The United States and North Dakota exercise concurrent
jurisdiction over two military bases on which the Department of
Defense (DoD) operates clubs and package stores. In 1986, in order
to reduce the price the military pays for alcoholic beverages sold
on such bases, Congress passed a statute directing that distilled
spirits be "procured from the most competitive source, price and
other factors considered." A DoD regulation also requires that
alcohol purchases be made in such a manner as to obtain "the most
advantageous contract, price and other considered factors."
Although the regulation promises cooperation with state officials,
it denies any obligation to submit to state control or to make
purchases from in-state or state-prescribed suppliers. Since long
before 1986, North Dakota has maintained a liquor importation and
distribution system, under which,
inter alia, out-of-state
distillers/suppliers may sell only to state-licensed wholesalers or
federal enclaves, while licensed wholesalers may sell to licensed
retailers, other licensed wholesalers, and federal enclaves. One
state regulation requires that all persons bringing liquor into the
State file monthly reports, and another requires that out-of-state
distillers selling directly to a federal enclave affix a label to
each individual item indicating that the liquor is for consumption
only within the enclave. After a number of out-of-state distillers
and importers informed military officials that they would not deal
with, or would increase prices to, the North Dakota bases because
of the burden of complying with the two state regulations, the
Government filed suit in the District Court seeking declaratory and
injunctive relief against the regulations' application to liquor
destined for federal enclaves. The court granted the State's motion
for summary judgment, reasoning that there was no conflict between
the state and federal regulations because the state regulations did
not prevent the Government from obtaining beverages at the "lowest
cost." The Court of Appeals reversed, holding that the state
regulations impermissibly made out-of-state distillers less
competitive with local wholesalers.
Held: The judgment is reversed.
856 F.2d 1107 (CA8 1988), reversed.
Justice STEVENS, joined by THE CHIEF JUSTICE, Justice WHITE, and
Justice O'CONNOR, concluded that the state regulations are not
invalid under the Supremacy Clause. Pp.
495 U. S.
430-444.
Page 495 U. S. 424
(a) Under § 2 of the Twenty-first Amendment -- which prohibits
the transportation or importation of intoxicating liquor into a
State for delivery or use therein in violation of state law -- a
State has no power to pass regulations that burden the Federal
Government in an area or over a transaction that falls outside the
State's jurisdiction,
see, e.g., Collins v. Yosemite Park &
Curry Co., 304 U. S. 518, but
has "virtually complete control" over the importation and sale of
liquor and the structure of the liquor distribution system within
the State's jurisdiction,
see California Retail Liquor Dealers
Assn. v. Midcal Aluminum, Inc., 445 U. S.
97,
445 U. S. 110.
Since North Dakota's labeling and reporting regulations fall within
the core of the State's power to regulate distribution under the
Twenty-first Amendment, and unquestionably serve a valid state
interest in prohibiting the diversion of liquor from military bases
into the civilian market, they are supported by a strong
presumption of validity, and should not be lightly set aside,
see, e.g., Capital Cities Cable, Inc. v. Crisp,
467 U. S. 691,
467 U. S. 714.
Pp.
495 U. S.
430-433.
(b) The regulations do not violate the intergovernmental
immunity doctrine. Although they may indirectly affect the Federal
Government's liquor costs, they do not regulate the Government
directly, since they operate only against suppliers.
See, e.g.,
Helvering v. Gerhardt, 304 U. S. 405,
304 U. S. 422.
Nor do they discriminate against the Government or those with whom
it deals, since the regulatory regime of which they are a part
actually favors the Government. All other liquor retailers in the
State are required to purchase from state-licensed wholesalers,
whereas the Government alone has the
option either to do
so or to purchase from out-of-state wholesalers who have complied
with the labeling and reporting requirements. Thus, the regulatory
system does not discriminate with regard to the economic burdens
that result from it.
See Washington v. United States,
460 U. S. 536,
460 U. S.
544-545. Pp.
495 U. S.
434-439.
(c) Congress has not here spoken with sufficient clarity to
preempt North Dakota's attempt to protect its liquor distribution
system. The language of the federal procurement statutes does not
expressly preempt the state reporting and labeling regulations or
address the problem of unlawful diversion. The state regulations do
not directly prevent the Government from obtaining covered liquor
"from the most competitive source, price and other factors
considered," but merely raise the price charged by the most
competitive source, out-of-state shippers. Pp.
495 U. S.
439-441.
(d) The state reporting and labeling requirements are not
preempted by the DoD regulation. That regulation does not purport
to carry a greater preemptive power than the federal statutes. Nor
does the regulation's text purport to preempt any such laws. Its
command to the military to consider various factors in determining
"the most advantageous
Page 495 U. S. 425
contract, price and other considered factors" cannot be
understood to preempt state laws that merely have the incidental
effect of raising costs for the military. Although the regulation
does admonish that military cooperation with local authorities
should not be construed as admitting an obligation to submit to
state control or to buy from in-state or state-prescribed
suppliers, the North Dakota regulations do not require such
actions. Pp.
495 U. S.
442-443.
(e) The present record does not establish the precise burdens
the reporting and labeling laws will impose on the Government, but
there is no evidence that they will be substantial. It is for
Congress, not this Court, to decide whether the federal interest in
procuring the most inexpensive liquor outweighs the State's
legitimate interest in preventing diversion. It would be an unwise
and unwarranted extension of the intergovernmental immunity
doctrine for the Court to hold that the burdens associated with the
regulations -- no matter how trivial -- are sufficient to make them
unconstitutional. Pp.
495 U. S.
443-444.
Justice SCALIA, although agreeing that the availability to the
Government of the option of buying liquor from in-state
distributors saves the labeling regulation from invalidity,
concluded that it does so not because the Government is thereby
relieved of the burden of having to pay higher prices than anyone
else, but only because that option is not a course of action that
the Government has a constitutional right to avoid. The
Twenty-first Amendment is binding on the Government, like everyone
else, and empowers North Dakota to require that all liquor sold for
use in the State be purchased from a licensed in-state wholesaler.
Since letting the Government choose between purchasing label-free
bottles from such wholesalers and purchasing labeled bottles from
out-of-state distillers provides the Government with greater,
rather than lesser, prerogatives than those enjoyed by other liquor
retailers, the labeling requirement does not discriminate against
the United States, and thus does not violate any federal immunity.
Pp.
495 U. S.
444-448.
Justice BRENNAN, joined by Justice MARSHALL, Justice BLACKMUN,
and Justice KENNEDY, agreed that North Dakota's reporting
regulation is lawful. Pp.
495 U. S. 448,
495 U. S. 465,
n.10.
STEVENS, J., announced the judgment of the Court and delivered
an opinion, in which REHNQUIST, C.J., and WHITE and O'CONNOR, JJ.,
joined. SCALIA, J., filed an opinion concurring in the judgment,
post, p.
495 U. S. 444.
BRENNAN, J., filed an opinion concurring in the judgment in part
and dissenting in part, in which MARSHALL, BLACKMUN, and KENNEDY,
JJ., joined,
post, p.
495 U. S.
448.
Page 495 U. S. 426
Justice STEVENS announced the judgment of the Court and
delivered an opinion in which THE CHIEF JUSTICE, Justice WHITE, and
Justice O'CONNOR Join.
The United States and the State of North Dakota exercise
concurrent jurisdiction over the Grand Forks Air Force Base and the
Minot Air Force Base. Each sovereign has its own separate
regulatory objectives with respect to the area over which it has
authority. The Department of Defense (DoD), which operates clubs
and package stores located on those bases, has sought to reduce the
price that it pays for alcoholic beverages sold on the bases by
instituting a system of competitive bidding. The State, which has
established a liquor distribution system in order to promote
temperance and ensure orderly market conditions, wishes to protect
the integrity of that system by requiring out-of-state shippers to
file monthly reports and to affix a label to each bottle of liquor
sold to a federal enclave for domestic consumption. The clash
between the State's interest in preventing the diversion of liquor
and the federal interest in obtaining the lowest possible price
forms the basis for the Federal Government's Supremacy Clause and
preemption challenges to the North Dakota regulations.
Page 495 U. S. 427
I
The United States sells alcoholic beverages to military
personnel and their families at clubs and package stores on its
military bases. The military uses revenue from these sales to
support a morale, welfare, and recreation program for personnel and
their families.
See 32 CFR § 261.3 (1989); DoD Directive
1015.1 (Aug. 19, 1981). Before December, 1985, no federal statute
governed the purchase of liquor for these establishments. From
December 19, 1985, to October 19, 1986, federal law required
military bases to purchase alcoholic beverages only within their
home State.
See Pub.L. 99-190, § 8099, 99 Stat. 1219.
Effective October 30, 1986, Congress eliminated the requirement
that the military purchase liquor from within the State, and
directed that distilled spirits be "procured from the most
competitive source, price and other factors considered." Pub.L.
99661, § 313, 100 Stat. 3853, 10 U.S.C. § 2488(a). [
Footnote 1]
In accordance with this statute, the Department of Defense (DoD)
has developed a joint military purchasing program to buy liquor in
bulk directly from the Nation's primary distributors who offer the
lowest possible prices. Purchases are made pursuant to a DoD
regulation which provides that:
"The Department of Defense shall cooperate with local, state,
and federal officials to the degree that their duties relate to the
provisions of this chapter. However, the purchase of all alcoholic
beverages for resale at any camp, post station, base, or other DoD
installation within the United States shall be in such a manner and
under such conditions as shall obtain for the government the most
advantageous contract, price and other considered factors. These
other factors shall not be construed as meaning any submission to
state control, nor shall cooperation
Page 495 U. S. 428
be construed or represented as an admission of any legal
obligation to submit to state control, pay state or local taxes, or
purchase alcoholic beverages within geographical boundaries or at
prices or from suppliers prescribed by any state."
32 CFR § 261.4 (1989).
Since long before the enactment of the most recent procurement
statute, the State of North Dakota has regulated the importation
and distribution of alcoholic beverages within its borders.
See N.D.Cent.Code, ch. 5 (1987 and Supp.1989). Under the
State's regulatory system, there are three levels of liquor
distributors: out-of-State distillers/suppliers, state-licensed
wholesalers, and state-licensed retailers. Distillers/suppliers may
sell to only licensed wholesalers or federal enclaves.
N.D.Admin.Code § 84-02-01-05(2) (1987). Licensed wholesalers, in
turn, may sell to licensed retailers, other licensed wholesalers,
and federal enclaves. N.D.Cent.Code 5-03-01 (1987). Taxes are
imposed at both levels of distribution. N.D.Cent.Code § 5-03-07
(1987); N.D.Cent.Code, ch. 5739.2 (Supp.1989). In order to monitor
the importation of liquor, the State since 1978 has required all
persons bringing liquor into the State to file monthly reports
documenting the volume of liquor they have imported. The reporting
regulation provides:
"All persons sending or bringing liquor into North Dakota shall
file a North Dakota Schedule A Report of all shipments and returns
for each calendar month with the state treasurer. The report must
be postmarked on or before the fifteenth day of the following
month."
N.D.Admin.Code § 84-02-01-05(1) (1986).
Since 1986, the State has also required out-of-state distillers
who sell liquor directly to a federal enclave to affix labels to
each individual item indicating that the liquor is for domestic
consumption only within the federal enclave. The labels may be
purchased from the state treasurer for a small sum or printed by
the distillers/suppliers themselves according
Page 495 U. S. 429
to a state-approved format. App. 34. The labeling regulation
provides:
"All liquor destined for delivery to a federal enclave in North
Dakota for domestic consumption and not transported through a
licensed North Dakota wholesaler for delivery to such bona fide
federal enclave in North Dakota shall have clearly identified on
each individual item that such shall be for consumption within the
federal enclave exclusively. Such identification must be in a form
and manner prescribed by the state treasurer."
N.D.Admin.Code § 84-02-01-05(7) (1986).
Within the State of North Dakota, the United States operates two
military bases: Grand Forks Air Force Base and Minot Air Force
Base. The State and Federal Government exercise concurrent
jurisdiction over both. [
Footnote
2] Shortly after the effective date of the procurement statute
permitting the military to make purchases from out-of-state, the
state treasurer conducted a meeting with out-of-state suppliers to
explain the labeling and reporting requirements. App. 34. Five
out-of-state distillers and importers thereupon informed federal
military procurement officials that they would not ship liquor to
the North Dakota bases because of the burden of complying with the
North Dakota regulations. [
Footnote
3] A sixth supplier, Kobrand Importers, Inc., increased its
prices from between $.85 and $20.50 per case to reflect the cost of
labeling and reporting.
Page 495 U. S. 430
The United States instituted this action in the United States
District Court for the District of North Dakota seeking declaratory
and injunctive relief against the application of the State's
regulations to liquor destined for federal enclaves. The District
Court denied the United States' cross-motion for summary judgment
and granted the State's motion. The court reasoned that there was
no conflict between the state and federal regulations because the
state regulations did not prevent the Government from obtaining
beverages at the "lowest cost."
675 F.
Supp. 555, 557 (N.D.1987). A divided United States Court of
Appeals for the Eighth Circuit reversed. 856 F.2d 1107 (1988).
While recognizing that "nothing in the record compels us to believe
that the regulations are a pretext to require in-state purchases,"
id. at 1113, the majority held that the regulations
impermissibly made out-of-state distillers less competitive with
local wholesalers.
Ibid. Chief Judge Lay argued in dissent
that the effect on the Federal Government was a permissible
incident of regulations passed pursuant to the State's powers under
the Twenty-first Amendment.
Id. at 1115-1116. We noted
probable jurisdiction, 489 U.S. 1095 (1989), and now reverse.
II
The Court has considered the power of the States to pass liquor
control regulations that burden the Federal Government in four
cases since the ratification of the Twenty-first Amendment.
[
Footnote 4]
See Collins v.
Yosemite Park & Curry Co., 304 U.
S. 518 (1938);
Hostetter v. Idlewild Bon Voyage
Liquor Corp., 377 U. S. 324
(1964);
United States v. Mississippi Tax Comm'n,
412 U. S. 363
(1973) (
Mississippi Tax Comm'n I);
United States v.
Mississippi Tax Comm'n, 421 U. S. 599
(1975) (
Mississippi Tax Comm'n II);
see also Johnson
v.
Page 495 U. S.
431
Yellow Cab Transit Co., 321 U.
S. 383 (1944). In each of those cases, we concluded that
the State has no authority to regulate in an area or over a
transaction that fell outside of its jurisdiction. In
Collins, we held that the Twenty-first Amendment did not
give the States the power to regulate the use of alcohol within a
national park over which the Federal Government had exclusive
jurisdiction. In
Hostetter, we held that the Twenty-first
Amendment conferred no authority to license the sale of tax-free
liquors at an airport for delivery to foreign destinations made
under the supervision of the United States Bureau of Customs.
Mississippi Tax Comm'n I held that the State had no
authority to regulate a transaction between an out-of-state liquor
supplier and a federal military base within the exclusive federal
jurisdiction. And in
Mississippi Tax Comm'n II we held
that the State has no authority to tax directly a federal
instrumentality on an enclave over which the United States
exercised concurrent jurisdiction.
At the same time, however, within the area of its jurisdiction,
the State has "virtually complete control" over the importation and
sale of liquor and the structure of the liquor distribution system.
See California Retail Liquor Dealers Assn. v. Midcal Aluminum,
Inc., 445 U. S. 97,
445 U. S. 110
(1980);
see also Capital Cities Cable, Inc. v. Crisp,
467 U. S. 691,
467 U. S. 712
(1984);
California Board of Equalization v. Young's Market
Co., 299 U. S. 59
(1936). The Court has made clear that the States have the power to
control shipments of liquor during their passage through their
territory and to take appropriate steps to prevent the unlawful
diversion of liquor into its regulated intrastate market. In
Hostetter, we stated that our decision in
Collins, striking down the California Alcoholic Beverage
Control Act as applied to an exclusive federal reservation, might
have been otherwise if
"California had sought to regulate or control the transportation
of the liquor there involved from the time of its entry into the
State until its delivery at the national park, in the interest of
preventing
Page 495 U. S. 432
unlawful diversion into her territory."
377 U.S. at
377 U. S. 333.
We found that the state licensing law there under attack was
unlawful because New York
"ha[d] not sought to regulate or control the passage of
intoxicants through her territory in the interest of preventing
their unlawful diversion into the internal commerce of the State.
As the District Court emphasized, this case does not involve
'measures aimed at preventing unlawful diversion or use of
alcoholic beverages within New York.' [
Commonwealth of Puerto
Rico v. Condado Development Corp.] 212 F.Supp. [386] at 386
[D.P.R. 1961]."
Id. 377 U.S. at
377 U. S.
333-334.
In
Mississippi Tax Comm'n I, supra, after holding that
the State could not impose its normal markup on sales to the
military bases, we added that
"a State may, in the absence of conflicting federal regulation,
properly exercise its police powers to regulate and control such
shipments during their passage through its territory insofar as
necessary to prevent the 'unlawful diversion' of liquor 'into the
internal commerce of the State.'"
412 U.S. at
412 U. S.
377-378 (citations omitted).
The two North Dakota regulations fall within the core of the
State's power under the Twenty-first Amendment. In the interest of
promoting temperance, ensuring orderly market conditions, and
raising revenue, the State has established a comprehensive system
for the distribution of liquor within its borders. That system is
unquestionably legitimate.
See Carter v. Virginia,
321 U. S. 131
(1944);
California Board of Equalization v. Young's Market
Co., 299 U. S. 59
(1936). The requirements that an out-of-state supplier which
transports liquor into the State affix a label to each bottle of
liquor destined for delivery to a federal enclave and that it
report the volume of liquor it has transported are necessary
components of the regulatory regime. Because liquor sold at Grand
Forks and Minot Air Force Bases has been purchased directly from
out-of-state suppliers, neither the markup nor the state taxes paid
by liquor wholesalers and retailers in North Dakota is reflected in
the military purchase price. Moreover, the federal enclaves are not
governed by
Page 495 U. S. 433
state laws with respect to the sale of intoxicants; the military
establishes the type of liquor it sells, the minimum age of buyers,
and the days and times its package stores will be open. The risk of
diversion into the retail market and disruption of the liquor
distribution system is thus both substantial and real. [
Footnote 5] It is necessary for the
State to record the volume of liquor shipped into the State and to
identify those products which have not been distributed through the
State's liquor distribution system. The labeling and reporting
requirements unquestionably serve valid state interests. [
Footnote 6] Given the special
protection afforded to state liquor control policies by the
Twenty-first Amendment, they are supported by a strong presumption
of validity, and should not be set aside lightly.
See, e.g.,
Capital Cities Cable, Inc. v. Crisp, 467 U.S. at
467 U. S.
714.
Page 495 U. S. 434
III
State law may run afoul of the Supremacy Clause in two distinct
ways: the law may regulate the Government directly or discriminate
against it,
See McCulloch v.
Maryland, 4 Wheat. 316,
17 U. S.
425-437 (1819), or it may conflict with an affirmative
command of Congress.
See Gibbons v.
Ogden, 9 Wheat. 1,
22 U. S. 211
(1824);
see also Hillsborough County v. Automated Medical
Labs., Inc., 471 U. S. 707,
471 U. S.
712-713 (1985). The Federal Government's attack on the
regulations is based on both grounds of invalidity.
The Government argues that the state provisions governing the
distribution of liquor by out-of-state shippers "regulate"
governmental actions, and are therefore invalid directly under the
Supremacy Clause. The argument is unavailing. State tax laws, state
licensing provisions, contract laws, even "a statute or ordinance
regulating the mode of turning at the corner of streets,"
Johnson v. Maryland, 254 U. S. 51,
254 U. S. 56
(1920), no less than the reporting and labeling regulations at
issue in this case, regulate federal activity in the sense that
they make it more costly for the Government to do its business. At
one time, the Court struck down many of these state regulations,
see Panhandle Oil Co. v. Mississippi ex rel. Knox,
277 U. S. 218,
277 U. S. 222
(1928) (state tax on military contractor);
Dobbins v.
Commissioners of Erie County, 16 Pet. 435 (1842)
(tax on federal employee);
Gillespie v. Oklahoma,
257 U. S. 501
(1922) (tax on lease of federal property);
Weston v.
City Council of Charleston, 2 Pet. 449 (1829) (tax
on federal bond), on the theory that they interfered with "the
constitutional means which have been legislated by the government
of the United States to carry into effect its powers."
Dobbins, 16 Pet. at
41 U. S. 449.
Over 50 years ago, however, the Court decisively rejected the
argument that any state regulation which indirectly regulates the
Federal Government's activity is unconstitutional,
see James v.
Dravo Contracting Co., 302 U. S. 134
(1937), and that view has now been "thoroughly
Page 495 U. S. 435
repudiated."
South Carolina v. Baker, 485 U.
S. 505,
485 U. S. 520
(1988);
see also California Board of Equalization v. Sierra
Summit, Inc., 490 U. S. 844,
490 U. S. 848
(1989);
Cotton Petroleum Corp. v. New Mexico, 490 U.
S. 163,
490 U. S. 174
(1989).
The Court has more recently adopted a functional approach to
claims of governmental immunity, accommodating of the full range of
each sovereign's legislative authority and respectful of the
primary role of Congress in resolving conflicts between National
and State Government.
See United States v. County of
Fresno, 429 U. S. 452,
429 U. S.
467-468 (1977);
cf. Garcia v. San Antonio
Metropolitan Transit Auth., 469 U. S. 528
(1985). Whatever burdens are imposed on the federal government by a
neutral state law regulating its suppliers "are but normal
incidents of the organization within the same territory of two
governments."
Helvering v. Gerhardt, 304 U.
S. 405,
304 U. S. 422
(1938);
see also South Carolina v. Baker, 485 U.S. at
485 U. S.
520-521;
Penn Dairies, Inc. v. Milk Control Comm'n
of Pennsylvania, 318 U. S. 261,
318 U. S. 271
(1943);
Graves v. New York ex rel. O'Keefe, 306 U.
S. 466,
306 U. S. 487
(1939). A state regulation is invalid only if it regulates the
United States directly or discriminates against the Federal
Government or those with whom it deals.
South Carolina v.
Baker, 485 U.S. at
485 U. S. 523;
County of Fresno, 429 U.S. at
429 U. S. 460.
In addition, the question whether a state regulation discriminates
against the Federal Government cannot be viewed in isolation.
Rather, the entire regulatory system should be analyzed to
determine whether it is discriminatory "with regard to the economic
burdens that result."
Washington v. United States,
460 U. S. 536,
460 U. S. 544
(1983). Claims to any further degree of immunity must be resolved
under principles of congressional preemption.
See, e.g., Penn
Dairies, Inc. v. Milk Control Comm'n, 318 U.S. at
318 U. S. 271;
James v. Dravo Contracting Co., 302 U.S. at
302 U. S. 161.
[
Footnote 7]
Page 495 U. S. 436
Application of these principles to the North Dakota regulations
demonstrates that they do not violate the intergovernmental
immunity doctrine. There is no claim in this case, nor could there
be, that North Dakota regulates the Federal Government directly.
See United States v. New Mexico,
Page 495 U. S. 437
455 U. S. 720
(1982);
Hancock v. Train, 426 U.
S. 167 (1976);
Mississippi Tax Comm'n II, 421
U.S. at
421 U. S.
608-610;
Mayo v. United States, 319 U.
S. 441 (1943). Both the reporting requirement and the
labeling regulation operate against suppliers, not the Government,
and concerns about direct interference with the Federal Government,
see City of Detroit v. Murray Corp. of America,
355 U. S. 489,
355 U. S.
504-505 (1958) (opinion of Frankfurter, J.), therefore
are not implicated. In this respect, the regulations cannot be
distinguished from the price control regulations and taxes imposed
on government contractors that we have repeatedly upheld against
constitutional challenge.
See United States v. City of
Detroit, 355 U. S. 466
(1958);
Penn Dairies, Inc., 318 U.S. at
318 U. S.
279-280;
Alabama v. King & Boozer,
314 U. S. 1,
314 U. S. 8
(1941). [
Footnote 8]
Nor can it be said that the regulations discriminate against the
Federal Government or those with whom it deals. The
nondiscrimination rule finds its reason in the principle that the
States may not directly obstruct the activities of the Federal
Page 495 U. S. 438
Government.
McCulloch v.
Maryland, 4 Wheat. 316,
17 U. S.
425-437 (1819). [
Footnote 9] Since a regulation imposed on one who deals
with the Government has as much potential to obstruct governmental
functions as a regulation imposed on the Government itself, the
Court has required that the regulation be one that is imposed on
some basis unrelated to the object's status as a government
contractor or supplier, that is, that it be imposed equally on
other similarly situated constituents of the State.
See, e.g.,
United States v. County of Fresno, 429 U.S. at
429 U. S.
462-464. Moreover, in analyzing the constitutionality of
a state law, it is not appropriate to look to the most narrow
provision addressing the Government or those with whom it deals. A
state provision that appears to treat the Government differently on
the most specific level of analysis may, in its broader regulatory
context, not be discriminatory. We have held that
"[t]he State does not discriminate against the Federal
Government and those with whom it deals unless it treats someone
else better than it treats them."
Washington v. United States, 460 U.S. at
460 U. S.
544-545. [
Footnote
10]
The North Dakota liquor control regulations, the regulatory
regime of which the Government complains, do not disfavor the
Federal Government, but actually favor it. The
Page 495 U. S. 439
labeling and reporting regulations are components of an
extensive system of statewide regulation that furthers legitimate
interests in promoting temperance and controlling the distribution
of liquor, in addition to raising revenue. The system applies to
all liquor retailers in the State. In this system, the Federal
Government is favored over all those who sell liquor in the State.
All other liquor retailers are required to purchase from
state-licensed wholesalers, who are legally bound to comply with
the State's liquor distribution system. N.D.Cent.Code § 5-03-01.1
(1987). The Government has the option, like the civilian retailers
in the State, to purchase liquor from licensed wholesalers.
However, alone among retailers in the State, the Government also
has the option to purchase liquor from out-of-state wholesalers if
those wholesalers comply with the labeling and reporting
regulations. The system does not discriminate "with regard to the
economic burdens that result."
Washington, 460 U.S. at
460 U. S. 544.
A regulatory regime which so favors the Federal Government cannot
be considered to discriminate against it.
IV
The conclusion that the labeling regulation does not violate the
intergovernmental immunity doctrine does not end the inquiry into
whether the regulation impermissibly interferes with federal
activities. Congress has the power to confer immunity from state
regulation on government suppliers beyond that conferred by the
Constitution alone,
see, e.g., United States v. New
Mexico, 455 U.S. at
455 U. S.
737-738;
Penn Dairies, Inc., 318 U.S. at
318 U. S. 275,
even when the state regulation is enacted pursuant to the State's
powers under the Twenty-first Amendment.
Capital Cities Cable,
Inc. v. Crisp, 467 U.S. at
467 U. S. 713.
But when the Court is asked to set aside a regulation at the core
of the State's powers under the Twenty-first Amendment, as when it
is asked to recognize an implied exemption from state taxation,
see Rockford Life
Page 495 U. S.
440
Ins. Co. v. Illinois Dept. of Revenue, 482 U.
S. 182,
482 U. S. 191
(1987), it must proceed with particular care.
Capital Cities
Cable, 467 U.S. at
467 U. S. 714.
Congress has not here spoken with sufficient clarity to preempt
North Dakota's attempt to protect its liquor distribution
system.
The Government's claim that the regulations are preempted rests
upon federal statute and federal regulation. The federal statute is
10 U.S.C. § 2488, which governs the procurement of alcoholic
beverages by nonappropriated fund instrumentalities. It provides
simply that purchases of alcoholic beverages for resale on military
installations "shall be made from the most competitive source,
price and other factors considered," § 2488(a)(1), but that malt
beverages and wine shall be purchased from sources within the State
in which the installation is located. It may be inferred from the
latter provision as well as from the provision, elsewhere in the
Code, that alcoholic beverages purchased for resale in Alaska and
Hawaii must be purchased in-state, Act of Oct. 30, 1986, Pub.L.
99-591, § 9090, 100 Stat. 3341-116, that Congress intended for the
military to be free in the other 48 States to purchase liquor from
out-of-state wholesalers. It follows that the States may not
directly restrict the military from purchasing liquor out-of-state.
That is the central lesson of our decisions in
Paul v. United
States, 371 U. S. 245
(1963);
United States v. Georgia Public Service Comm'n,
371 U. S. 285
(1963);
Public Utilities Comm'n of California v. United
States, 355 U. S. 534
(1958); and
Leslie Miller, Inc. v. Arkansas, 352 U.
S. 187 (1956), in which we invalidated state regulations
that prohibited what federal law required. We stated in
Paul that there was a "collision . . . clear and acute,"
between the federal law which required competitive bidding among
suppliers and the state law which directly limited the extent to
which suppliers could compete. 371 U.S. at
371 U. S.
253.
It is one thing, however, to say that the State may not pass
regulations which directly obstruct federal law; it is quite
Page 495 U. S. 441
another to say that they cannot pass regulations which
incidentally raise the costs to the military. Any number of state
laws may make it more costly for the military to purchase liquor.
As Chief Judge Lay observed in dissent,
"[c]ompliance with regulations regarding the importation of raw
materials, general operations of the distillery or brewery,
treatment of employees, bottling, and shipping necessarily increase
the cost of liquor."
856 F.2d at 1116. Highway tax laws and safety laws may make it
more costly for the military to purchase from out-of-state
shippers.
The language used in the 1986 procurement statute does not
expressly preempt any of these state regulations or address the
problem of unlawful diversion of liquor from military bases into
the civilian market. It simply states that covered alcoholic
beverages shall be obtained from the most competitive source, price
and other factors considered. As the District Court observed,
however, "
[l]owest cost' is a relative term." 675 F. Supp. at
557. The fact that the reporting and labeling regulations, like
safety laws or minimum wage laws, increase the costs for
out-of-state shippers does not prevent the Government from
obtaining liquor at the most competitive price, but simply raises
that price. The procurement statute does not cut such a wide swath
through state law as to invalidate the reporting and labeling
regulations.
In this case, the most competitive source for alcoholic
beverages are out-of-state distributors, whose prices are lower
than those charged by North Dakota wholesalers, regardless of
whether or not the labeling and reporting requirements are
enforced. The North Dakota regulations, which do not restrict the
parties from whom the Government may purchase liquor or its ability
to engage in competitive bidding, but at worst raises the costs of
selling to the military for certain shippers, do not directly
conflict with the federal statute.
Page 495 U. S. 442
V
The DoD regulation restates, in slightly different language,
[
Footnote 11] the statutory
requirement that distilled spirits be "procured from the most
competitive source, price and other factors considered," but it
does not purport to carry a greater preemptive power than the
statutory command itself. It is Congress -- not the Department of
Defense -- that has the power to preempt otherwise valid state
laws, and there is no language in the relevant statute that either
preempts state liquor distribution laws or delegates to the
Department of Defense the power to preempt such state laws.
[
Footnote 12]
Nor does the text of the DoD regulation itself purport to
preempt any state laws.
See California Coastal Comm'n v.
Granite Rock Co., 480 U. S. 572,
480 U. S. 583
(1987);
Hillsborough County v. Automated Medical Laboratories,
Inc., 471 U. S. 707,
471 U. S.
717-718 (1985). It directs the military to consider
various factors in determining "the most advantageous contract,
price and other considered factors," but that command cannot be
understood to preempt state laws that have the incidental effect of
raising costs for the military. Indeed, the regulation specifically
envisions some regulation by state law, for it provides that the
Department "shall cooperate with local [and] state . . . officials
. . . to the degree that their duties relate to the provisions of
this chapter." The regulation
Page 495 U. S. 443
does admonish that such cooperation should not be construed as
an admission that the military is obligated to submit to state
control or required to buy from suppliers located within the State
or prescribed by the State. The North Dakota regulations, however,
do not require the military to submit to state control or to
purchase alcoholic beverage from suppliers within the State or
prescribed by the State. The DoD regulation has nothing to say
about labeling or reporting by out-of-state suppliers.
When the Court is confronted with questions relating to military
discipline and military operations, we properly defer to the
judgment of those who must lead our armed forces in battle. But in
questions relating to the allocation of power between the Federal
and State Government on civilian commercial issues, we heed the
command of Congress without any special deference to the military's
interpretation of that command.
The present record does not establish the precise burdens the
reporting and labeling regulations will impose on the Government,
but there is no evidence that they will be substantial. The
reporting requirement has been in effect since 1978, and there is
no evidence that it has caused any supplier to raise its costs or
stop supplying the military. Although the labeling regulation has
caused a few suppliers either to adjust their prices or to cease
direct shipments to the bases, there has been no showing that there
are not other suppliers willing to enter the market, and there is
no indication that the Government has made any attempt to secure
other out-of-state suppliers. The cost of the labels is
approximately three to five cents if purchased from the state
treasurer, and the distillers have the right to print their own
labels if they prefer. App. 34. Even in the initial stage of
enforcing the requirement for the two bases in North Dakota,
various distillers and suppliers have already notified the state
treasurer that they intend to comply with the new regulations.
Ibid.
Page 495 U. S. 444
And, even if its worst predictions are fulfilled, the military
will still be the most favored customer in the State.
It is Congress, not this Court, which is best situated to
evaluate whether the federal interest in procuring the most
inexpensive liquor outweighs the State's legitimate interest in
preventing diversion. Congress has already effected a compromise by
excluding beer and wine and the States of Hawaii and Alaska from
the 1986 statute. It may also decide to prohibit labels entirely or
prescribe their use on a nationwide basis. It would be both an
unwise and an unwarranted extension of the intergovernmental
immunity doctrine for this Court to hold that the burdens
associated with the labeling and reporting requirements -- no
matter how trivial they may prove to be -- are sufficient to make
them unconstitutional. The judgment of the Court of Appeals is
reversed.
It is so ordered.
[
Footnote 1]
Congress kept the rule requiring in-state purchases of distilled
spirits for installations in Hawaii and Alaska and of beer and wine
for installations throughout the United States. Act of Oct. 30,
1986, Pub.L. 99-591, § 9090, 100 Stat. 3341-116.
[
Footnote 2]
The parties stipulated to concurrent jurisdiction, but offered
no further information. App. 16. A territory under concurrent
jurisdiction is generally subject to the plenary authority of both
the Federal Government and the State for the purposes of the
regulation of liquor as well as the exercise of other police
powers.
See, e.g., United States v. Mississippi Tax
Comm'n, 412 U. S. 363,
412 U. S.
379-380 (1973);
James v. Dravo Contracting Co.,
302 U. S. 134,
302 U. S.
141-142 (1937);
Surplus Trading Co. v. Cook,
281 U. S. 647,
281 U. S.
650-651 (1930). The parties have not argued that North
Dakota ceded its authority to regulate the importation of liquor
destined for federal bases.
[
Footnote 3]
The five are Heublein, Inc., James B. Beam, Joseph Seagrams,
Somerset Importers, and Hiram Walker & Sons, Inc. App. 26.
[
Footnote 4]
Section 2 of the Twenty-first Amendment provides:
"The transportation or importation into any State, Territory, or
possession of the United States for delivery or use therein of
intoxicating liquors, in violation of the laws thereof, is hereby
prohibited."
[
Footnote 5]
A member of the National Conference of State Liquor
Administrators executed an affidavit describing the following types
of misconduct that North Dakota liquor regulations are intended to
prevent:
"a. Diversion of alcohol off a federal enclave in Hawaii by a
dependent of a Department of Defense employee in quantities large
enough to supply the dependent's own liquor store in the private
sector."
"b. Loss of quantities of alcohol from the time the supplier
delivered the product to the Department of Defense personnel to the
time when the product was to be inventoried or taken by Department
of Defense personnel to another facility."
"c. Purchases of alcohol is [
sic] quantities so large
that the only logical explanation is that the alcohol was diverted
from the military base into a state's stream of commerce. This
occurred in the state of Washington as documented by the Washington
State Liquor Control Board's February 20, 1987, letter to Mr.
Chapman Cox, Assistant Secretary of Defense at the Pentagon in
Washington, D.C. A copy of that letter is attached hereto as
Attachment 1. The Washington State Liquor Control Board letter
describes purchases of alcohol in quantities so large that on-base
personnel would have had to individually consume 85 cases each
during the fiscal year 1986. This amounts to 1,020 bottles or
approximately 5 bottles per person per day, including Sundays and
holidays."
App. 36.
[
Footnote 6]
Cf. Rice v. Rehner, 463 U. S. 713
(1983) ("The State has an unquestionable interest in the liquor
traffic that occurs within its borders").
[
Footnote 7]
Thus, for example, in
Public Utilities Comm'n of California
v. United States, 355 U. S. 534
(1958), we put to one side
"cases where, absent a conflicting federal regulation, a State
seeks to impose safety or other requirements on a contractor who
does business for the United States."
Id. at
355 U. S. 543.
We invalidated the state law because there was a clear conflict
between the state policy of regulation of negotiated rates and the
federal policy, expressed in statute and regulation, of negotiated
rates.
Id. at
355 U. S. 544.
Similarly, in
Leslie Miller, Inc. v. Arkansas,
352 U. S. 187
(1956), the state licensing law came into direct conflict with
"the action which Congress and the Department of Defense ha[d]
taken to insure the reliability of persons and companies
contracting with the Federal Government."
Id., 352 U.S. at
352 U. S. 190.
Paul v. United States, 371 U. S. 245
(1963), involved the Armed Services Procurement Act and regulations
promulgated thereunder. We stated that the collision between the
federal policy, expressed in these laws and the state policy was
"clear and acute."
Id. at
371 U. S. 253.
In
United States v. Georgia Public Serv. Comm'n,
371 U. S. 285
(1963), we relied upon the passage by Congress of the Federal
Property and Administrative Services Act, which spoke too clearly
to permit any state regulation of competitive bidding or
negotiation.
In discussing why it was proper to convene a three-judge court,
the Court in
Georgia Public Serv. Comm'n did state,
"[d]irect conflict between a state law and federal
constitutional provisions raises, of course, a question under the
Supremacy Clause, but one of broader scope than where the alleged
conflict is only between a state statute and a federal statute that
might be resolved by the construction, given either the state or
the federal law."
Id. at
371 U. S. 287
(citing
Kesler v. Department of Public Safety,
369 U. S. 153
(1962)). That statement constituted an explanation for the
assertion of jurisdiction, not an expression of a general principle
of implied intergovernmental immunity. Under 28 U.S.C. § 2281 (1970
ed.), a three-judge court was required whenever a state statute was
sought to be enjoined "upon the ground of the unconstitutionality
of such statute";
Kesler held that such a court was
required, and the Constitution was implicated, when the conflicting
state and federal laws were clear.
Georgia Public Serv.
Comm'n raised a "broader" question, because it could not "be
resolved by the construction, given either the state or the federal
law." 371 U.S. at
371 U. S. 287.
In
Swift & Co. v. Wickham, 382 U.
S. 111 (1965), we overruled
Kesler and
explained that the variant of Supremacy Clause jurisprudence there
discussed was that which is implicated when "a state measure
conflicts with a federal requirement." 382 U.S. at
382 U. S.
120.
[
Footnote 8]
Justice BRENNAN would strike down the labeling regulation
because it subjects the military to special surcharges and forces
it to pay higher in-state prices.
Post at
495 U. S. 458.
Yet he would uphold the reporting requirement, whose costs are also
a component of the out-of-state supplier's expenses, presumably on
the grounds that there has been no showing that those costs have
been passed on to the military.
Post at
495 U. S. 464,
n. 9. Whereas five companies stopped supplying the military after
the labeling regulation went into effect and a sixth raised prices
by as much as $20 per case,
post at
495 U. S. 458,
the Government introduced no evidence that the reporting regulation
interfered with the military's policy of purchasing from the most
competitive source.
Post at
495 U. S. 464,
n. 9. Justice BRENNAN's test contains no standard by which
"burdensomeness" may be measured. Would a state regulation that
forced one company to stop dealing with the Government be invalid?
What about a regulation that raised prices to the military, not by
$20, but by $5 a case? We prefer to rely upon our traditional
standard of "burden" -- that specified by Congress and, in its
absence, that which exceeds the burden imposed on other comparably
situated citizens of the State -- and decline to embark on an
approach that would either result in the invalidation or the trial,
by some undisclosed standard, of every state regulation that in any
way touched federal activity.
[
Footnote 9]
"The danger of hindrance of the Federal Government in the use of
its property, resulting in erosion of the fundamental command of
the Supremacy Clause, is at its greatest when the State may,
through regulation or taxation, move directly against the
activities of the Government."
City of Detroit v. Murray Corp. of America,
355 U. S. 489,
355 U. S. 504
(1958) (opinion of Frankfurter, J.).
[
Footnote 10]
In our opinion in
Washington v. United States, we made
the following comment on our holding in
United States v. County
of Fresno, 429 U. S. 452
(1977):
"We rejected the United States' contention that the tax system
discriminated against lessees of federal property. Because the
economic burden of a tax imposed on the owner of nonexempt property
is ordinarily passed on to the lessee, we explained that those who
leased property from the Federal Government were no worse off than
their counterparts in the private sector. 429 U.S. at
429 U. S.
464-465"
460 U.S. at
460 U. S.
543.
[
Footnote 11]
See supra at
495 U. S.
427-428. The fact that this regulation was promulgated
in 1982 makes it rather clear that it was not intended to address
the problem of labeling or reporting regulations or otherwise to
enlarge the authority to make out-of-state purchases as permitted
by the 1986 statute.
[
Footnote 12]
The statute pursuant to which the DoD regulation was promulgated
does not even speak to the purchase of liquor by the military. It
provides in part:
"The Secretary of Defense is authorized to make such regulations
as he may deem to be appropriate governing the sale, consumption,
possession of or traffic in beer, wine, or any other intoxicating
liquors to or by members of the Armed Forces . . . at or near any
camp, station, post or other place primarily occupied by members of
the Armed Forces. . . ."
65 Stat. 88, 50 U.S.C.App. § 473 (1982 ed.).
Justice SCALIA, concurring in the judgment.
All agree in this case that state taxes or regulations that
discriminate against the Federal Government or those with whom it
deals are invalid under the doctrine of intergovernmental immunity.
See ante at
495 U. S. 435
(opinion of STEVENS, J.);
post at
495 U. S.
451-452 (opinion of BRENNAN, J.);
Memphis Bank &
Trust Co. v. Garner, 459 U. S. 392,
459 U. S. 398
(1983). The principal point of contention is whether North Dakota's
labeling requirement produces such discrimination. I agree with
Justice STEVENS that it does not, because the Federal Government
can readily avoid that discrimination against its contractors by
purchasing its liquor from in-state distributors, as everyone else
in North Dakota must do. I disagree with Justice STEVENS, however,
as to
why the availability of this option saves the
regulation.
If I understand Justice STEVENS correctly, the availability of
the option suffices, in his view, whether or not North Dakota would
have the power to prevent the Federal Government from purchasing
liquor directly from out-of-state
Page 495 U. S. 445
suppliers. So long as the Federal Government does not have to
pay more tax than North Dakota citizens in order to obtain liquor,
the principle of governmental immunity is not offended. For this
proposition Justice STEVENS relies on
Washington v. United
States, 460 U. S. 536
(1983), in which we upheld a state scheme for taxing building
materials in which the Federal Government's business partners paid
a tax other market participants did not. There the State normally
imposed a tax upon the landowner for the purchase of construction
materials. Since it could not constitutionally do so where the
Federal Government was the landowner, it imposed the tax instead
upon the building contractor, though at a lower rate than the tax
applicable to landowners. We upheld the contractor tax on the
ground that the net result accorded the Federal Government
treatment no worse than that received by its private-sector
counterparts; at worst, it would have to reimburse its contractors
for the tax paid, in which event (because of the lower rate for the
contractor tax) it would still be better off than the private
landowner. 460 U.S. at
460 U. S.
542.
As an original matter, I am not sure I would have agreed with
the approach we took in
Washington, for reasons of both
principle and practicality. As a matter of principle, if (as we
recognized in
Washington) the Federal Government has a
constitutional entitlement to its immunity from direct State
taxation, then it seems to me the State cannot require it to "pay"
for that entitlement by bearing the burden of an indirect tax
directed at it alone. And as a matter of practicality, a
jurisdictional issue (the jurisdiction to tax) should not turn upon
a factor that is, as a general matter, so difficult to calculate as
the Federal Government's "net" position. But today's case is, in
any event, distinguishable from
Washington in that the
difficulty of calculation is not only an accurate general
prediction, but a reality on the facts before us. Unlike in
Washington, where the relative burdens placed on the
Federal Government and its private sector counterparts were
easily
Page 495 U. S. 446
compared (one could simply look at the tax rates), North
Dakota's labeling requirement cannot be directly measured against
the taxes imposed on other participants in the State's liquor
market. One might, with some difficulty, determine the cost of
compliance with the labeling requirement, and uphold the regulation
if that cost is less than the taxes imposed upon non-federal
purchasers. But under that approach, the constitutionality of North
Dakota's regulation might vary year to year as the cost of
compliance (the cost of buying and affixing labels) fluctuates. I
do not think
Washington compels us to uphold a regulatory
requirement uniquely imposed on federal contractors that is so
different from the offsetting burden on private market participants
as to require difficult and periodic computation of relative
burden.
This problem of comparability of burden does not trouble Justice
STEVENS because, he says, the rule of
Washington is
satisfied in this case because the Federal Government is given the
option of purchasing label-free liquor from in-state distributors,
and thus (by definition) the
option of not carrying a
higher financial burden than anyone else. That approach carries
Washington one step further (though, I must admit, a
logical step further) down the line of analysis that troubled me
about the case in the first place.
Washington said
(erroneously, in my view) that you can impose a discriminatory
indirect tax, so long as it is no higher than the general direct
tax which the Federal Government has a constitutional right to
avoid. But if economic comparability is the touchstone, reasons
Justice STEVENS -- that is, if everything is OK so long as the
Federal Government pays no more taxes than anyone else -- then it
should follow that you can impose a discriminatory indirect tax
that is even
greater than the constitutionally avoided
direct tax so long as the Federal Government is given the
option of paying the direct tax instead. I would not make
that extension, however reasonable it may be. Suffering a
discriminatory imposition in the precise amount of the
constitutionally avoidable tax is not the same
Page 495 U. S. 447
in kind (though it may well be the same in effect) as suffering
a discriminatory imposition in a higher amount with the option of
escaping it by paying the constitutionally avoidable tax. If,
therefore, in the present case, the State could not compel the
Federal Government to purchase its liquor from in-state
distributors, then I do not think it could force the Federal
Government to choose between paying for a discriminatory labeling
requirement and purchasing from in-state suppliers.
I ultimately agree with Justice STEVENS, however, that the
existence of the option in the present case saves the
discriminatory regulation -- but only because the option of buying
liquor from in-state distributors (unlike the option of paying a
direct tax in
Washington) is not a course of action that
the Federal Government has a constitutional right to avoid. The
Twenty-First Amendment, which prohibits "the transportation or
importation into any State . . . for delivery or use therein of
intoxicating liquors, in violation of the laws thereof," is binding
on the Federal Government like everyone else, and empowers North
Dakota to require that all liquor sold for use in the State be
purchased from a licensed in-state wholesaler. Nothing in our
Twenty-First Amendment case law forecloses that conclusion. In all
but one of the cases in which we have invalidated state
restrictions on liquor transactions between the Federal Government
and its business partners, the liquor was found not to be for
"delivery or use" in the State because its destination was an
exclusive federal enclave.
See United States v. Mississippi Tax
Commission, 412 U. S. 363
(1973) (
Mississippi Tax Commission I);
Collins v.
Yosemite National Park Co., 304 U. S. 518
(1938);
cf. Johnson v. Yellow Cab Co., 321 U.
S. 383 (1944). In the remaining case,
United States
v. Mississippi Tax Commission, 421 U.
S. 599 (1975) (
Mississippi Tax Commission II),
we held that the State could not impose a sales tax, the legal
incidence of which fell on the Federal Government, on liquor
supplied to a federal military base under concurrent state-federal
jurisdiction. That decision rested on the conclusion
Page 495 U. S. 448
that the Twenty-First Amendment had not abolished the federal
government's traditional immunity from state taxation.
Id.
at
421 U. S.
612-613. I do not believe one must also conclude that
the Twenty-First Amendment did not abolish the federal government's
immunity from state regulation. Federal immunity from state
taxation, which has been a bedrock principle of our federal system
since
McCulloch v.
Maryland, 4 Wheat. 316 (1819), is at least arguably
consistent with the text of the Twenty-First Amendment's
prohibition on transportation or importation in violation of state
law. Federal immunity from state liquor import regulation is
not.
That is not to say, of course, that the State may enact
regulations that discriminate against the Federal Government. But
for reasons already adverted to, the North Dakota regulations do
not do so. In giving the Federal Government a choice between
purchasing label-free bottles from in-state wholesalers or
purchasing labelled bottles from out-of-state distillers, North
Dakota provides an option that no other retailer in the State
enjoys. That being so, the labeling requirement for liquor destined
for sale or use on nonexclusive federal enclaves does not violate
any federal immunity.
For these reasons, I concur in the judgment.
Justice BRENNAN, with whom Justice MARSHALL, Justice BLACKMUN
and Justice KENNEDY join, concurring in the judgment in part and
dissenting in part.
I concur in the Court's judgment that North Dakota's reporting
requirement is lawful, but cannot join the Court in upholding that
State's labeling requirement. I cannot join the plurality, because
it underestimates the degree to which North Dakota's law interferes
with federal operations and derogates the Federal Government's
immunity from such interference, which is secured by the Supremacy
Clause. I cannot join Justice SCALIA, because his approach is at
odds with our decision in
United States v. Mississippi Tax
Comm'n, 421 U. S. 599
(1975) (
Mississippi Tax Comm'n II).
Page 495 U. S. 449
I
The labeling requirement imposed by North Dakota is not a
trifling inconvenience necessary to the State's regulatory regime.
An importer or distiller supplying the United States military bases
in North Dakota must not only purchase or manufacture special
labels and affix one to each bottle, it also must segregate and
then track those bottles throughout the remainder of its
manufacturing and distribution process. The special label
requirement throws a wrench into the firm's entire production
system. The cost of complying with the regulation, therefore, is
far greater than the few pennies per label acknowledged by the
plurality.
See ante at
495 U. S.
428-429. Five of the Government's suppliers have
declined to continue shipping to the military bases in North Dakota
as a direct result. The five firms are the primary United States
distributors for nine popular brands of liquor: Chivas Regal
scotch, Johnnie Walker scotch, Tanqueray gin, Canadian Club
whiskey, Courvoisier cognac, Jim Beam bourbon, Seagrams 7 Crown
whiskey, Smirnoff vodka, and Jose Cuervo tequila. The U.S. importer
of Beefeaters gin agreed to continue doing business, but only at a
price increase of up to $20.50 per case. The suppliers of these
brands potentially still available to fill the military's needs are
either companies operating further down the distribution chain than
these distillers and importers, who might be willing to undertake
the onerous labeling requirement and duly charge the Government for
their trouble, or North Dakota's own liquor wholesalers, who are
exempt from the requirement.
The labeling requirement, furthermore, cannot be considered
"necessary" to the State's liquor regulatory regime by any
definition of the term. The State could achieve the same result in
its effort to "prevent the unlawful diversion of liquor into [its]
regulated intrastate markets,"
ante at 431, by instead
requiring special labels on liquor shipped to in-state
Page 495 U. S. 450
wholesalers. Such labels would accomplish precisely the same
goal -- providing a means for state police to distinguish legal
bottles from illegal ones -- without interfering with federal
operations. The State is also free to enforce its reporting
requirement and take any other action that does not interfere with
federal activities, including negotiating a mutual enforcement
program with the military, which is itself governed by a regulation
prohibiting the kind of diversion that the State seeks to control.
See DoD Directive 1015.3-R, ch. 4(F)(3) (May 1982).
[
Footnote 2/1]
That North Dakota's declared purpose for implementing the
regulation is to discourage and police unlawful diversion of liquor
into its domestic market does not prevent this Court from ruling on
its constitutionality. To be sure, this Court has twice said that
the States retain police power to regulate shipments of liquor
through their territory "insofar as necessary to prevent" unlawful
diversion in the absence of conflicting federal regulation.
United States v. Mississippi Tax Comm'n, 412 U.
S. 363,
412 U. S. 377
(1973) (
Mississippi Tax Comm'n I);
see also Hostetter
v. Idlewild Bon Voyage Liquor Corp., 377 U.
S. 324,
377 U. S.
333-334 (1964). Such statements were indications that
this Court believed that States are not rendered utterly powerless
in this respect by the dormant Commerce Clause. We have never held,
however, that any regulation with this avowed purpose is insulated
from review under the federal immunity doctrine or any other
constitutional ground, including the dormant Commerce Clause. Nor
have we ever upheld such a regulation, or any state regulation of
liquor that clashed with some federal law or operation, on the
basis
Page 495 U. S. 451
of a "presumption of validity."
Cf. ante at
495 U. S. 433.
Indeed, our previous, limited statements -- that States are not
prevented by the Commerce Clause from regulating shipments of
liquor through their territory where necessary to prevent diversion
-- recognized that the regulations must be consistent with other
constitutional requirements.
See Mississippi Tax Comm'n I,
supra, 412 U.S. at
412 U. S. 377
(recognizing such state power only "in the absence of conflicting
federal regulation"). Since the States' power is limited by the
doctrine of federal preemption, which flows from the Supremacy
Clause, then that power must also be limited by the doctrine of
federal immunity, which also flows from the Supremacy Clause.
[
Footnote 2/2]
II
The plurality characterizes the doctrine of federal immunity as
invalidating state laws only if they regulate the Federal
Government directly or discriminate against the Government or those
with whom it deals.
See ante at
495 U. S. 435.
As the plurality recognizes,
"a regulation imposed on one who deals with the Government has
as much potential to obstruct governmental functions as a
regulation imposed on the Government itself."
Ante at
495 U. S. 438.
But contrary to the plurality's view, the rule to be distilled from
our prior cases is that those dealing with the Federal Government
enjoy immunity from
Page 495 U. S. 452
state control not only when a state law discriminates, but also
when a state law actually and substantially interferes with
specific federal programs.
See United States v. New
Mexico, 455 U. S. 720,
455 U. S. 735,
n. 11 (1982) ("It remains true, of course, that state taxes are
constitutionally invalid if they discriminate against the Federal
Government, or substantially interfere with its activities").
Cf. James v. Dravo Contracting Co., 302 U.
S. 134,
302 U. S. 161
(1937) (permitting application of a general state tax to federal
contractors on the ground that it did not discriminate against them
or "interfere in any substantial way with the performance of
federal functions"). North Dakota's labeling regulation violates
the Supremacy Clause under both standards. It substantially
obstructs federal operations, and it discriminates against the
Federal Government and its chosen business partners.
A
The plurality recognizes that we have consistently invalidated
nondiscriminatory state regulations that interfere with affirmative
federal policies, including those governing procurement, but
designates these cases as resting on principles of preemption.
See ante at
495 U. S. 435
and
495 U. S.
435-436, n. 7. This characterization is not only at odds
with the reasoning in the opinions themselves, but suggests a rigid
demarcation between the two Supremacy Clause doctrines of federal
immunity and preemption which is not present in our cases. Whether
a state regulation interferes with federal objectives is, of
course, a central inquiry in our traditional preemption analysis.
But when we have evaluated the validity of an obligation imposed by
a State on the Federal Government and its business partners, we
have justly considered whether the obligation interferes with
federal operations as part of our federal immunity analysis.
In
Leslie Miller, Inc. v. Arkansas, 352 U.
S. 187 (1956), for example, we held that building
contractors employed by the Federal Government were immune from a
neutral Arkansas
Page 495 U. S. 453
regulation requiring contractors to obtain a state license,
because the regulation would give the State
"a virtual power of review over the federal determination of
'responsibility' and would thus frustrate the expressed federal
policy of selecting the lowest responsible bidder."
Id. at
352 U. S. 190.
We found the following rationale applicable:
"'It seems to us that the immunity of the instruments of the
United States from state control in the performance of their duties
extends to a requirement that they desist from performance until
they satisfy a state officer upon examination that they are
competent for a necessary part of them and pay a fee for permission
to go on. Such a requirement does not merely touch the Government
servants remotely by a general rule of conduct; it lays hold of
them in their specific attempt to obey orders. . . .'"
Ibid. (quoting
Johnson v. Maryland,
254 U. S. 51,
254 U. S. 57
(1920)). The plurality's assertion that
Leslie Miller,
Inc., was not decided on immunity grounds,
see ante
at
495 U. S. 436,
n. 7, is inconsistent with that opinion's own analysis.
In
Public Utilities Comm'n of California v. United
States, 355 U. S. 534
(1958), we found unconstitutional a state provision requiring
common carriers to receive state approval before offering free or
reduced rate transportation to the United States. We distinguished
our cases sustaining nondiscriminatory state taxes, and found the
regulation unconstitutional because it would have interfered with
the Government's policy of negotiating rates.
Id. at
355 U. S.
543-545. We explained that a decision in favor of
California would have interfered with the activities of federal
procurement officials, and would have required the Federal
Government either to pay higher rates or to conduct separate
negotiations with the regulatory divisions of, potentially, each of
the then-48 States.
Id. at
355 U. S.
545-546.
Contrary to the plurality's contention,
ante at
495 U. S.
435-436, n. 7, we concluded that the regulation was
unconstitutional,
Page 495 U. S. 454
not under preemption doctrine, but because it "place[d] a
prohibition on the Federal Government" as significant as the
licensing requirements invalidated in
Leslie Miller, Inc. v.
Arkansas, supra, and
Johnson v. Maryland, supra, both
decided on federal immunity grounds.
See supra at
495 U. S.
452-4523. Moreover, we relied on the following passage
from
McCulloch v.
Maryland, 4 Wheat. 316,
17 U. S. 427
(1819), which elucidates the doctrine of federal immunity:
"It is of the very essence of supremacy to remove all obstacles
to [federal] action within its own sphere, and so to modify every
power vested in subordinate governments, as to exempt its own
operations from their own influence. Furthermore, the Court's
rationale in
Public Utilities Comm'n -- that a state
regulation which obstructs federal operations is prohibited under
the federal immunity doctrine -- is not inconsistent with our
decisions sustaining state taxes solely on the ground that they do
not discriminate against the Government or its business partners.
Indeed, we sustained such a nondiscriminatory state tax on federal
contractors the same day that we decided
Public Utilities
Comm'n. See United States v. City of Detroit, 355 U. S.
466,
355 U. S. 472 (1958)
(upholding the application of a state tax to lessees of federal
property). [
Footnote 2/3]
Page 495 U. S. 455
"
In the companion cases of
United States v. Georgia Public
Service Comm'n, 371 U. S. 285
(1963), and
Paul v. United States, 371 U.
S. 245 (1963), we invalidated two other neutral
Page 495 U. S. 456
state regulations because they interfered with the Federal
Government's chosen mode of procurement. [
Footnote 2/4] In
Georgia Public Service Comm'n,
supra, 371 U.S. at
371 U. S. 292,
we held that Georgia could not revoke the operating certificates of
any moving
Page 495 U. S. 457
company for undertaking a mass intrastate shipment of household
goods for the Federal Government at volume discount rates, although
such rates violated Georgia law, because federal regulations
required government officers to secure the "
lowest over-all
cost'" in purchasing transportation "through competitive bidding or
negotiation." Similarly, in Paul v. United States, supra,
we held that California minimum wholesale milk prices could not be
enforced against sellers supplying United States military bases
where federal regulations mandated "full and free competition" and
selection of the "lowest responsible bidder" because the
"California policy defeats the command to federal officers to
procure supplies at the lowest cost to the United States."
Id. at 371 U. S. 252,
253.
North Dakota's labeling regulation would interfere with the
military's ability to comply with affirmative federal policy in the
same way as the regulations we invalidated in
Public Utilities
Comm'n of California v. United States, 355 U.
S. 534 (1958),
United States v. Georgia Public
Service Comm'n, supra, and
Paul v. United States,
supra. As in those cases, the state regulation threatens to
scuttle the Federal Government's express determination to secure
products and services in the most competitive manner possible.
Federal law requires military officials to purchase distilled
spirits "from the most competitive source, price and other factors
considered." 10 U.S.C. § 2488(a). In enacting this standard,
Congress made a deliberate choice to permit, and generally
encourage, the military to buy liquor for its bases outside the
States in which they are located. The "competitive source"
provision replaced an earlier statute requiring bases to purchase
all alcoholic beverages in-state.
See Pub.L. 99-190, §
8099, 99 Stat. 1219. The statute's legislative history shows that
Congress determined that the military should be free to purchase
distilled spirits out-of-state from the most competitive
source,
Page 495 U. S. 458
both to save money and to generate more funding for morale and
welfare activities. [
Footnote
2/5]
For liquor, the most competitive sources are distillers and
importers -- companies operating at the top of the national
distribution chain. It is not only plausible that such companies
would find it more trouble than it was worth to comply with North
Dakota's labeling requirement, five companies have already refused
to fill orders for the North Dakota bases. At least one other firm
has been willing to fill orders only at a substantially increased
price. The regulation would force the military to lose some of the
advantages of a highly competitive nationwide market, either
because it would be subjected to special surcharges by out-of-state
suppliers or forced to pay high in-state prices -- or some
combination of these. Moreover, the difficulties presented by North
Dakota's labeling requirement would increase exponentially if
additional States adopt equivalent rules, a consideration we found
dispositive in
Public Utilities Comm'n of California,
supra, at
355 U. S.
545-546.
See also Memphis Bank & Trust Co. v.
Garner, 459 U. S. 392,
459 U. S. 398,
n. 8 (1983) (rejecting the argument
Page 495 U. S. 459
that a Tennessee bank tax that discriminated against federal
obligations might be
de minimis because, if every State
enacted comparable provisions, the Federal Government would sustain
significantly higher borrowing costs).
The regulation also intrudes on federal procurement in a manner
not unlike the licensing requirement we found unacceptable in
Leslie Miller, Inc. v. Arkansas, 352 U.
S. 187 (1956). Just as Arkansas' licensing regulation
would have given that State a say as to which building contractor
the Federal Government could hire, the North Dakota labeling
requirement -- by acting as a deterrent to contracting with the
Federal Government -- would prevent the Federal Government from
making an unfettered choice among liquor suppliers. The military
cannot effectively comply with Congress' command to purchase from
"the most competitive source" when a number of the most competitive
sources -- distillers and importers -- are driven out of the market
by the State's regulation. Thus, North Dakota's labeling
regulation
"'does not merely touch the Government servants remotely by a
general rule of conduct; it lays hold of them in their specific
attempt to obey orders.'"
Leslie Miller, Inc. v. Arkansas, supra, at
352 U. S. 190
(quoting and applying
Johnson v. Maryland, 254 U.S. at
254 U. S. 57).
Federal military procurement policies for distilled spirits,
therefore, would be obstructed and, under this Court's federal
immunity doctrine, the regulation should fall. [
Footnote 2/6]
Page 495 U. S. 460
B
Even if I agreed with the plurality that our federal immunity
doctrine proscribes only those state laws that discriminate against
the Federal Government or its business partners, however, I would
still find North Dakota's labeling regulation invalid. North
Dakota's labeling regulation plainly discriminates against the
distillers and importers who supply the Federal Government because
it is applicable only to "liquor destined for delivery to a federal
enclave in North Dakota." N.D.Admin.Code § 84-02-01-05(7) (1986). A
state control that makes the Federal Government or those with whom
it deals worse off than "their counterparts in the private sector"
is discriminatory.
Washington v. United States,
460 U. S. 536,
460 U. S. 543
(1983).
"The appropriate question is whether [someone] who is
considering working for the Federal Government is faced with a cost
he would not have to bear if he were to do the same work for a
private party."
Id. at
460 U. S. 541,
n. 4. An importer or distiller for a particular brand has two kinds
of potential customers in North Dakota: military bases and North
Dakota wholesalers. For any liquor it sells to the military, it is
required to buy or manufacture and affix special labels. Then it
must monitor separately the handful of cases destined for the two
military bases in North Dakota during the rest of the company's
manufacturing and shipping process, in order to ensure that only
specially labeled bottles are sent to Grand Forks and Minot Air
Force Bases. However, the same distiller could sell its product to
a North Dakota liquor wholesaler without affixing
Page 495 U. S. 461
special labels or reducing its economies of scale. [
Footnote 2/7]
Washington v. United
States, therefore, mandates a finding that the labeling
requirement discriminates against those who deal with the Federal
Government. [
Footnote 2/8]
Page 495 U. S. 462
The plurality attempts to reach the opposite result by arguing
that we need to view the state regulatory scheme in its entirety to
determine whether the Federal Government is better or worse off on
the whole, in the endeavor affected by a seemingly discriminatory
State law, than those given preferred treatment by that law.
See ante at
495 U. S. 435.
This Court has never subscribed to such an approach. To the
contrary,
Washington v. United States, supra, which the
plurality cites for this proposition, holds merely that, where
"[t]he tax on federal contractors is part of the same structure,
and imposed at the same rate, as the tax on the transactions of
private landowners and contractors"
it is nondiscriminatory.
Id. at
460 U. S. 545.
In so deciding, the Court specifically cautioned that
"[a] different situation would be presented if a State imposed a
sales tax on contractors who work for the Federal Government, and
an entirely different kind of tax, such as a head tax or a payroll
tax, on every other business."
Id. at
460 U. S. 546,
n. 11.
In
Washington v. United States, we found that the state
building tax on federal contractors and the slightly larger
building tax on private landowners placed no larger an economic
burden on federal contractors than on private ones. The Court
concluded that, although the legal incidence of the taxes was
different -- one fell on the landowners directly and the other on
the federal contractors -- the tax did not discriminate against
federal contractors or the Federal Government because each tax
would be reflected in the fees the contractors could charge. As a
result, the Court concluded that the tax on the federal contractors
cost them no more than the equivalent tax borne indirectly by their
private counterparts, and very likely cost them less.
Id.
at
460 U. S.
541-542.
The conclusion to be drawn from
Washington v. United
States is that North Dakota would not violate the federal
immunity doctrine by placing a labeling requirement on the
out-of-state distillers who supply the military bases within the
State if it also imposed the same labeling requirement directly
Page 495 U. S. 463
on the in-state wholesalers for all liquor purchased
out-of-state. The plurality's view, that the labeling regulation is
not discriminatory unless the entire North Dakota liquor regulatory
system places the Federal Government at a disadvantage competing
with in-state wholesalers or retailers, is a different proposition
altogether.
See also Justice SCALIA's opinion,
ante at
495 U. S.
448.
The plurality argues that, in this case, the State compensates
the Federal Government for the discriminatory labeling requirement
by prohibiting private retailers from buying liquor from
out-of-state suppliers, and that therefore the Government is
favored over other North Dakota retailers. There are core
difficulties with this comparison. Since the regulation is imposed
on out-of-state suppliers, the regulation would affect the Federal
Government when it purchases liquor from those suppliers. The
private parties within the State who are comparable, therefore, are
North Dakota wholesalers who purchase liquor outside the State and
resell it to the distributors and retailers farther down the
distribution chain within the State -- not North Dakota
retailers.
The appropriate comparison between the Federal Government and
its actual private counterpart -- a North Dakota wholesaler --
cannot be made with confidence. The regulations that the plurality
presumes are economically equivalent are so entirely unlike that it
is wholly speculative that the impositions on in-state wholesalers
are comparable to the imposition on the Federal Government and its
suppliers. Such a comparison requires us to determine whether there
is greater profit in buying from out-of-state distillers at a price
that does not reflect the labeling requirement while reaping only
the wholesaler's markup, or more lucrative to buy from whomever
will sell specially labeled liquor at whatever price this costs,
but to reap the margin on retail sales. Even if the comparison
could be made reliably at some set moment, there is no reason to
expect the result to
Page 495 U. S. 464
be the same every year; it would vary depending on the business
conditions affecting each half of the equation. [
Footnote 2/9]
As is obvious, there is simply no assurance that North Dakota is
actually regulating even-handedly when it taxes and licenses some
and requires special product labels for others. The labeling
regulation is not part of a larger scheme where like obligations
are imposed, albeit at different stages of commerce, on federal and
nonfederal suppliers. It is that "different situation," that we
identified in
Washington v. United States, where unlike
and hard-to-compare obligations are imposed. Contrary to the
plurality's assertion,
ante at
495 U. S. 438,
Washington v. United States does not require or even
support a finding that the regulation is constitutional. To the
contrary, when a State imposes an obligation, triggered solely by a
federal transaction, that cannot be found with confidence to place
the Federal Government and its contractors in as good or better a
position than its counterparts in the private
Page 495 U. S. 465
sector, our cases require a finding that the regulation is
wholly impermissible. [
Footnote
2/10]
III
Justice SCALIA, alone, agrees with petitioner that § 2 of the
Twenty-first Amendment [
Footnote
2/11] saves the labeling regulation because the regulation
governs the importation of liquor into the State. I believe,
however, that the question presented in this case, whether the
Twenty-first Amendment empowers States to regulate liquor shipments
to military bases over which the Federal Government and a State
share concurrent jurisdiction, is one we have addressed before and
answered in the negative. In
Mississippi Tax Comm'n II,
421 U. S. 599
(1975), [
Footnote 2/12] we
explained:
Page 495 U. S. 466
"'[T]he Twenty-first Amendment confers no power on a State to
regulate -- whether by licensing, taxation, or otherwise -- the
importation of distilled spirits into territory over which the
United States exercises exclusive jurisdiction.'"
Id. at
421 U. S. 613,
quoting
Mississippi Tax Comm'n I, 412 U.S. at
412 U. S. 375.
We reach the same conclusion as to the concurrent jurisdiction
bases to which Art. I, § 8, cl. 17, does not apply:
"'Nothing in the language of the [Twenty-first] Amendment nor in
its history leads to [the] extraordinary conclusion' that the
Amendment abolished federal immunity with respect to taxes on sales
of liquor to the military on bases where the United States and
Mississippi exercise concurrent jurisdiction. . . . "
". . . [I]t is a 'patently bizarre' and 'extraordinary
conclusion' to suggest that the Twenty-first Amendment abolished
federal immunity as respects taxes on sales to the bases where the
United States and Mississippi exercise concurrent jurisdiction, and
'now that the claim for the first time is squarely presented, we
expressly reject it.'"
Mississippi Tax Comm'n II, supra, 421 U.S. at
421 U. S.
613-614 (quoting
Department of Revenue v. James B.
Beam Distilling Co., 377 U. S. 341,
377 U. S.
345-346 (1964), and
Hostetter v. Idlewild Bon Voyage
Liquor Corp., 377 U.S. at
377 U. S.
332).
Appellants argue that
Mississippi Tax Comm'n II is
applicable only to taxes or other regulations imposed directly on
the United States, because the legal incidence of the tax at issue
in that case fell on the military, not its supplier.
See
421 U.S. at
421 U. S. 609.
Petitioners' reliance on this distinction, however, is misplaced.
To be sure, a tax or regulation imposed directly on the Federal
Government is invariably invalid under the doctrine of federal
immunity whereas a tax
Page 495 U. S. 467
or regulation imposed on those who deal with the Government is
invalid only when it actually obstructs or discriminates against
federal activity. But the labeling regulation at issue here and the
tax at issue in
Mississippi Tax Comm'n II, supra, violate
the doctrine of federal immunity for precisely the same reason:
they burden the Federal Government in its conduct of governmental
operations. A state regulation that obstructs federal activity is
invalid no matter whom it regulates. To the extent that petitioners
assume that there are two doctrines of federal immunity -- one that
protects the Government from direct taxation or regulation and one
that protects the Government from the indirect effects of taxes or
regulations imposed on those with whom it deals -- petitioners
misconstrue the law.
Justice SCALIA argues that
Mississippi Tax Comm'n II
holds only that the Twenty-first Amendment did not override the
Government's immunity from state taxation, but did not reach the
question whether the Amendment also overrode federal immunity from
state regulation.
See ante at
495 U. S.
447-448. I agree that the Court had only a state tax
question before it in that decision, but I do not agree that the
Court intended to leave the question of state regulation open.
See Mississippi Tax Comm'n II, supra, 421 U.S. at
421 U. S. 613
(concluding that its decision that States have no power to regulate
the importation of liquor into exclusive jurisdiction federal
enclaves is also applicable to concurrent jurisdiction
enclaves).
Justice SCALIA's argument raises two separate questions. First,
how do we separate those State liquor importation laws that the
Twenty-first Amendment permits to override federal laws and other
constitutional prohibitions from those laws it does not? Second,
how do we determine whether liquor is being imported into North
Dakota or into a federal island within the boundaries of the
State?
The first is perhaps the more difficult question. It is clear
from our decisions that the power of States over liquor
transactions
Page 495 U. S. 468
is not plenary, [
Footnote
2/13] even when the State is attempting to regulate liquor
importation. [
Footnote 2/14] To
the extent that Justice SCALIA concedes that
Mississippi Tax
Comm'n II is decided correctly,
ante at
495 U. S.
447-448, his assumption that concurrent jurisdiction
federal enclaves are within the State for Twenty-first Amendment
purposes requires him to concede that, under certain circumstances,
the "transportation or importation" of liquor into a State "in
violation of the laws" of the State in which the enclave is located
is not prohibited by the Twenty-first Amendment. This is true
because we decided that out-of-state importers and distillers could
ship liquor to military bases without collecting and remitting the
use tax required by Mississippi law. Thus, Justice SCALIA's
approach is to draw a line between taxes and regulations which,
while consistent with some of our cases, is inconsistent with
others such as
Page 495 U. S. 469
Healy v. The Beer Institute, Inc., 491 U.
S. 324 (1989).
See 495
U.S. 423fn2/13|>n. 13,
supra. [
Footnote 2/15]
There is no need, however, to suggest a resolution as to the
exact powers of a State to regulate the importation of liquor into
its own territory in this case, because the second question raised
by Justice SCALIA's approach is dispositive here. I continue to
agree with the Court's position in
Mississippi Tax Comm'n
II that concurrent jurisdiction federal enclaves, like
exclusive jurisdiction federal enclaves, [
Footnote 2/16] are not within a "State" for purposes of
the Twenty-first Amendment. 421 U.S. at
421 U. S.
613.
In addition, North Dakota appears to have ceded all of its power
concerning the two federal enclaves within its boundaries, and to
enjoy concurrent jurisdiction only through the grace of the United
States Air Force. As noted by the plurality,
see ante at
495 U. S. 429,
n. 2, the parties offer no details concerning the terms of the
concurrent jurisdiction on these two bases. But the public record
fills in some quite relevant data. North Dakota has long ceded by
statute to the Federal Government full jurisdiction over any tract
of land that may be acquired by the Government for use as a
military post (retaining only the power to serve process within).
See
Page 495 U. S. 470
N.D.Cent.Code § 54-01-08 (1989). Thus, the State ceded its
jurisdiction over the Air Force Bases long since. [
Footnote 2/17] Moreover, North Dakota defines its
own jurisdiction as extending to all places within its boundaries
except, where jurisdiction has been or is ceded to the United
States, the State's jurisdiction is "qualified by the terms of such
cession or the laws under which such purchase or condemnation has
been or may be made."
See N.D.Cent.Code § 54-01-06 (1989).
Since 1970, Congress has provided that the branches of the armed
services could retrocede some or all of the United States'
jurisdiction over any property administered by them if exclusive
jurisdiction is considered unnecessary.
See 10 U.S.C. §
2683. North Dakota's laws permit the Governor to consent to any
retrocession of jurisdiction offered.
See N.D.Cent.Code §
54-01-09.3 (1989).
Contrary to the plurality's suggestion,
see ante at
495 U. S. 429,
n. 2, we have never held that "concurrent jurisdiction" always
means that the State and Federal Government each have plenary
authority over the territory in question. To the contrary, each
decision cited by the plurality either does not address the
question,
see, e.g., Mississippi Tax Comm'n I, 412 U.S. at
412 U. S.
380-381, or says that the division of authority over
territory under concurrent jurisdiction is determined by
Page 495 U. S. 471
the terms of the cession of jurisdiction by the State.
See
James v. Dravo Contracting Co., 302 U.S. at
302 U. S. 142
("If lands are otherwise acquired [not as exclusive jurisdiction
enclaves], and jurisdiction is ceded by the State to the United
States, the terms of the cession, to the extent that they may
lawfully be prescribed, that is, consistently with the carrying out
of the purpose of the acquisition, determine the extent of the
federal jurisdiction");
Surplus Trading Co. v. Cook,
281 U. S. 647,
281 U. S.
651-652 (1930). Therefore, even were I to accept the
proposition that a concurrent jurisdiction federal enclave might be
a "State" for purposes of the Twenty-first Amendment, I would
regard the State's authority over the North Dakota bases as an open
question for which remand for further proceedings, not reversal, is
the appropriate action.
V
Because I find that North Dakota's labeling requirement both
discriminates against the Federal Government and its suppliers and
obstructs the operations of the Federal Government, I cannot agree
with the Court that it is valid. The operations of the Federal
Government are constitutionally immune from such interference by
the several States.
[
Footnote 2/1]
The regulation provides:
"Diversion. Packaged alcoholic beverage sales outlets are
operated solely for the benefit of authorized purchasers. Members
of the Uniformed Services and other authorized purchasers shall not
sell, exchange, or otherwise divert packaged alcoholic beverages to
unauthorized personnel, or for purposes which violate federal,
state, or local laws, or Status of Forces agreements."
[
Footnote 2/2]
The principle of federal immunity from state tax and other
regulation was first discerned in
McCulloch
v. Maryland, 4 Wheat. 316,
17 U. S. 436
(1819) ("The Court has bestowed on this subject its most deliberate
consideration. The result is a conviction that the States have no
power, by taxation or otherwise, to retard, impede, burden, or in
any manner control, the operations of the constitutional laws
enacted by Congress to carry into execution the powers vested in
the general government. This is, we think, the unavoidable
consequence of that supremacy which the constitution has declared")
(invalidating a State tax that fell solely on notes issued by the
Bank of the United States). Without such immunity, Chief Justice
Marshall reasoned, any State held the power to defeat federal
operations because "the power to tax involves the power to
destroy,"
id. at 431, and the Federal Government, unlike
the state's citizens, has no voice in the state legislature with
which to guard against abuse.
Id. at
17 U. S.
428.
[
Footnote 2/3]
The plurality relies on
South Carolina v. Baker,
485 U. S. 505,
485 U. S. 523
(1988), and
United States v. County of Fresno,
429 U. S. 452,
429 U. S. 460
(1977), for the proposition that a state regulation is invalid
under the immunity doctrine only if it directly regulates the
United States or is discriminatory.
See ante at
495 U. S.
434-435. This extrapolates too much from the
City of
Detroit line of cases, and ignores the
Public Utilities
Comm'n of California line. What
South Carolina v.
Baker and
County of Fresno actually say is that a
state tax is not invalid unless it is directly laid on the Federal
Government or discriminatory. Both cases cite, in support of this
proposition,
City of Detroit, which itself cites the same
rule:
"a tax may be invalid even though it does not fall directly on
the United States if it operates so as to discriminate against the
Government or those with whom it deals."
355 U.S. at
355 U. S. 473.
The Court's decision the same day, in
Public Utilities Comm'n
of California, 355 U.S. at
355 U. S. 544,
that California's regulation of public carriers in their dealings
with the Federal Government violated the federal immunity doctrine,
underscores that the language in
City of Detroit and other
tax cases was never intended to delineate the full scope of the
doctrine. The California regulation could not have been
characterized as discriminatory. Carriers were permitted to
contract with the United States on the same terms as with any other
customer; they were just required to obtain state permission before
giving the government special treatment. 355 U.S. at
355 U. S.
537.
To be sure, state taxes and regulations are subject to the same
restrictions under the federal immunity doctrine,
see Mayo v.
United States, 319 U. S. 441,
319 U. S. 445
(1943). Regulations, however, present a wider range of
possibilities for interference with federal activities than do
taxes. The tax in
City of Detroit did not interfere with
the Federal Government's ability to lease property, and therefore
interference was not an issue that required discussion. In
contrast, the regulation in
Public Utilities Comm'n of
California did interfere with the Federal Government's ability
to choose "
the least costly means of transportation . . . which
will meet military requirements,'" 355 U.S. at 355 U. S. 542,
and the issue was discussed.
As the Court said in
Graves v. New York ex rel.
O'Keefe, 306 U. S. 466,
306 U. S. 484
(1939), a nondiscriminatory tax "could not be assumed to obstruct
the function which [a government entity] had undertaken to
perform." This is because
"the purpose of the immunity was not to confer benefits on the
employees [of the Federal Government] by relieving them from
contributing their share of the financial support of the other
government, whose benefits they enjoy, or to give an advantage to a
government by enabling it to engage employees at salaries lower
than those paid for like services by other employers, public or
private, but to prevent undue interference with the one government
by imposing on it the tax burdens of the other."
Id. at
306 U. S.
483-484 (footnote omitted). Therefore, we have upheld
nondiscriminatory taxes imposed on those with whom the Federal
Government deals because
"[i]t seems unreasonable to treat the absence of an exemption
from taxes [for those with whom the Government deals] as a burden
upon the normal exercise of a governmental function."
See California Board of Equalization v. Sierra Summit,
Inc., 490 U. S. 844,
490 U. S. 849,
n. 4 (quoting favorably Judge Augustus Hand's explanation from
In re Leavy, 85 F.2d 25, 27 (CA2 1936)). And we have found
in specific cases involving "a state tax that is general and
nondiscriminatory" that
"'[t]he tax does not place a financial burden upon the United
States; nor will it . . . render the [federal official's] task more
difficult or cumbersome.'"
California Board of Equalization, supra, at
490 U. S. 850,
n. 6 (quoting Wurzel, Taxation During Bankruptcy Liquidation, 55
Harv.L.Rev. 1141, 1166-1169 ( 1942)). However, the fact that
nondiscriminatory taxes have not been found to obstruct federal
operations does not mean that nondiscriminatory regulations can be
assumed to be equally harmless, as our cases make evident.
[
Footnote 2/4]
These cases as well were decided on immunity grounds. The Court
characterized both cases, decided the same day, as presenting the
question
"whether or not the state regulatory scheme burdened the
exercise by the United States of its constitutional powers to
maintain the Armed Services."
Paul, 371 U.S. at
371 U. S. 250.
In addition, in
Paul, the Court explained its invalidation
of California's milk regulations even as applied to purchases of
milk for resale at federal commissaries, as follows:
"These commissaries are 'arms of the Government deemed by it
essential for the performance of governmental functions,' and
'partake of whatever immunities' the Armed Services 'may have under
the Constitution and federal statutes.'"
Id. at
371 U. S. 261
(citation omitted). In
Georgia Public Service Comm'n, the
Court relied on its earlier decision in
Public Utilities Comm'n
of California, supra, which decision was grounded in the
McCulloch v. Maryland federal immunity doctrine.
See 371 U.S. at
371 U. S. 293.
Moreover,
Paul recharacterized the decision in
Penn
Dairies, Inc. v. Milk Control Comm'n of California,
318 U. S. 261
(1943), which the plurality cites for the proposition that States
may permissibly obstruct federal operations if they do so by means
of neutral laws,
see ante at
495 U. S. 435.
In the later Court's view,
Penn Dairies stood for the
unremarkable proposition that, when federal law expressly permits
the Government to purchase supplies on the open market "
when
the price [of such supplies] is fixed by federal, state, municipal
or other competent legal authority'" and expressly manifested a
"`hands off' policy respecting minimum price laws of the States,"
state minimum price laws may constitutionally be enforced against
the Government's suppliers. 371 U.S. at 371 U. S.
254-255. Revealingly, the plurality musters no support
other than the no longer apposite Penn Dairies for its
assertion that price control regulations aimed at government
suppliers have repeatedly been upheld against constitutional
challenge. See ante at 495 U. S.
437.
[
Footnote 2/5]
The Senate Armed Services Committee Report explained that it
"included a provision mandating that purchases of such alcoholic
beverages for resale be made in the most efficient and economic
manner, without regard to the location of the source of the
beverages, except as that location may affect cost . . . [because]
the committee believes that procurement of alcoholic beverage[s]
for resale should be subjected to the same favorable effects of
competition as is useful in the procurement of other goods and
services. Additionally, the committee does not believe it
appropriate to impose upon the Department, or the morale and
welfare activities of the Department, a requirement that will
result in additional costs of tens of millions of dollars, caused
by the imposition of indirect State taxation [o]n the Federal
government and the lack of competition."
S.Rep. No. 99-331, p. 283 (1986), U.S.Code Cong. &
Admin.News 1986, p. 6476.
The Senate supported deletion of the in-state purchasing
requirement for all alcoholic beverages, but the House prevailed in
excepting beer and wine, on the ground that the military's overall
alcohol procurement costs would not be unduly affected. H.R.Rep.
No. 99-718, pp. 183-184 (1986); H.R.Conf.Rep. No. 99-1001, pp. 39,
464 (1986).
[
Footnote 2/6]
Contrary to the plurality's assertion, I would find the labeling
regulation invalid not because it "in any way touched federal
activity,"
ante at
495 U. S. 437,
n. 8, but because it obstructs an affirmative federal procurement
policy specified by Congress (and also because it discriminates
against the Federal Government and its suppliers). The plurality
suggests that my recognition of this aspect of federal immunity
doctrine will lead to a parade of horribles: every state regulation
will be potentially subject to challenge.
Ibid. But this
particular parade has long been braved by our court system, not
only under the doctrine of federal immunity but also under the much
broader doctrine of preemption.
See Hines v. Davidowitz ,
312 U. S. 52,
312 U. S. 67
(1941) (explaining that state law is preempted whenever it "stands
as an obstacle to the accomplishment and execution of the full
purposes and objectives of Congress");
Rice v. Santa Fe
Elevator Corp., 331 U. S. 218,
331 U. S. 230
(1947) (explaining that state law is preempted where it produces a
result inconsistent with the objective of a federal statute). A
judiciary capable of discerning when federal objectives are
frustrated under preemption doctrine and when interstate
commerce is
burdened under dormant Commerce Clause
doctrine also may be relied on to determine when federal operations
are obstructed under federal immunity doctrine.
[
Footnote 2/7]
Compare California Board of Equalization v. Sierra Summit,
Inc., 490 U.S. at
490 U. S. 849
(upholding the application of a use tax to a bankruptcy sale
because "
the purchaser at the judicial sale was only required
to pay the same tax he would have been bound to pay if he had
purchased from anyone else'") (quoting and applying In re
Leavy, 85 F.2d at 27); United States v. County of
Fresno, 429 U.S. at 429 U. S. 465
(upholding a state tax on federal lessees because "appellants who
rent from the Forest Service are no worse off under California tax
laws than those who work for private employers and rent houses in
the private sector").
[
Footnote 2/8]
In
Washington v. United States, we also placed reliance
on the fact that the state tax at issue was imposed at the same
rate on every retail sale in the State, and that "virtually every
citizen is affected by the tax in the same way." 460 U.S. at
460 U. S.
545-546. Therefore, we concluded, there was a "political
check," because the
"state tax falls on a significant group of state citizens who
can be counted upon to use their votes to keep the State from
raising the tax excessively, and thus placing an unfair burden on
the Federal Government."
Id. at
460 U. S. 545.
As we explained in
United States v. County of Fresno,
supra, 429 U.S. at
429 U. S. 463,
n. 11
"A tax on the income of federal employees, or a tax on the
possessory interest of federal employees in Government houses, if
imposed only on them, could be escalated by a State so as to
destroy the federal function performed by them either by making the
Federal Government unable to hire anyone or by causing the Federal
Government to pay prohibitively high salaries. This danger would
never arise, however, if the tax is also imposed on the income and
property interests of all other residents and voters of the
State."
A "political check" "has been thought necessary because the
United States does not have a direct voice in the state
legislatures."
Washington v. United States, 460 U.S. at
460 U. S.
545.
This Court has never upheld a state tax or regulation triggered
solely by a federal transaction where the Court did not also find
that the tax or regulation was part of a larger scheme that
affected a politically significant number of citizens of the State.
See Washington v. United States, supra, at
460 U. S. 545;
County of Fresno, supra, 429 U.S. at
429 U. S. 465
(upholding a special tax on federal employees because the Court
found that an equivalent tax was imposed on other state residents).
In contrast, there is no one represented in the North Dakota state
legislature to provide a political check on that State's liquor
labeling regulation, because it affects solely out-of-state
companies and the Federal Government.
[
Footnote 2/9]
Even if the plurality were correct that the appropriate
comparison were to a North Dakota retailer, so long as the
Government continues to purchase liquor out-of-state, its relative
position turns on another apples-and-oranges comparison. Is it
economically advantageous to reimburse out-of-state distillers for
the cost of compliance with the State's labeling requirement, but
to avoid paying a wholesaler's mark-up? Or is paying the
wholesaler's mark-up less expensive, when the base price to the
wholesaler need not reflect the cost of compliance?
It is true that, if the Government simply purchased liquor from
North Dakota's own wholesalers -- at an estimated increased cost of
$200.000 to $250.000 in the next year -- it would avoid the
labeling requirement, and thereby occupy the same position as North
Dakota retailers. But the regulation cannot be claimed to be
nondiscriminatory on the ground that the Government has the option
to do what the State may not force it to do directly --
i.e., purchase liquor inside the State. Even the plurality
concedes that North Dakota may not permissibly restrict the
Government from purchasing liquor out of state.
See ante
at
495 U. S. 440.
Thus, to be considered nondiscriminatory, the North Dakota
regulatory scheme, even under the plurality's approach, must place
the Federal Government and its suppliers in as good a position as
their North Dakota counterparts,
even if the Government chooses
not to purchase liquor in-state.
[
Footnote 2/10]
By contrast, North Dakota's reporting requirement does not
discriminate against either the military bases or the distillers
and importers who supply them, nor does it obstruct federal
operations. By its terms, it is imposed on "[a]ll persons sending
or bringing liquor into North Dakota." N.D.Admin.Code §
84-02-01-05(1) (1986). The regulation requires all out-of-state
suppliers to make monthly reports to the State, whether they sell
to the Federal Government or to private firms in North Dakota. The
military's suppliers are in no different a position
vis-a-vis the reporting requirement than they would be if
they were supplying the private sector. The military is in no
different a position than any private firm importing liquor into
North Dakota. Nor was there any evidence introduced showing that
the regulation interferes with the military's ability to comply
with the affirmative federal policy of purchasing liquor in bulk
from the most competitive sources in the country. The reporting
requirement has been in effect since 1978, and, therefore, none of
the suppliers' refusals to deal or increase of prices announced in
1986 can be attributed plausibly to this requirement alone.
[
Footnote 2/11]
Section 2 of the Twenty-first Amendment provides:
"The transportation or importation into any State, Territory, or
possession of the United States for delivery or use therein of
intoxicating liquors, in violation of the laws thereof, is hereby
prohibited."
[
Footnote 2/12]
The two
Mississippi Tax Comm'n cases required us to
decide whether Mississippi constitutionally could require
out-of-state liquor suppliers to collect a tax from the Federal
Government on liquor shipped to four military bases within the
State's boundaries. The Government had exclusive jurisdiction over
two of the bases and concurrent jurisdiction over the other two. In
Mississippi Tax Comm'n I, 412 U.
S. 363 (1973), we decided in favor of the United States
as to the two exclusive jurisdiction enclaves. In
Mississippi
Tax Comm'n II, 421 U. S. 599
(1975), we decided in favor of the United States as to the two
concurrent jurisdiction enclaves.
[
Footnote 2/13]
See, e.g., Bacchus Imports, Ltd. v. Dias, 468 U.
S. 263 (1984) (invalidating a Hawaiian liquor tax
because it discriminated against interstate commerce);
Capital
Cities Cable, Inc. v. Crisp, 467 U. S. 691
(1984) (invalidating an Oklahoma prohibition of wine advertisements
on cable television broadcasts to households within its
jurisdiction);
California Retail Liquor Dealers Assn. v. Midcal
Aluminum, Inc., 445 U. S. 97 (1980)
(deciding that California lacked the power to sanction horizontal
price-fixing for wine sold within its borders);
Craig v.
Boren, 429 U. S. 190
(1976) (striking down, under the Equal Protection Clause, a state
law setting different drinking ages for men and women);
Hostetter v. Idlewild Bon Voyage Liquor Corp.,
377 U. S. 324
(1964) (holding that New York lacked power to tax or regulate
liquor sold at an airport under state jurisdiction, but under
Federal Bureau of Customs supervision and intended for use outside
the state).
[
Footnote 2/14]
See, e.g., Healy v. The Beer Institute, Inc.,
491 U. S. 324
(1989) (invalidating a Connecticut law that required out-of-state
shippers of beer to affirm that their prices to Connecticut were no
higher than the prices charged in bordering States on the ground
that the regulation gave Connecticut a prohibited power over
commerce outside its borders);
Department of Revenue v. James
B. Beam Distilling Co., 377 U. S. 341
(1964) (striking down Kentucky's import tax on scotch under the
Export-Import Clause).
[
Footnote 2/15]
To the extent that the Twenty-first Amendment was intended to
permit States to prohibit liquor altogether, it is arguable that
even federal immunity might not permit the Federal Government to
import liquor into a completely dry State to sell at a federal post
office or to serve at a cocktail party in a federal court building.
But if the Court, as Justice SCALIA urges, may draw a line between
regulations and taxes, which are in fact just one form of
regulation, the Court might even more plausibly draw a line between
regulations which govern whether liquor may be imported into a
State's territory under any circumstances and those which govern
merely the circumstances under which liquor may be imported.
[
Footnote 2/16]
See Collins v. Yosemite Park & Curry Co.,
304 U. S. 518
(1938), in which this Court found unconstitutional the application
of California's liquor taxes and regulations to private
concessionaires operating hotels, camps and stores in Yosemite
National Park on the ground that the park was an exclusive federal
enclave.
[
Footnote 2/17]
While the parties do not say when the Grand Forks and Minot Air
Force enclaves were acquired, the public record does indicate that,
as recently as 1962, North Dakota had no territory under partial or
concurrent jurisdiction with the Federal Government,
see
Haines, Crimes Committed on Federal Property -- Disorderly
Jurisdictional Conduct, 4 Crim.Just.J. 375, 402 (1981), and that
the statute ceding exclusive jurisdiction over military bases
within its boundaries has been in effect since at least 1943.
See Report of the Interdepartmental Committee for the
Study of Jurisdiction over Federal Areas Within the States, Part I,
p. 190 (1956). Thus, at whatever point this land was acquired,
North Dakota consented to its being governed under exclusive
federal jurisdiction.
A state statute ceding jurisdiction suffices as consent to
exclusive federal jurisdiction under Art. I, § 8, cl. 17 (giving
Congress the power to exercise exclusive legislation over land only
if the State in which it is located consents).
See Fort
Leavenworth R. Co. v. Lowe, 114 U. S. 525
(1885).