United States v. State Tax Commission of Mississippi 8212 548

• Decision Date: 02 June 1975
• Docket Number: No. 74,74
• Parties: UNITED STATES, Appellant, v. STATE TAX COMMISSION OF the State of MISSISSIPPI et al. —548
• Court: U.S. Supreme Court

421 U.S. 599

95 S.Ct. 1872

44 L.Ed.2d 404

UNITED STATES, Appellant,

v STATE TAX COMMISSION OF the State of MISSISSIPPI et al.

No. 74—548.

Argued April 22, 1975.

Decided June 2, 1975.

Syllabus

A Mississippi Tax Commission regulation requires out-of-state liquor distillers and suppliers to collect from military installations within Mississippi, and remit to the Commission, a tax in the form of a wholesale markup on liquor sold to the installations. The United States has four military installations in Mississippi, exercising exclusive jurisdiction over two and concurrent jurisdiction over the other two. The United States paid under protest the markup on liquor purchased from out-of-state distillers by the various nonappropriated fund activities at these installations, and brought action to have the regulation declared unconstitutional and for other relief. After this Court's reversal of a three-judge District Court's opinion denying relief, United States v. Mississippi Tax Comm'n, 412 U.S. 363, 93 S.Ct. 2183, 37 L.Ed.2d 1, that court on remand again denied relief. Held: Viewing the markup as a sales tax, the legal incidence of the tax rests upon instrumentalities of the United States as the purchasers, First Agricultural Nat. Bank v. Tax Comm'n, 392 U.S. 339, 88 S.Ct. 2173, 21 L.Ed.2d 1138, and hence the markup is unconstitutional as a tax imposed upon the United States and its instrumentalities, McCulloch v. Maryland, 4 Wheat. 319, 4 L.Ed. 579. Pp. 604-614.

(a) Since the legal incidence of the tax is upon the United States, in view of the requirement of the regulation that the tax be passed on to the purchaser, the federal immunity with respect to sales of liquor to the two exclusively federal enclaves is preserved by § 107(a) of the Buck Act. Under that provision § 105(a) of the Act, which precludes any person from being relieved of any state sales or use tax on the ground that the sale or use occurred in whole or in part within a federal area, 'shall not be deemed to authorize the levy or collection of any tax on or from the United States or any instrumentality thereof.' Pp. 611-613.

(b) The Twenty-first Amendment did not abolish federal immunity with respect to taxes on the sales of liquor to the concurrent- jurisdiction bases. Cf. United States v. Mississippi Tax Comm'n, supra. Pp. 613-614.

378 F.Supp. 558, reversed.

Stuart A. Smith, Washington, D.C., for appellant.

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

Mr. Justice BRENNAN delivered the opinion of the Court.

Regulation 25 of the Mississippi State Tax Commission requires out-of-state liquor distillers and suppliers to collect from military installations within Mississippi, and remit to the Commission, a tax in the form of a wholesale markup of 17% to 20% on liquor sold to the installations.¹ The United States has four military in- stallations in the State. Exclusive federal jurisdiction is exercised over two of the installations, Keesler Air Force Base and the Naval Construction Battalion Center.² The United States and Mississippi exercise concurrent jurisdiction over the other two installations, Columbus Air Force Base and Meridian Naval Air Station. The issue presented on this appeal is whether Regulation 25 imposes an unconstitutional state tax upon these federal instrumentalities.

I

The controversy between the United States and the Tax Commission over Regulation 25 is here for the sec- ond time. Shortly after adoption of the Regulation, the United States asserted before the Commission that the markup was unconstitutional as a tax upon federal instrumentalities, and proposed an escrow account for the amount of the tax pending a judicial determination of its legality. The Commission refused and advised out-of-state distillers by letter that the markup 'must be invoiced to the Military and collected directly from the Military . . .' or the distillers would face criminal prosecution and delistment of their authority to sell liquor in Mississippi. The United States thereupon paid the markup under protest and brought this action in the District Court for the Southern District of Mississippi. The complaint sought a declaratory judgment that Regulation 25 imposed an unconstitutional tax on federal instrumentalities, an injunction against its enforcement, and a refund of the sums paid under protest.³ The Tax Commission moved for summary judgment. A three-judge District Court granted the Commission's motion. 340 F.Supp. 903 (1972). The District Court concluded that despite Art. I, § 8, cl. 17, of the Constitution,⁴ the Twenty-first Amendment permitted the Tax Commission to apply the markup to out-of-state purchases destined for nonappropriated fund activities on the two installations, Kessler and the Naval Construction Battalion Center, over which the United States exercises exclusive jurisdiction, and that therefore, a fortiori, the liquor sales made on the two bases over which the United States and Mississippi exercise concurrent jurisdiction, Meridian and Columbus, are similarly subject to the Mississippi tax. We reversed and remanded for further proceedings. We held that the court erred in ruling that the Twenty-first Amendment empowered the Tax Commission to apply the markup to transactions between out-of-state distillers and nonappropriated fund activities on the two exclusively federal enclaves, and held that this conclusion also eliminated the essential premise of the District Court's decision concerning the two concurrent jurisdiction bases. 412 U.S. 363, 93 S.Ct. 2183, 37 L.Ed.2d 1 (1973).

There were, however, other issues addressed to Regulation 25 that had not been reached by the District Court. We therefore remanded the case for that court's initial consideration and determination of the issues. In respect to the two exclusively federal enclaves, the Tax Commission argued that the markup might properly be viewed as a sales tax, and that the United States had consented to the imposition of such a 'tax' under the Buck Act of 1940, now 4 U.S.C. §§ 105—110. Section 105(a) provides that no person may be relieved of any sales or use tax levied by a State on the ground that the sale or use occurred in whole or part within a federal area. But § 107(a) provides that § 105(a) 'shall not be deemed to authorize the levy or collection of any tax on or from the United States or any instrumentality thereof . . ..' We directed that, upon remand, the District Court address and determine the questions whether the markup should be treated as a tax on sales occurring within a federal area within the meaning of § 105(a), and, if so, whether the exception contained in § 107(a) nevertheless preserves the federal immunity with respect to transactions with nonappropriated fund activities on the two exclusively federal enclaves. 412 U.S. at 378—379, 93 S.Ct., at 2192—2193.

The Buck Act questions are irrelevant to the markup as applied to the two concurrent jurisdiction bases, and, therefore, the United States argued that the markup is a tax upon instrumentalities of the United States that is unconstitutional under McCulloch v. Maryland, 4 Wheat. 316, 4 L.Ed. 579 (1819). We directed that the District Court also address and decide the instrumentality argument on remand. 412 U.S., at 380—381, 93 S.Ct., at 2193—2194.⁵

II

On the remand the District Court held, as to the exclusively federal enclaves, that the markup constituted a 'sales or use tax' within the meaning of § 105(a) of the Buck Act, and that the exception in § 107(a) for taxes upon federal instrumentalities was inapplicable because Regulation 25 imposes the legal incidence of the tax upon the distillers, and not upon any federal instrumentality, 378 F.Supp. 558, 570—573 (1974). For the same reason, the District Court held that the tax upon the sales to the two concurrent jurisdiction bases was not an unconstitutional tax upon instrumentalities of the United States. Id., at 569. We again noted probable jurisdiction, 419 U.S. 1104, 95 S.Ct. 773, 42 L.Ed.2d 800 (1975). We reverse.

III

The exception in § 107(a) is plainly a congressional preservation of federal immunity from any state tax that would violate the principle of McCulloch v. Maryland, supra, prohibiting state taxation of instrumentalities of the United States. If Regulation 25 is invalid under that principle, it is invalid in its imposition of the markup upon all out-of-state purchases, both those destined for the nonappropriated fund activities on the exclusive jurisdiction bases, and those destined for those activities on the concurrent jurisdiction bases. We therefore turn to our reasons for concluding that Regulation 25 is an unconstitutional tax upon instrumentalities of the United States.

Before 1966, Mississippi prohibited the sale or possession of alcoholic beverages within its borders. In that year, however, the state legislature enacted the 'Local Option Alcoholic Beverage Control Law,' Miss.Code Ann. § 67—1—1 et seq., which created the State Tax commission as the sole importer and wholesaler of alcoholic beverages, not including malt liquor, in the State, Miss. Code Ann. § 67—1—41. The statute authorized the Tax Commission to purchase intoxicating liquors and sell them 'to authorize 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 seem(s) right and proper in keeping with the provisions and purposes of this chapter.' Ibid. The legislature also directed the Commission to add to the cost of all alcoholic beverages a price markup designed to cover the cost of operation of the wholesale liquor business, yield a reasonable profit, and keep Mississippi's liquor prices competitive with those of neighboring States, Miss.Code Ann. § 27—71—11. Generally, the wholesale markup was 17% on distilled spirits and 20% on wine.

...