Pursuant to a contract with the United States for the production
of ordnance, a contractor installed machinery in his mill. In the
assessment of the mill for state taxes, the value of the machinery
1. Whether the machinery was property of the United States was a
federal question. P. 322 U. S.
2. Title to the machinery was in the United States. P.
322 U. S.
3. The state tax law, so far as it purports to authorize
taxation of the property interests of the United States in the
machinery in the contractor's plant, or to use that interest to tax
or to enhance the tax upon the Government's bailee, violates the
Federal Constitution. P. 322 U. S.
4. The claim in this case that immunity from state taxation was
waived is unsupported. P. 322 U. S.
(a) A provision of the contract requiring the contractor to
abide by the "applicable" state law was inadequate to waive federal
immunity. P. 322 U. S.
(b) A provision of the contract whereby the Government was
obligated to pay certain taxes of the contractor did not operate to
waive immunity. P. 322 U. S.
Page 322 U. S. 175
5. The invalidity of the tax was not dependent upon where it
economic burden fell. P. 322 U. S.
6. Local government may not impose either compensatory or
retaliatory taxes on property interests of the Federal Government.
P. 322 U. S.
7. The contractor, upon whom the tax was laid, and the
Government, as intervenor, having made timely insistence in the
proceeding below that the state tax law as applied violated the
Federal Constitution, and the highest court of the State having
rendered final judgment against the claim of federal right, this
Court has jurisdiction on appeal. Jud.Code § 237(a). P.
322 U. S.
347 Pa.191, 32 A.2d 236, reversed.
Appeal from the reversal of a judgment which held a state tax
invalid under the Federal Constitution.
MR. JUSTICE JACKSON delivered the opinion of the Court.
We are called upon to solve another of the recurring conflicts
between the power to tax and the right to be free from taxation
which are inevitable where two governments function at the same
time and in the same territory.
Page 322 U. S. 176
In arguing the case of McCulloch v. Maryland,
Martin, Attorney General of Maryland, himself a member of the
Constitutional Convention, said,
"The whole of this subject of taxation is full of difficulties,
which the Convention found it impossible to solve in a manner
entirely satisfactory. The first attempt was to divide the subjects
of taxation between the State and the national government. This
being found impracticable, or inconvenient, the State governments
surrendered altogether their right to tax imports and exports, and
tonnage, giving the authority to tax all other subjects to
Congress, but reserving to the States a concurrent right to tax the
same subjects to an unlimited extent. This was one of the anomalies
of the government the evils of which must be endured or mitigated
by discretion and mutual forbearance."
McCulloch v. Maryland,
4 Wheat. 316, 376 [see printed
version for argument of counsel]. Where discretion and forbearance
have failed, it often has fallen to this Court to determine
specific cases for which the Convention was unable to agree upon a
general rule. Looking backward, it is easy to see that the line
between the taxable and the immune has been drawn by an unsteady
But, since 1819, when Chief Justice Marshall in the
case expounded the principle that properties,
functions, and instrumentalities of the Federated Government are
immune from taxation by its constituent parts, this Court never has
departed from that basic doctrine or wavered in its application. In
the course of time. it held that. even without explicit
congressional action. immunities had become communicated to the
income or property or transactions of others because they in some
manner dealt with or acted for the Government. [Footnote 1
Page 322 U. S. 177
recent years, this Court has curtailed sharply the doctrine of
implied delegated immunity. [Footnote 2
] But unshaken, rarely questioned, and indeed
not questioned in this case is the principle that possessions,
institutions, and activities of the Federal Government itself, in
the absence of express congressional consent, are not subject to
any form of state taxation. The real controversy here is whether,
especially in view of recent decisions, taxing authorities of the
Pennsylvania have infringed this admitted immunity.
Mesta Machine Company, an appellant with the United States,
exists as a corporation under the laws of Pennsylvania, and has a
manufacturing plant in the County of Allegheny, of that
Commonwealth, the County being appellee herein. It is engaged in
the manufacture of heavy machinery. In October 1940, the War
Department desired to produce a quantity of large field guns. It
could have assembled an organization, created a government-owned
corporation, and erected a plant which would have been wholly tax
immune. Clallam County v. United States, 263 U.
. But, for reasons of time and policy, it chose to
utilize a going concern under private management and ownership.
Mesta's plant was not equipped for the manufacture of ordnance. It
was agreed that certain additional equipment specially required
Page 322 U. S. 178
the work should be furnished at Government cost, and should
remain the property of the United States.
The basic arrangement between Mesta and the Government was
provided for by three separate titles of a single contract, made in
October, 1940. A title was devoted to each feature of the
arrangement, being generally: procurement of Government-owned
equipment at Government cost, lease of such equipment by the
Government to Mesta, and Mesta's undertaking to make and deliver
the guns at a fixed price each. In February, 1941, a supplemental
contract was made.
Under the first title of the contract, machinery was to be
procured in three possible ways: Mesta, as an independent
contractor and not as agent of the Government, could purchase it;
Mesta could manufacture it; or the Government, at its option, could
furnish any part of it. In carrying out the agreement, Mesta
manufactured one machine, the Government furnished eight gun-boring
lathes and two rifling machines from its Watervliet Arsenal, and
the rest Mesta purchased from other machine tool manufacturers. The
machinery bought or built by Mesta was inspected and accepted on
behalf of the United States, which thereupon compensated Mesta as
agreed. The contract provided that title to all such property
should vest in the Government upon delivery at the site of work and
inspection and acceptance.
By the second title of the contract, the Government leased this
equipment to Mesta for the period during which guns are
manufactured by it under this contract or later supplements. As
rental, Mesta agreed to pay the sum of one dollar. Mesta was
permitted to use the equipment "for the purpose of expediting the
manufacture of guns" and for no other, without consent, except that
such machinery as was "purchased or furnished to supplement its
existing facilities" might be used "for general purposes."
Liability of Mesta for loss, damage, or destruction
Page 322 U. S. 179
of equipment was "that of a bailee under a mutual benefit
bailment." Mesta could not remove any of it without permission, and
at all times it was accessible to Government inspection. On
termination of the gun supply contract, unless a standby contract
was made, Mesta agreed to remove and ship the equipment according
to Government directions, in good condition subject to fair wear
and tear and depreciation.
The leasing title of the contract made no mention of taxation.
The equipment procurement title provided for reimbursement of Mesta
"in the performance of the work under this Title" for payments
"under the Social Security Act and any applicable State or local
taxes, fees, or charges which the Contractor may be required on
account of this contract to pay on or for any plant, equipment,
process, organization, materials, supplies, or personnel."
The gun supply title recited that the contract price did not
"include any tax imposed by any state, county, or municipality
upon the transaction of this purchase of guns. The Government shall
not be liable, directly or indirectly, for the payment of any such
taxes, except that, if the Contractor, after using every effort
short of litigation to procure exemption or refund, as the case may
be, should be compelled to pay to any state, county, or
municipality, any tax upon the transaction of this procurement, an
amount equal to the tax so paid shall be paid by the Government on
demand of the Contractor, in addition to the prices herein
The Government admits liability to reimburse Mesta if it is
obliged to pay tax by reason of the assessment in question
The machinery was bolted on concrete foundations in Mesta's
plant on real property owned by it. It could be removed without
damage to the building.
The present controversy flared when the assessing authorities of
Allegheny County revised Mesta's previously determined assessment
for ad valorem
taxes. They added
Page 322 U. S. 180
thereto the value of the machinery in question, fixed at
$618,000. This included property acquired from other tool
manufacturers as above described, $444,000; that manufactured by
Mesta, $14,000; lathes brought from the Watervliet Arsenal,
$160,000. Mesta protested, and exhausted administrative remedies
without avail, and, on July 30, 1942, paid under protest $5,137.12,
the amount of the tax attributable to this increased
Mesta took a timely appeal allowed by statute to the Court of
Common Pleas. The United States petitioned to intervene, reciting
that it would be required to reimburse Mesta by force of its
contract. Intervention was permitted against objection by the
County, and the United States has participated in the litigation
since. Mesta attacked the assessment under both state and federal
law, claiming that, under the State Tax Law, property belonging to
another was not to be considered a part of its mill, and that, if
construed to authorize assessment and taxation of this machinery,
the statute violated the Federal Constitution.
The Court of Common Pleas held that the State Act authorized the
assessment, but that the machinery here involved was "owned by the
United States," and so, for constitutional reasons, could not be
The Supreme Court of Pennsylvania, on appeal of the County,
reversed, and reinstated the assessment. It held that, under the
state law, regardless of who held the title to it, the machinery
constituted a part of the mill for purposes of assessment, and was
properly assessed as real estate. It acknowledged that property
held by the United States is "beyond the pale of taxation" by a
state, but this assessment, it said, is not against the United
States, but against Mesta, which is operating its mill for private
purposes. If Mesta defaulted in tax payments, the Court held that
"the paramount rights of the government in the
Page 322 U. S. 181
machinery could not be divested or in any way affected;" hence
the government could suffer no loss. Evidence that the machinery
was not owned by Mesta it held to be irrelevant and improperly
admitted. Two Justices dissented.
The United States and Mesta appealed, and we postponed
consideration of jurisdictional questions to the hearing on the
It is denied that the Government has valid title to the
machinery. This contention is urged by the member cities of the
National Institute of Municipal Law Officers, permitted to file a
brief and to argue orally as amici curiae.
is that "the Government is subject to the legal rules applicable to
private transactions." Under Pennsylvania law, transfer of title to
personal property to be good as against subsequent purchasers and
lienors must be accompanied by delivery of possession. They say
that inspection and acceptance by a contracting officer on behalf
of the United States at the Mesta plant did not, under decisional
law of Pennsylvania, amount to delivery of possession to the United
States, and hence that its title is defective. The position of the
County is less extreme. It argued earlier in the litigation that
the machinery became part of Mesta's real estate upon installation,
and that the United States had only "a reversionary interest after
the termination of the contract." It later conceded that title to
the property was not in Mesta "except for tax purposes." The
Pennsylvania Supreme Court thought it immaterial whether title was
in the Government, but said,
". . . this private arrangement between the Mesta Company, the
owner of the land and buildings and operator of the mill, and the
Federal government, the owner of the machinery, which treats the
equipment as personal property and permits
Page 322 U. S. 182
the latter to remove it at the termination of the contract, can
in no way change the legal effect of the Act of assembly which
specifically designates machinery, under these circumstances, as
real estate for tax purposes."
We do not determine whether, under Pennsylvania law, the
retention of possession by Mesta would protect only good faith
purchasers or lienors who relied upon it or whether, as urged by
it also makes the Government's title imperfect
as against these taxing authorities, who were fully advised of the
Government's claim before the assessment was made. Even if the
latter were true, we do not think the state law would be decisive
of the question of title.
The Constitution provides that
"The Congress shall have Power to dispose of and make all
needful Rules and Regulations respecting the Territory or other
Property belonging to the United States. . . ."
Art. IV, Sec. 3, cl. 2. It also gives Congress the power "[t]o
make all Laws which shall be necessary and proper for carrying into
Execution" all powers vested in the Government or in any department
or officer thereof, Art. I, Sec. 8, cl. 18, and it makes the laws
of the United States enacted pursuant thereto
"the supreme Law of the Land, and the Judges in every State
shall be bound thereby, any Thing in the Constitution or Laws of
any State to the Contrary notwithstanding."
Art. VI, cl. 2.
Every acquisition, holding, or disposition of property by the
Federal Government depends upon proper exercise of a constitutional
grant of power. In this case, no contention is made that the
contract with Mesta is not fully authorized by the congressional
power to raise and support armies and by adequate congressional
authorization to the contracting officers of the War Department. It
must be accepted as an act of the Federal Government warranted by
the Constitution and regular under statute.
Page 322 U. S. 183
Procurement policies so settled under federal authority may not
be defeated or limited by state law. The purpose of the supremacy
clause was to avoid the introduction of disparities, confusions and
conflicts which would follow if the Government's general authority
were subject to local controls. The validity and construction of
contracts through which the United States is exercising its
constitutional functions, their consequences on the rights and
obligations of the parties, the titles or liens which they create
or permit, all present questions of federal law not controlled by
the law of any state. Clearfield Trust Co. v. United
States, 318 U. S. 363
Jackson County v. United States, 308 U.
; Carpenter v. Shaw, 280 U.
; Utah Power & Light Co. v. United
States, 243 U. S. 389
United States v. Ansonia Brass & Copper Co.,
218 U. S. 452
see D'Oench, Duhme & Co. v. Federal Deposit Ins.
Corp., 315 U. S. 447
Deitrick v. Greaney, 309 U. S. 190
Federal Land Bank v. Bismarck Lumber Co., 314 U. S.
. Federal statutes may declare liens in favor of the
Government and establish their priority over subsequent purchasers
or lienors irrespective of state recording acts. Detroit Bank
v. United States, 317 U. S. 329
United States v. Snyder, 149 U. S. 210
the Government may avail itself, as any other lienor, of state
recording facilities, in which case, while it has never been denied
that it must pay nondiscriminatory fees for their use, the
recording may not be made the occasion for taxing the Government
property. Federal Land Bank v. Crosland, 261 U.
; Pittman v. Home Owners' Loan Corp.,
308 U. S. 21
We hold that title to the property in question is in the United
States and is effective for tax purposes.
The County denies, however, that it is taxing property belonging
to the United States. First, it says it taxes only the land, which
the United States does not own, and the
Page 322 U. S. 184
machinery is not taxed, but is considered only as an enhancement
of the value of the land to Mesta, its owner. Secondly, it says the
lien of the tax does not encumber, and the process of collection
does not involve any sale or other interference with, the
machinery. The Pennsylvania Supreme Court has upheld the questioned
tax because upon these grounds it concluded that no interference
with the federal function resulted.
"Where a federal right is concerned, we are not bound by the
characterization given to a state tax by state courts or
Legislatures, or relieved by it from the duty of considering the
real nature of the tax and its effect upon the federal right
Carpenter v. Shaw, 280 U. S. 363
280 U. S.
It is not contended that the scheme of taxation employed by
Pennsylvania is anything other than the old and widely used ad
general property tax. This taxation plan involves the
identification and valuation of the variable individual holdings to
be taxed, commonly called the assessment, the application of a
uniform rate calculated on the need for public revenues, and the
collection, in default of payment, by distraint and sale of the
property assessed and taxed. This form of taxation is not regarded
primarily as a form of personal taxation, but rather as a tax
against the property as a thing. Its procedures are more nearly
analogous to procedures in rem
than to those in
While personal liability for the tax may be and
sometimes is imposed, the power to tax is predicated upon
jurisdiction of the property, not upon jurisdiction of the person
of the owner, which often is lacking without impairment of the
power to tax. In both theory and practice, the property is the
subject of the tax, and stands as security for its payment.
The Pennsylvania statutes embody this scheme of taxation. They
are a century old. The basic provision reads:
Page 322 U. S. 185
"The following subjects and property
shall . . . be
valued and assessed, and subject to taxation.
Taxes are "declared to be a first lien on said
" [Footnote 4
(Emphasis supplied.) It is only under these legislative provisions
that the tax in question is laid.
The procedure of the assessors is consistent with no other
theory than that the machinery itself was being assessed and taxed
exactly as land was being assessed and taxed. The Government-owned
machinery was inspected and itemized by the assessor, each machine
was then separately appraised by a machinery expert, and the
aggregate full values of $618,000 were carried into the assessment.
The assessment against Mesta was entered in the books of the
assessors as follows: "Land, $293,795; Buildings, $1,123,124;
Machinery $2,489,085; Total assessment, $3,906,004." The machinery
item included the value of the Government's property.
The assessors made no claim that the temporary presence of the
Government's machinery actually enhanced the market value or the
use value of Mesta's land. The assessors simply and forthrightly
valued Mesta's land as land, and the Government's machines as
machinery, and added the latter to the former. We discern little
theoretical difference, and no practical difference at all, between
what was done and what would be done if the machinery were taxed in
form. Its full value was ascertained and added to the base to which
the annual rates would apply for county, city, borough, town,
township, school, and poor purposes.
We hold that the substance of this procedure is to lay an ad
general property tax on property owned by the United
Page 322 U. S. 186
It is contended, however, that Government title does not prevent
such state taxation because the incidence of the tax is borne by
Mesta, not the Government, and the taxation creates no lien upon
its property or interference with its function.
The Commonwealth certainly has broad powers and choices of
methods to tax Mesta, a corporation created by it and domiciled and
operating within its borders. The trend of recent decisions has
been to withdraw private property and profits from the shelter of
governmental immunity, but without impairing the immunity of the
State or the Nation itself. Benefits which a contractor receives
from dealings with the Government are subject to state income
taxation. [Footnote 5
received from it may be taxed. [Footnote 6
] The fact that materials are destined to be
furnished to the Government does not exempt them from sales taxes
imposed on the contractor's vendor. [Footnote 7
] But, in all of these cases, what we have
denied is immunity for the contractor's own property, profits, or
purchases. We have not held either that the Government could be
taxed or its contractors taxed because property of the Government
was in their hands. The distinction between taxation of private
interests and taxation of governmental interests, although
sometimes difficult to define, is fundamental in application of the
immunity doctrine as developed in this country.
Mesta has some legal and beneficial interest in this property.
It is a bailee for mutual benefit. Whether such a right of
possession and use in view of all the circumstances could be taxed
by appropriate proceedings we do not decide. Its leasehold interest
is subject to some
Page 322 U. S. 187
qualification of the right to use the property except for gun
manufacture, is limited to the period it engages in such work, and
is perhaps burdened by other contractual conditions. We have held
that, where private interests in property were so preponderant that
all the Government held was a naked title and a nominal interest,
the whole value was taxable to the equitable owner. Northern
Pacific R. Co. v. Myers, 172 U. S. 589
New Brunswick v. United States, 276 U.
. But that is not the situation here, and the
State has made no effort to segregate Mesta's interest and tax it.
The full value of the property, including the whole ownership
interest, as well as whatever value proper appraisal might
attribute to the leasehold, was included in Mesta's assessment.
It is contended the whole value of the property may be reached,
since the impact of the tax is upon Mesta. In support of this, we
are reminded that the tax, so the Supreme Court of Pennsylvania
held, falls upon the real estate alone, because the lien thereof
does not touch the Government's property, which before or after tax
default may be removed. But renunciation of any lien on Government
property itself, which could not be sustained in any event, hardly
establishes that it is not being taxed. The fact is that the lien
on the underlying land is increased because of and in proportion to
the assessment of the machinery. If the tax is collected by selling
the land out from under the machinery, the effect on its usefulness
to the Government would be almost as disastrous as to sell the
machinery itself. The coercion of payment from compelling the
Government to move its property and interrupt production at the
Mesta plant would defeat the purpose of the Government in owning
and leasing it.
We think, however, that the Government's property interests are
not taxable either to it or to its bailee. The "Government" is an
abstraction, and its possession of property largely constructive.
Actual possession and custody
Page 322 U. S. 188
of Government property nearly always are in someone who is not
himself the Government, but acts in its behalf and for its
purposes. He may be an officer, an agent, or a contractor. His
personal advantages from the relationship by way of salary, profit,
or beneficial personal use of the property may be taxed, as we have
held. But neither he nor the Government can be taxed for the
Government's property interest. Rarely does a state or municipality
pursue the Federal Government itself. Most of the immunity cases we
have been called upon to deal with involved assertion of a right to
tax Government property against an individual. In United States
v. Rickert, 188 U. S. 432
this Court decided that improvements made upon lands to which the
United States held title but which were put in possession of
Indians for their benefit remained immune from taxation, and that
cattle, horses, and chattels purchased with the money of the
Government and "put into the hands of the Indians to be used in
execution of the purpose of the government in reference to them"
were likewise immune from taxation. In Van Brocklin v.
Tennessee, 117 U. S. 151
Tennessee attempted to sell for state taxes lands which the United
States owned at the time the taxes were assessed and levied, but in
which it had ceased to have any interest at the time of sale.
There, as here, it was claimed the collection affected only private
persons, whose equities in the matter were at least doubtful, and
that the United States could suffer no harm. The Court held,
however, that the immunity protected the private owner for the tax
had been laid against an interest of the Government which was
beyond the reach of state taxing power. See also Irwin v.
Wright, 258 U. S. 219
Lee v. Osceola & Little River Road Improvement
District, 268 U. S. 643
A state may tax personal property, and might well tax it to one
in whose possession it was found, but it could hardly tax one of
its citizens because of moneys of the
Page 322 U. S. 189
United States which were in his possession as Collector of
Internal Revenue, Postmaster, Clerk of the United States Court, or
other federal officer, agent, or contractor. We hold that
Government-owned property, to the full extent of the Government's
interest therein, is immune from taxation, either as against the
Government itself or as against one who holds it as a bailee.
We find no support for the claim that the immunity has been
waived. Congress certainly has not done so. It is true that the
contract requires Mesta to obey and abide by the "applicable" law
of Pennsylvania. But such language does not require Mesta to submit
to unconstitutional exactions. It clearly is inadequate to waive
federal immunity even if we assume a contracting officer had power
to do so. Likewise any contractual obligation of the War Department
to pay Mesta's taxes does not operate either to waive or to create
an immunity. Nor is the validity of the tax dependent upon the
ultimate resting place of the economic burden of the tax. We also
think it immaterial what, if any, right of reimbursement the
Pennsylvania law grants a lessee against a private lessor in
similar circumstances. State law could not obligate the Central
Government to reimburse for a valid tax, much less for an invalid
Each party urges equities in its favor. The Government points to
the exigencies of war, points to numerous and increasing state
efforts to tax such property, and urges against the decision below
that it is a precedent for taxation of a substantial portion of
property of the Government valued at 7 1/2 billion dollars in the
possession and use of private contractors engaged in war
production. It owns property on private lands, under contracts
similar to this, with a value approximating two billion dollars,
over $257,000,000 of it located in Pennsylvania.
Page 322 U. S. 190
Appellees, and especially the amici,
on the other hand,
point for a different purpose to the amount of Government property
in war production. It is said that increased municipal services, to
serve and protect the influx of war workers, are required in all
communities where large war contracts of this type are placed; that
such local services rely heavily on real estate taxation; that to
exclude property such as this, together with the large real estate
holdings that have been and are being acquired by the Government,
imposes this increased cost on others. While validation of
assessments of this character will measurably increase the cost of
waging the war, it is argued that the Federal Government may
diffuse the cost throughout the country instead of putting a
back-breaking burden on local governments where war plants are
located. For these reasons, we are urged to hold the position of
the Government "unsound as well as inequitable."
Such considerations remind us of our heavy responsibility in
deciding the issues, but hardly provide a guide or alter the usual
principles for decision. The equities in this unfortunate conflict
between the United States and one of its most important industrial
communities are not capable of judicial ascertainment or
equalization. Whether a county loses more than it gains by such
federal activity, and what other federal benefits ought to be
considered if a balance were to be struck between advantages and
disadvantages, we cannot say. The adjustment of benefits and
burdens is for other departments, and studies to that end have been
undertaken. [Footnote 8
] We can
only say that our
Page 322 U. S. 191
constitutional system as judicially interpreted from the
beginning leaves no room for the localities to impose either
compensatory or retaliatory taxation on Government property
interests. Their remedy lies in petition to the Federal Congress,
which also is their Congress.
Our jurisdiction was questioned by appellee's motion to dismiss,
and its consideration was postponed to hearing of the merits. The
argument runs that the tax is laid only upon Mesta, and therefore
only Mesta can question its validity; that, if Mesta does so, it
can be only under the Fourteenth Amendment; that no question has
been assigned under this Amendment, and hence the appeal should be
The questions in this case do not arise under the Fourteenth
Amendment. They depend on provisions adopted and principles settled
long before the Fourteenth Amendment, and which exist independently
The United States was admitted to the case as an intervenor.
Both it and Mesta raised these questions of taxability, as either
may do. The United States may question the taxation in order to
protect its sovereignty over the property in question. Mesta, as
bailee, is under a duty to protect the property, and may protect
itself from unlawful burdens put upon it because of its possession
Page 322 U. S. 192
property. The tax is calculated and imposed on the land and
machinery as a unit, the lien of the assessment on the machinery
becomes a lien on the land which can be taken to pay the tax
occasioned by the machinery. Since the tax must be paid out of
Mesta's property, it is in a position to challenge the validity of
the tax, as was the case in Van Brocklin v. Tennessee,
Both Mesta and the Government made timely insistence
that the Pennsylvania Tax Law, as applied, violates the Federal
Constitution. The highest court of the State rendered final
judgment against the claim of federal right. We have jurisdiction
by appeal. Judicial Code § 237(a). The motion to dismiss is
The Tax Law of the Pennsylvania, as interpreted and applied in
this case, violates the Federal Constitution insofar as it purports
to authorize taxation of the property interests of the United
States in the machinery in Mesta's plant, or to use that interest
to tax or to enhance the tax upon the Government's bailee. The
judgment is reversed, and the cause remanded for further
proceedings not inconsistent with this opinion.
MR. JUSTICE BLACK and MR. JUSTICE DOUGLAS concur in the
See Dobbins v.
16 Pet. 435; Collector
11 Wall. 113; New York ex rel. Rogers
v. Graves, 299 U. S. 401
9 Wheat. 738; Owensboro National Bank v.
Owensboro, 173 U. S. 664
Choctaw, O. & Gulf R. Co. v. Harrison, 235 U.
; Gillespie v. Oklahoma, 257 U.
; Jaybird Mining Co. v. Weir,
271 U. S. 609
Federal Land Bank v. Crosland, 261 U.
; Western Union Telegraph Co. v. Texas,
105 U. S. 460
Leloup v. Port of Mobile, 127 U.
; Indian Motorcycle Co. v. United States,
283 U. S. 570
Panhandle Oil Co. v. Mississippi ex rel. Knox,
277 U. S. 218
Graves v. Texas Co., 298 U. S. 393
See Alabama v. King & Boozer, 314 U. S.
; Graves v. New York ex rel. O'Keefe,
306 U. S. 466
James v. Dravo Contracting Co., 302 U.
; Helvering v. Gerhardt, 304 U.
; Helvering v. Mountain Producers Corp.,
303 U. S. 376
72 P.S.Pa. § 5020-201.
tit. 53, § 2022.
James v. Dravo Contracting Co., 302 U.
Graves v. New York ex rel. O'Keefe, 306 U.
Alabama v. King & Boozer, 314 U. S.
Report on Federal Contributions to States and Local
Governmental Units with Respect to Federally Owned Real Estate,
House Doc. No. 216, 78th Cong., 1st Sess. (1943). This
comprehensive report shows the impossibility of generalizing about
the equities between the Federal Government and a community in
cases dealing with isolated properties. Much federally owned
property is held for the accommodation and service of the locality,
such as the Post Office or the courthouses. Other is held for
general administrative purposes in which the locality has an
interest or for the care of wards, such as veterans, in which local
inhabitants share with others. The report considers all federally
owned real estate and improvements, but not personalty. It shows
that the United States had within Pennsylvania on June 30, 1937,
property costing $278,519,000, with market value of $151,806,000.
The estimated annual tax based on fair market value at local rates
would be $3,152,000. But the average annual federal aid to that
state is reported to be: 1928-30, $6,834,000; 1931-33, $10,791,000;
1934-37, all kinds, $190,071,000 (excluding FERA, CWA, and WPA,
MR. JUSTICE ROBERTS.
I think the judgment of the Supreme Court of Pennsylvania is
right, and should be affirmed for the reasons stated in its
If James v. Dravo Contracting Co., 302 U.
, were not upon our books, or had been decided the
other way, I should agree to the opinion of the Court. In that
case, at the insistence of the United States, this Court held that
a State gross receipts tax upon payments by the United States to a
contractor for erecting structures on United
Page 322 U. S. 193
States property was valid because the tax was not laid upon the
contract, the Government, its property, its officers, or its
instrumentality; was laid upon an independent contractor and was
nondiscriminatory. Although admitting that the payment of the tax
imposed a burden upon the activities of the United States because
it inevitably increased the cost of exercise of its functions, the
Court nonetheless sustained the exaction. I then thought, as I
still think, that the decision overruled a century of precedents in
It was not long before the Government repented its generosity.
Four years later, it insisted, in Alabama v. King &
Boozer, 314 U. S. 1
, that a
state sales tax upon a purchase of building materials by a
contractor who was to incorporate them into a Government project,
and where, upon delivery, inspection, and acceptance, they became
the property of the Government, was so direct a tax on the
Government as to infringe its constitutional immunity. The Court,
however, followed to its logical conclusion the decision in
James v. Dravo Contracting Co.
and expressly overruled
earlier decisions inconsistent with James v. Dravo Contracting
and Alabama v. King & Boozer. *
I concurred in
that decision, feeling myself bound by the Dravo
In this case, as I think, the Court necessarily reverts to the
test of burdensomeness by a form of words and, as a result, again
plunges the applicable principle into confusion.
The truth is that the tax liability of Mesta in respect of its
manufacturing plant has been increased by the presence in the plant
of machinery bailed to the taxpayer by the federal Government. It
is true, too, that, either as a result of the express terms of the
Government's contract with Mesta, the Government's monetary
Page 322 U. S. 194
Mesta will be increased by the imposition of increased tax or,
as in the Dravo
case, if the contractor is liable for an
increase of tax by reason of the fact that he is such contractor,
the Government, in the long run, will have to pay more for goods
and services as a result of such increase.
In order to relieve the Government of this burden, the Court is
now obliged to say that the law of Pennsylvania is something
different from what the Supreme Court of the Commonwealth has
declared it, and that a century of State administrative and
judicial construction is meaningless when the supposed necessity
arises to unburden the Government from the result of State taxation
upon privately owned property.
The law of Pennsylvania is, and always has been, that a tax
imposed on real estate is enhanced in amount by buildings and
machinery placed upon the land with the consent of the owner, even
though he does not own the improvements, but is a mere bailee. The
lien of the tax extends only to the land owned by the taxpayer, and
the bailed improvements are neither under the lien nor subject to
seizure or sale for payment of the tax. But this settled law is
brushed aside, and it is said, notwithstanding these facts, that,
in some indefinable way, Pennsylvania has in truth levied an ad
tax upon property of the United States which is in the
possession of Mesta as bailee. This is nothing in substance but to
say, in the teeth of the Dravo
and King &
cases, that, if a tax levied upon a contractor of the
Government imposes a burden upon the Government's activities, it
violates the constitutional immunity, and must be stricken down.
Whereas, in those cases, the Court accepted the tax for what it was
a tax upon the contractor, and not upon the
Government, here, although, under State law the liability to the
State is that of the contractor and his property, and can, in no
event, be the liability of the Government or its property -- except
as the Government either
Page 322 U. S. 195
contractually assumes the burden or bears it as an incident of
the contractor's burden -- the Court announces that the tax is laid
on the Government's property.
I think the case was decided by the court below on a nonfederal
ground. The decision is pitched solely upon the character and
incidence of the real property tax of the Commonwealth. As that
court, in the light of a hundred years of history, defined the tax
and the tax lien, neither was laid upon or collectable from the
United States or its property. As a result of that decision, Mesta
became liable for an increased tax as a result of certain
transactions with the Government. Unless the doctrine of immunity
from consequent burden on the Government, as the other party to the
contract, is to be reimported into our jurisprudence, the appeal
should be dismissed because the decision below was based upon an
adequate nonfederal ground.
* Panhandle Oil Co. v. Knox, 277 U.
; Graves v. Texas Co., 298 U.
MR. JUSTICE FRANKFURTER, dissenting.
I should like to add a few words to the opinion of my brother
ROBERTS, with which, in the main, I agree.
This controversy is treated by the Court as though it presented
a challenge by Pennsylvania to the authority of the United States.
The case is not entitled, on the facts as I understand them, to
have such importance attributed to it. We are all agreed that a
State must subordinate its policies to the constitutional powers
duly exercised by the United States. War, of course, evokes powers
of government not available in times of peace, but it is no less
true of the war powers of the Government than of the peace powers
that the Constitution and the laws enacted in accordance with it
are "the supreme Law of the Land." United States Constitution, Art.
Implicit in our federal scheme is immunity of the Federal
Government from taxation by the States. After having long been the
subject of differences of opinion, the
Page 322 U. S. 196
extent of this implied immunity was greatly curtailed. The basis
of the doctrine was shifted from that of an argumentative financial
burden to the Federal Government to that of freedom from
discrimination against transactions with the Government and freedom
from direct impositions upon the property and the instrumentalities
of the Government. The decisions in James v. Dravo Contracting
Co., 302 U. S. 134
Alabama v. King & Boozer, 314 U. S.
, mean nothing unless they mean that it is not enough
that the Government may ultimately have to bear the cost of a part
or even the whole of a tax which a State imposes on a third person
who has business relations with the Government, when a State could
impose such a tax upon such a third person but for the fact that
the transaction which gave rise to it was not with a private
person, but with the Government. So much for the scope of the
implied immunity of the Government from state taxation as I
understand the decisions to date. But, in carrying on effectively
the task committed to it, the United States can, I believe, go
beyond the judicial doctrine of implied immunity from taxation. I
have no doubt that Congress, by appropriate legislation, could
immunize those who deal with the Government from sales and property
taxes which States otherwise are free to impose.
On the record before us, Pennsylvania has not challenged the
implied immunity of the Federal Government from taxation, nor has
she sought to tax that which Congress has said should be free from
taxation. Pennsylvania has not taxed property owned by the
Government. Pennsylvania has not used her otherwise unquestioned
power of taxation to discriminate against one dealing with the
Government. Finally, Pennsylvania has not tried to impose a tax
which Congress, in order to facilitate war production, has
forbidden the States to levy.
Page 322 U. S. 197
Pennsylvania merely seeks to enforce a tax assessment against
the owner of lands and buildings in the manner in which she has
made such an assessment for one hundred years. She has assessed
real property concededly owned by Mesta at a valuation increased by
the value of the machinery made available to Mesta by various
arrangements with the Government. But it is the realty that is
being taxed, precisely as other realty is taxed, and by precisely
the same method of determining the value of other realty. If the
machinery which has here been affixed to the land through
arrangements with the Government had been machinery that belonged
to Remington Arms, and Mesta had been operating through Remington
as a subcontractor for the Government, I suppose no one would doubt
that Pennsylvania could assess the value of the land taxed against
Mesta as it was here assessed, quite regardless of the retention of
the title by Remington of the annexed fixtures, the value of which
served to enhance the amount at which the land was assessed. It
cannot alter the nature of the tax as a tax against Mesta's
ownership of the land and buildings whether the enhancing fixtures
belong to the Government or to Remington. Constitutional answers do
at times turn on a nicety, but not on a nicety without at least a
The case thus appears to me one that was decided by the
Pennsylvania Supreme Court on the settled construction of the
Pennsylvania statute as a tax on realty, and not at all as a tax on
the only thing that belongs to the United States -- namely,
machinery annexed to the realty. Here also,
"there can be no pretence that the court adopted its view in
order to evade a constitutional issue, and the case has been
decided upon grounds that have no relation to any federal
Nickel v. Cole, 256 U. S. 222
256 U. S. 225
The only interest which the State here taxed was an interest within
the power of the State to tax; it was not a
Page 322 U. S. 198
federal interest. See Elder v. Wood, 208 U.
, 208 U. S. 232
New Brunswick v. United States, 276 U.
. The rate at which that interest was taxed is
equally a matter for Pennsylvania to determine. In view of the
and Alabama v. King &
there is not before us a constitutionally
immunized burden of the Government. Insofar as the financial burden
has been directly assumed by the Government, it has been so assumed
by arrangements which the contracting officers of the Government
saw fit to make with Mesta.
In respect to the problem we are considering, the constitutional
relation of the Dominion of Canada to its constituent Provinces is
the same as that of the United States to the States. A recent
decision of the Supreme Court of Canada is therefore pertinent. In
City of Vancouver v. Attorney General of Canada,
S.C.R. 23, that Court denied the Dominion's claim to immunity, in a
situation precisely like this, as I believe we should deny the
claim of the Government.