An Arkansas corporation, organized for profit and having its
only place of business within the Government Reservation known as
Hot Springs National Park, maintained and operated, under a
long-term lease from the Secretary of the Interior, a bath house
which it erected and equipped. The operation and use of the bath
house facilities were subject to regulations promulgated by the
Department of the Interior. The corporation had more than eight
persons in its employ.
Held:
1. The corporation was not an "instrumentality of the United
States" within the meaning of the federal Social Security Act,
Page 308 U. S. 359
and was not, under § 907, exempt from the tax imposed by that
Act. P.
308 U. S.
362.
2. The corporation was subject to the tax imposed by the
Arkansas Unemployment Compensation Law -- a law reciprocal to, and
integrated with, the federal Social Security Act. P.
308 U.S. 363.
3. That Arkansas was authorized by Congress to impose the tax is
implied from the fact that the corporation is subject to the
federal tax and from the design of the federal Act to provide a
cooperative system of state and federal taxation for social
security in which the States were in effect invited to tax the same
classes of employers as are taxed under the federal Act. P.
308 U. S.
364.
In the absence of any declaration to the contrary, it is a fair
presumption
semble that the purpose of Congress was to
have the state law closely coterminous with its own.
4. The authority of Arkansas to impose the tax in question is
merely an extension of the power to tax as personal property all
structures and other property in private ownership on the
Reservation, conferred by the Act of March 3, 1891. Pp.
308 U. S.
364-365.
198 Ark. 91, 127 S.W.2d 802, affirmed.
Certiorari,
post, p. 508, to review the affirmance by
the State Supreme Court of a decree of the lower state court which
sustained a demurrer to and dismissed a bill to enjoin the
collection of a tax imposed under the Arkansas Unemployment
Compensation Law.
MR. JUSTICE DOUGLAS delivered the opinion of the Court.
Section 901 of the Social Security Act, 49 Stat. 620, levies an
excise tax, equal to specified percentages of total wages paid, on
"every employer" of eight or more persons with respect to their
"employment." By § 902, the taxpayer may credit against this tax
the amount of contributions paid by him into an unemployment fund
under a state law, such credit, however, not to exceed 90 percent
of the tax, and to be allowed only for contributions made
Page 308 U. S. 360
under the laws of states approved and certified by the Social
Security Board in accordance with the standards prescribed in §
903. By § 907, the term "employment" is defined to mean "any
service, of whatever nature, performed within the United States by
an employee for his employer" except,
inter alia, service
performed "in the employ of the United States Government or of an
instrumentality of the United States."
Petitioner is an Arkansas corporation, organized for profit and
with its only place of business situated on the United States
Government Reservation known as Hot Springs National Park. It
operates a bath house, which it erected and equipped, under a
long-term lease from the Secretary of the Interior. By the terms of
that lease, the operation and use of the bath house facilities are
subject to certain control by the Department of the Interior, which
in the main relate to the number of bath tubs which may be used,
the charges to the public, the qualifications of employees, the
maintenance and care of the premises, a prohibition of employment
of agents to solicit patronage, and control over an assignment or
transfer of the lease or any interest therein.
Respondents are officials of the Arkansas charged with the duty
of enforcement of the Arkansas Unemployment Compensation Law,
[
Footnote 1] an act reciprocal
to, and integrated with, the Social Security Act. [
Footnote 2] Pursuant to that act, respondents
sought to collect from petitioner as an employer the required
contributions for the calendar year 1937. Petitioner paid into the
Treasury of the United States the tax required by the Social
Security Act
Page 308 U. S. 361
for that period. But it refused to pay the state tax, and sued
in the state court to enjoin its collection on the grounds,
inter alia, that it is an instrumentality of the United
States, and that certain acts of Congress and statutes of Arkansas
exempt it from such taxation. The Supreme Court of Arkansas
affirmed a decree sustaining a demurrer to the bill and dismissing
it on the grounds that the Arkansas statute was applicable to
petitioner and that, on construction of the acts in question,
petitioner did not have the claimed immunity, 127 S.W.2d 802. We
granted certiorari because that decision was asserted to be
repugnant to the acts vesting exclusive jurisdiction over the Hot
Springs Reservation in the United States. 308 U.S. 508.
Petitioner's contention here, as below, is based primarily on
the Act of Congress of March 3, 1891, 26 Stat. 842, whereby the
consent of the United States was given
"or the taxation, under the authority of the laws of the
Arkansas applicable to the equal taxation of personal property in
that State, as personal property of all structures and other
property in private ownership on the Hot Springs Reservation
(National Park). [
Footnote 3]
Petitioner points
Page 308 U. S. 362
out that the tax imposed by the Social Security Act against
which appropriate credits may be made for contributions under state
laws is laid, as stated by this Court in
Steward Machine Co. v.
Davis, 301 U. S. 548,
301 U. S.
578, 'as a duty, an impost, or an excise upon the
relation of employment;' and that, as held by the Supreme Court of
Arkansas, the tax in question is 'not a tax on personal property;
nor is it, in any sense, a property tax.' 127 S.W.2d 805.
Therefore, petitioner concludes that the United States did not
confer on the state of Arkansas the power to impose such a tax, but
retains its sovereign jurisdiction in that regard, since the power
of Arkansas to tax was limited to the enumerated property
taxes."
We agree with the Supreme Court of Arkansas that the state had
jurisdiction to impose the tax in question.
There can be no question but that petitioner is liable for the
tax levied by § 901 of the Social Security Act, unless it is
exempted by that portion of § 907 which relieves "an
instrumentality of the United States" from that duty. But it seems
clear that petitioner is not, within the meaning of the Social
Security Act, such an instrumentality. The mere fact that a private
corporation conducts its business under a contract with the United
States does not make it an instrumentality of the latter.
Fidelity & Deposit Co. v. Pennsylvania, 240 U.
S. 319. Petitioner's lease from the Secretary of the
Interior did not convert it into such an instrumentality.
Petitioner "is engaged in its own behalf, not the government's, in
the conduct of a private business for profit."
See Federal
Compress & Warehouse Co. v. McLean, 291 U. S.
17,
291 U. S. 23.
Though it acts with the Government's permission and has received a
privilege from the Government, it does not exercise that privilege
on behalf of the latter.
See Broad River
Power
Page 308 U. S. 363
Co. v. Query, 288 U. S. 178,
288 U. S. 180.
The control reserved by the Government for protection of a
governmental program and the public interest is not incompatible
with the retention of the status of a private enterprise.
See
Federal Compress & Warehouse Co. v. McLean, supra. That
control, being wholly supervisory, is not to be differentiated from
the type of control which the United States may reserve over any
independent contractor without transforming him into its
instrumentality.
See James v. Dravo Contracting Co.,
302 U. S. 134,
302 U. S. 149.
In effect, petitioner concedes the point by admitting its liability
under the Social Security Act.
That petitioner is subject to the Social Security Act is
extremely relevant to the solution of the problem at hand. For that
Act laid the foundation for a cooperative endeavor between the
states and the nation to meet a grave emergency problem. As pointed
out by this Court in
Steward Machine Co. v. Davis, supra,
p.
301 U. S. 588,
that Act was an attempt to find a method by which the states and
the federal government could "work together to a common end." Prior
thereto, many states had "held back through alarm lest, in laying
such a toll upon their industries, they would place themselves in a
position of economic disadvantage as compared with neighbors or
competitors,"
id., p.
301 U. S. 588.
The Act was designed, therefore, to operate in a dual fashion --
state laws were to be integrated with the Federal Act; payments
under state laws could be credited against liabilities under the
other. That it was designed so as to bring the states into the
cooperative venture is clear. The fact that it would operate though
the states did not come in does not alter the fact that there were
great practical inducements for the states to become components of
a unitary plan for unemployment relief. It is this invitation by
the Congress to the states which is of importance to the issue
Page 308 U. S. 364
in this case. For certainly, under the coordinated scheme which
the act visualizes, when Congress brought within its scope various
classes of employers, it, in practical effect, invited the states
to tax the same classes. Hence, if there were any doubt as to the
jurisdiction of the states to tax any of those classes, it might
well be removed by that invitation, for, in absence of a
declaration to the contrary, it would seem to be a fair presumption
that the purpose of Congress was to have the state law as closely
coterminous as possible with its own. To the extent that it was
not, the hopes for a coordinated and integrated dual system would
not materialize.
Hence, it is our view that, on the facts of this case, Congress
has given Arkansas implied authority to tax petitioner under its
Unemployment Compensation Law, since the Congress has included
under the Social Security Act employers such as petitioner. Clear
evidence of a contrary intention would, of course, negative the
existence of the implied authority. But here, there is none. That
conclusion is strengthened by the exemption of certain classes of
employers from the sweep of the Federal Act. Thus, the exclusion of
federal instrumentalities from the scope of the Federal Act, and
hence from the complementary state systems, emphasizes the purpose
to exclude from this statutory system only that well defined and
well known class of employers who have long enjoyed immunity from
state taxation. Had it been desired to exempt the equally well
known class, of which petitioner is a member, so as to save it from
reciprocal state systems, it would seem that an equally clear
exception would have been made.
Whether the same result would follow in case the cession act had
absolutely forbidden a state to impose any tax on petitioner we
need not decide. For here, Arkansas did have a prior express power
to tax petitioner's property. The implied authority which we here
find to
Page 308 U. S. 365
exist is therefore used not to override an earlier express
authority but merely to extend it to a degree. For, in final
analysis, the Arkansas tax does have some relation to the use of
petitioner's property. The existence of the implied authority does
not, therefore, do violence to the earlier statutory grant.
Affirmed.
MR. JUSTICE REED concurs on the ground that the Act of Congress
of March 3, 1891, 26 Stat. 842, in which the United States
consented "for the taxation . . . as personal property of all
structures and other property in private ownership on the Hot
Springs Reservation [National Park]," should be interpreted to give
consent to the application of the Arkansas Unemployment
Compensation Law.
Collins v. Yosemite Park & Curry
Co., 304 U. S. 518,
304 U. S. 532,
304 U. S.
534.
[
Footnote 1]
Act No. 155, p. 529, approved February 26, 1937, Pope's Digest
§§ 8549
et seq.
[
Footnote 2]
The Arkansas Unemployment Compensation Law was certified and
approved by the Social Security Board under § 903 on March 9, 1937.
See Third Annual Report of the Social Security Board,
1938, p. 175.
[
Footnote 3]
The cession act of Arkansas was Act No. 30, p. 52, approved
February 21, 1903. It "ceded and granted" to the United States
"exclusive jurisdiction" over the area in question
"to be exercised so long as the same shall remain the property
of the United States; provided, that this grant of jurisdiction
shall not prevent the execution of any process of the State, civil
or criminal, on any person who may be on such reservation or
premises; provided, further, that the right to tax all structures
and other property in private ownership on the Hot Springs
reservation accorded the State by the Act of Congress approved
March 3rd, 1901, is hereby reserved to the Arkansas."
This cession was accepted by the Act of Congress of April 20,
1904, 33 Stat. 187. As to Arkansas' asserted right to tax property
in the reservation prior to the Act of Congress of March 3, 1891,
see Ex parte Gaines, 56 Ark. 227, 19 S.W. 602.
For earlier Acts of Congress dealing with the rights of the
United States to the Hot Springs Reservation,
see 4 Stat.
505; 20 Stat. 258. The early history of conflicting claims to these
hot springs is reviewed in the
Hot Springs Cases,
92 U. S. 698.
See also Arlington Hotel Co. v. Fant, 278 U.
S. 439.