United States v. State Tax Commission of Mississippi 8212 350

Decision Date04 June 1973
Docket NumberNo. 72,72
Citation37 L.Ed.2d 1,412 U.S. 363,93 S.Ct. 2183
PartiesUNITED STATES, Appellant, v. STATE TAX COMMISSION OF MISSISSIPPI et al. —350
CourtU.S. Supreme Court
Syllabus

The United States brought this action contesting the validity of appellee Tax Commission's regulation requiring out-of-state liquor distillers and sumpliers to collect and remit to the Commission a wholesale markup on liquor sold to military officers' clubs and other nonappropriated fund activities located on bases within Mississippi, over two of which the United States exercises exclusive jurisdiction, and the remaining two of which concurrent jurisdiction. Relying on the Twenty-first Amendment, the District Court upheld the regulation. Held:

1. The twenty-first Amendment does not empower a State to tax or otherwise regulate the importation of distilled spirits into a terriory over which the United States exercises exclusive jurisdiction, Collins v. Yosemite Park & Curry Co., 304 U.S. 518, 58 S.Ct. 1009, 82 L.Ed. 1502, regardless of whether some of the liquor may have been consumed off base. Pp. 369—378.

2. Whether the markup can be viewed as a sales tax to whose imposition in the context of the two exclusive-jurisdiction bases the United States has consented under the Buck Act, and whether, in any event, the markup unconstitutionally taxes federal instrumentalities, and violates the Supremacy Clause as conflicting with federal procurement regulations and policy, are issues that the District Court did not reach and should consider initially on remand. Pp. 378—381.

D.C., 340 F.Supp. 903, vacated and remanded.

Jewell S. Lafontant, Dept. of Justice, Washington, D.C., for appellant.

Robert L. Wright, Washington, D.C., for appellees.

Mr. Justice MARSHALL delivered the opinion of the Court.

In this case we are called upon the review the judgment of the District Court for the Southern District of Mississippi that the State of Mississippi may require out-of-state liquor distillers and suppliers to collect and remit to the State a wholesale markup on liquor sold to officers' clubs, ship's stores, and post exchanges located on various military bases over which the United States exercises either exclusive jurisdiction or jurisdiction concurrent with the State.

Prior to 1966, the State of Mississippi prohibited the sale or possession of alcoholic beverages within its borders. In that year, Mississippi passed a local option alcoholic beverage control law subject to the requirement that the State Tax Commission be the sole importer and wholesaler of alcoholic beverages distributed within the State.1 The Tax Commission was given exclusive authority to act as wholesale distributor in the sale of alcoholic beverages to licensed retailers within the State 'including, at the discretion of the Commission, any retail distributors operating within any military post . . . within the boundaries of the State, . . . exercising such control over the distribution of alcoholic beverages as (seems) right and proper in keeping with the provisions and purposes of this act.'2 In conjunction with these transactions with retailers, the Commission was directed to 'add to the cost of all alcoholic beverages such . . . markups as in its discretion will be adequate to cover the cost of operation of the State wholesale liquor business, yield a reasonable profit, and be competitive with liquor prices in neighboring states.'3 Under the authority granted to it by the Act, the Tax Commission promulgated Regulation 254 which gives military post exchanges, ship's stores, and officers' clubs the option of purchasing liquor either from the Commission or directly from the distiller. However, insofar as purchases are made directly from the distillers by such military facilities, the regulation requires the distiller to collect and remit to the Tax Commission the latter's 'usual wholesale markup.' During the period involved in this case, the Tax Commission's wholesale markup was 17% on distilled spirits and 20% on wine.

Four United States military bases are located in the State of Mississippi—Keesler Air Force Base, the Naval Construction Battalion Center, Columbus Air Force Base, and Meridian Naval Air Station. Prior to 1966, the officers' clubs, the post exchanges, and the ship's stores—- which are run with funds derived from operations rather than from funds appropriated by the United States—on these four bases had purchased liquor from distillers and suppliers located outside the State of Mississippi. Following the passage of the Mississippi local option law, these nonappropriated fund activities elected to continue the practice of purchasing liquor supplies outside the State rather than to purchase liquor from the Commission. Efforts were made by military authorities to convince the Commission not to collect the markup on out-of-state liquor purchases by nonappropriated fund activities, but these efforts failed, and the Commission compelled out-of-state distillers and suppliers to collect and remit the markup on military sales under threat of criminal prosecution and of delisting, that is, withdrawal of the privilege of selling to the Commission for retailing within Mississippi.5 The military authorities sought to pay the markup into an escrow fund pending judicial determination of the legality of the markup as applied to military purchases. But the Commission refused to accept such an arrangement, and in order to obtain liquor supplies the nonappropriated fund activities have had to pay the markup to the distillers and suppliers, albeit under protest.6

In November 1969, the United States brought this action seeking declaratory and injunctive relief against the continued enforcement of Regulation 25, plus a judgment in the total amount paid to the Commission, through the suppliers, since the imposition of the markup on military purchases. The complaint alleged that the United States has exclusive jurisdiction over Keesler Air Force Base and the Naval Construction Battalion Center, and that Mississippi and the United States exercise concur- rent jurisdiction over Columbus Air Force Base and Meridian Naval Air Station. The complaint contended that the Regulation was invalid because it constituted an attempt by the State to legislate with respect to military facilities and territory over which the Congress has exclusive legislative authority;7 to impose a tax on federal instrumentalities and thereby infringe upon the Federal Government's immunity from state taxation;8 and to interfere with federal procurement regulations and policy established by the Secretary of Defense pursuant to authority granted to him by Congress.9 The complaint also asked that a three-judge court be convened.

On cross-motions for summary judgment, the District Court ruled in favor of the Commission, upholding the validity of the challenged Regulation. 340 F.Supp. 903 (S.D.Miss.1972). The District Court agreed that the United States has exclusive jurisdiction over two of the four bases and concurrent jurisdiction over the remaining two. But it concluded that Congress' constitutional powers over the military forces and over territory belonging to the United States 'are diminished by the express prohibition of the XXI Amendment as to all packaged liquor transactions which (1) are made an 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.' Id., at 904. In light of this conclusion the District Court found it unnecessary to consider the import of the procurement regulations issued by the Secretary of Defense. Nor did it discuss the contention that the markup con- stituted an impermissible tax upon federal instrumentalities. On appeal by the United States, we noted probable jurisdiction, 409 U.S. 1005, 93 S.Ct. 437, 34 L.Ed.2d 298 (1972).10 For the reasons which follow, we now hold that the District Court erred in concluding that the Twenty-first Amendment provides the State with sufficient authority over liquor transactions to support the application of the Regulation to the two bases over which the United States exercises exclusive jurisdiction,11 and we vacate and remand the case to the District Court for consideration of further arguments, relevant to the nonappropriated fund activities on all four bases, that it did not reach.

I

A. With respect to the two bases over which it claims exclusive jurisdiction, Keesler Air Force Base and the Naval Construction Battalion Center, the Government places principal reliance upon Art. I, § 8, cl. 17, of the Constitution. That clause empowers Congress to 'exercise exclusive Legislation . . . over all Places purchased by the Consent of the Legislature of the State in which the Same shall be, for the Erection of Forts, Magazines, Arsenals, dock-Yards, and other needful Buildings.'

In Pacific Coast Dairy, Inc. v. Dept. of Agriculture, 318 U.S. 285, 63 S.Ct. 628, 87 L.Ed. 761 (1943), the Court considered that clause sufficient to render ineffective an attempt by the State of California to fix the prices at which California milk producers could sell milk to military authorities at Moffett Field, over which the United States exercised exclusive jurisdiction.

'When the federal government acquired the tract (upon which Moffett Field was located), local law not inconsistent with federal policy remained in force until altered by national legislation. The state statute involved was adopted long after the transfer of sovereignty and was without force in the enclave. It follows that contracts to sell and sales consummated within the enclave cannot be regulated by the California law. To hold otherwise would be to affirm that California may ignore the Constitutional provision that 'This Constitution, and the Laws of the United States which shall be made in Pursuance thereof; . . . shall...

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