United States v. State of New York, 2503.

• Decision Date: 17 November 1942
• Docket Number: No. 2503.,2503.
• Citation: 48 F. Supp. 15
• Parties: UNITED STATES v. STATE OF NEW YORK et al.
• Court: U.S. District Court — Northern District of New York

48 F. Supp. 15

UNITED STATES v. STATE OF NEW YORK et al.

No. 2503.

District Court, N. D. New York.

November 17, 1942.

Ralph L. Emmons, U. S. Atty., of Binghamton, N. Y. (B. F. Tompkins, Asst. U. S. Atty., of Syracuse, N. Y., Samuel O. Clark, Jr., Asst. Atty. Gen., and Andrew D. Sharpe and Alvin J. Rockwell, Sp. Assts. to Atty. Gen., of counsel), for plaintiff.

John J. Bennett, Jr., Atty. Gen., of New York (Henry Epstein, of Albany, N. Y., Milton Kaplan, of Cortland, N. Y., and Jack Goodman, of Albany, N. Y., of counsel), for the State of New York.

Schwarte, Slade, Harrington & Goldsmith, of Saratoga Springs, N. Y. (John A. Slade, and Denis J. Harrington, both of Saratoga Springs, N. Y., of counsel), for Saratoga Springs Commission and Saratoga Springs Authority.

BRYANT, District Judge.

This is a suit for the collection of taxes, penalties and interest in the amount of $4,473.50, and additional interest from various dates between December 14, 1932, and January 3, 1937, inclusive, accruing under section 615(a) (5) of the Revenue Act of 1932, 26 U.S.C.A. Int.Rev.Acts, page 613.

The question at issue is whether, in bottling for sale and selling certain mineral and table water, the State of New York and its agencies, Saratoga Springs Commission and Saratoga Springs Authority, are immune under the Federal Constitution from the taxes imposed by said Revenue Act. This Act imposed upon all natural or artificial mineral or table water "sold by the producer, bottler, or importer thereof, in bottles or other closed containers, at over 12½ cents per gallon, a tax of 2 cents per gallon".

There exist at and in the vicinity of Saratoga Springs, New York, mineral springs having a recognized medicinal value, the waters of which are prescribed by physicians both for bathing and internal use. Ever since Indian days these waters have been drunk and used for bathing purposes by vast numbers of people. Prior to the year 1912, a number of the springs had been acquired, and additional springs had been drilled, by private companies engaged in the extraction of the natural carbonic acid gas from the waters for commercial use. In order to increase the flow of these springs, pumps had been installed. As a result of this usage, immediately prior to the year 1911, no water flowed from any of the previous flowing or spouting springs; the water level had sunk several hundred feet below the surface of the ground and the springs were in danger of total extinction. Commencing in the year 1911, the State of New York, for the purpose of restoring the springs and preserving the waters for the benefit of the people of the State and the public generally, acquired all of the then existing springs. Title to all of the lands were taken in the name of the State. These lands, and the facilities located upon them, are usually referred to as the "Saratoga Reservation".

After acquisition by the State and prior to 1930, a private corporation, operating under a lease from the State, bottled and sold mineral and table water taken from the springs.

Defendant Saratoga Springs Commission was created by Chapter 866 of the New York Laws of 1930 as a temporary commission for the term of seven years and was continued as a permanent commission in the State Conservation Department by Chapter 279 of the Laws of 1937. It is a public agency of the State of New York. Its activities and liabilities were and are those of the State. It cannot sue nor be sued in its own name. In 1930, soon after creation, it took over the custody and control of the Reservation. One of its first acts was the purchase of the private corporation's lease and its rights to bottle and sell waters. With money appropriated by the State, the Commission built a modern and efficient bottling works and on May 1, 1932, took over the bottling and sale of the waters. It continued this activity until 1933.

In 1933, Saratoga Springs Authority came into existence under Chapter 208 of the New York Laws of 1933. It is an agency of the State of New York, a public benefit corporation with its powers, duties and purposes prescribed by law. It may sue and be sued in its own name without joining the State. In 1933, soon after creation, it took over the custody, control and operation of the Reservation. Since that time, among other things, it has carried on the business of bottling and selling mineral and spring water.

The State of New York has expended, in the purchase of lands and the improvements erected thereon, in addition to $3,200,000 received as a loan from the Reconstruction Finance Corporation, approximately $5,620,500. With moneys appropriated and borrowed as above stated, the Commission and the Authority, pursuant to authorization of the New York Legislature, have constructed a drink hall, two bath houses for administering mineral baths, an administration and research laboratory building which includes a small theatre, a bottling works (referred to above), a recreation center with swimming pool, golf course, outdoor gymnasium, tennis courts and other facilities for outdoor recreation and a hotel-sanitarium. They have also remodeled a second drink hall located in the downtown business section of the City. The foregoing buildings and facilities, as well as two older bath houses and certain drink pavillions on the premises at the time of purchase, are located upon and are administered as a part of the Reservation. All of these buildings, except the hotel-sanitarium and the theatre, were operated by the Saratoga Springs Commission during the period June, 1932, to September, 1933, inclusive, and, since the latter date, have been operated by the Saratoga Springs Authority. The Authority also operates a bus line from the City of Saratoga to the baths and springs on the Reservation. The...