1. A state tax imposed on dealers in gasoline for the privilege
of selling, and measured at so many cents per gallon of gasoline
sold, is void under the federal Constitution as applied to sales to
instrumentalities of the United States, such as the Coast Guard
Fleet and a Veterans' Hospital. P.
277 U. S.
222.
2. The substance and legal effect is to tax the sale, and thus
burden and tax the United States, exacting tribute on its
transactions for the support of the state.
Id.
3. Such an exaction infringes the right of the dealer to have
the constitutional independence of the United States in respect of
such purchases remain untrammeled.
Id.
147 Miss. 663 reversed.
Error to a judgment of the Supreme Court of Mississippi
sustaining a suit brought by the State of Mississippi to recover
taxes assessed on sales of gasoline made by the defendant,
plaintiff in error.
Page 277 U. S. 220
MR. JUSTICE BUTLER delivered the opinion of the Court.
Chapter 116 of the Laws of Mississippi of 1922 provided that
"any person engaged in the business of distributor of gasoline
or retail dealer in gasoline shall pay for the privilege of
engaging in such business, an excise tax of 1� (one cent) per
gallon upon the sale of gasoline, . . ."
except that sold in interstate commerce or purchased outside the
state and brought in by the consumer for his own use. Chapter 115,
Laws of 1924, increased the tax to three cents, and c. 119, Laws of
1926, made it four cents per gallon. Since some time in 1925,
petitioner has been engaged in that business. The state sued to
recover taxes claimed on account of sales made by petitioner to the
United States for the use of its Coast Guard fleet in service in
the Gulf of Mexico and its Veterans' Hospital at Gulfport. Some of
the sales were made while the Act of 1924 was in force, and some
after the rate had been increased by the Act of 1926. Accordingly,
the demand was for three cents a gallon on some and four cents on
the rest. Petitioner defended on the ground that these statutes, if
construed to impose taxes on such sales, are
Page 277 U. S. 221
repugnant to the federal Constitution. The court of first
instance sustained that contention, and the state appealed. The
supreme court held the exaction a valid privilege tax measured by
the number of gallons sold; that it was not a tax upon
instrumentalities of the federal government, and that the United
States was not entitled to buy such gasoline without payment of the
taxes charged dealers. 147 Miss. 663.
The United States is empowered by the Constitution to maintain
and operate the fleet and hospital. Art. I, § 8. That authorization
and laws enacted pursuant thereto are supreme (Art. VI), and, in
case of conflict, they control state enactments. The states may not
burden or interfere with the exertion of national power or make it
a source of revenue or take the funds raised or tax the means used
for the performance of federal functions.
McCulloch
v. Maryland, 4 Wheat. 316,
17 U. S. 425,
et seq.; 41 U. S.
Commissioners of Erie County, 16 Pet. 435,
41 U. S. 448;
Ohio v. Thomas, 173 U. S. 276;
Choctaw, O. & G. R. Co. v. Harrison, 235 U.
S. 292;
Indian Oil Co. v. Oklahoma,
240 U. S. 522;
Johnson v. Maryland, 254 U. S. 51;
Clallam County v. United States, 263 U.
S. 341,
263 U. S. 344;
Northwestern Mutual Life Ins. Co. v. Wisconsin,
275 U. S. 136;
New Brunswick v. United States, 276 U.
S. 547. The strictness of that rule was emphasized in
Gillespie v. Oklahoma, 257 U. S. 501,
257 U. S. 505.
The right of the United States to make such purchases is derived
from the Constitution. The petitioner's right to make sales to the
United States was not given by the state, and does not depend on
state laws; it results from the authority of the national
government under the Constitution to choose its own means and
sources of supply. While Mississippi may impose charges upon
petitioner for the privilege of carrying on trade that is subject
to the power of the state, it may not lay any tax upon transactions
by which the United States secures the things desired for its
governmental purposes.
Page 277 U. S. 222
The validity of the taxes claimed is to be determined by the
practical effect of enforcement in respect of sales to the
government.
Wagner v. City of Covington, 251 U. S.
95,
251 U. S. 102.
A charge at the prescribed rate is made on account of every gallon
acquired by the United States. It is immaterial that the seller,
and not the purchaser, is required to report and make payment to
the state. Sale and purchase constitute a transaction by which the
tax is measured and on which the burden rests. The amount of money
claimed by the state rises and falls precisely as does the quantity
of gasoline so secured by the government. It depends immediately
upon the number of gallons. The necessary operation of these
enactments, when so construed, is directly to retard, impede, and
burden the exertion by the United States of its constitutional
powers to operate the fleet and hospital.
McCulloch v.
Maryland, supra, 17 U. S. 436;
Gillespie v. Oklahoma, supra, 257 U. S. 505;
Jaybird Mining Co. v. Weir, 271 U.
S. 609,
271 U. S. 613.
To use the number of gallons sold the United States as a measure of
the privilege tax is, in substance and legal effect, to tax the
sale.
Telegraph Co. v. Texas, 105 U.
S. 460;
Frick v. Pennsylvania, 268 U.
S. 473,
268 U. S. 494.
And that is to tax the United States -- to exact tribute on its
transactions and apply the same to the support of the state.
The exactions demanded from petitioner infringe its right to
have the constitutional independence of the United States in
respect of such purchases remain untrammeled.
Osborn v.
United States Bank, 9 Wheat. 738,
22 U. S. 867;
Telegraph Co. v. Texas, supra. Cf. Terrace v.
Thompson, 263 U. S. 197,
263 U. S. 216.
Petitioner is not liable for the taxes claimed.
Judgment reversed.
MR. JUSTICE HOLMES, dissenting.
The State of Mississippi. in 1924 and 1926. imposed upon
distributors and retail dealers of gasoline, for the
Page 277 U. S. 223
privilege of engaging in the business, an excise tax of three
cents and four cents, respectively, per gallon sold in the state.
The supreme court of the state declares it to be a privilege tax,
but points out that, whether this tax is on the privilege or on the
property, it is imposed before the gasoline has left the dealer's
hands. The plaintiff in error, a dealer, was sued by the state for
certain sums that were due under the statutes. It pleaded that the
sales in respect of which the tax was demanded were sales to the
United States for the use of its Coast Guard and Veterans'
Hospital, that, these being instrumentalities of the government, it
did not include the amount of the tax in the price charged, and
that the statute did not and could not tax the dealer for them
consistently with the Constitution of the United States. The
supreme court of the state upheld the tax and pointed out the
extreme consequences to which a different decision might lead.
It seems to me that the state court was right. I should say
plainly right but for the effect of certain dicta of Chief Justice
Marshall which culminated in, or, rather, were founded upon, his
often quoted proposition that the power to tax is the power to
destroy. In those days, it was not recognized, as it is today, that
most of the distinctions of the law are distinctions of degree. If
the states had any power, it was assumed that they had all power,
and that the necessary alternative was to deny it altogether. But
this Court, which so often has defeated the attempt to tax in
certain ways, can defeat an attempt to discriminate or otherwise go
too far without wholly abolishing the power to tax. The power to
tax is not the power to destroy while this Court sits. The power to
fix rates is the power to destroy if unlimited, but this Court,
while it endeavors to prevent confiscation, does not prevent the
fixing of rates. A tax is not an unconstitutional regulation in
every case where an absolute prohibition of sales would be one.
Hatch v. Reardon, 204 U. S. 152,
204 U. S. 162.
Page 277 U. S. 224
To come down more closely to the question before us, when the
government comes into a state to purchase, I do not perceive why it
should be entitled to stand differently from any other purchaser.
It avails itself of the machinery furnished by the state, and I do
not see why it should not contribute in the same proportion that
every other purchaser contributes for the privileges that it uses.
It has no better or other right to use them than anyone else. The
cost of maintaining the state that makes the business possible is
just as necessary an element in the cost of production as labor or
coal. If the plaintiff in error had paid the tax and had added it
to the price, the government would have had nothing to say. It
could take the gasoline or leave it, but it could not require the
seller to abate his charge, even if it had been arbitrarily
increased in the hope of getting more from the government than
could be got from the public at large. But, in fact, the government
has not attempted to say anything in this case, which is simply
that of dealer trying to cut down a legitimate tax on his business
because certain purchasers proposed to use the goods in a certain
way, although, so far as the sale was concerned, they were free to
turn the gasoline into the ocean, use if for private purposes, or
sell it again. It does not appear that the government would have
refused to pay a price that included the tax if demanded, but, if
the government had refused, it would not have exonerated the
seller.
Pierce Oil Corp. v. Hopkins, 264 U.
S. 137,
264 U. S.
139.
An imperfect analogy with taxation that affects interstate
commerce is relied upon. Even the law on that subject has been
liberalized since the decision of most of the cases cited.
Sonneborn Brothers v. Cureton, 262 U.
S. 506. But obviously it does not follow from the
invalidity of a tax directly burdening interstate commerce that a
tax upon a domestic seller is bad because he may be able to shift
the burden to a purchaser, even
Page 277 U. S. 225
though an agency of the government, who is willing to pay the
price with the tax and who has no rational ground for demanding
favor. I am not aware that the President, the Members of Congress,
the Judiciary or, to come nearer to the case in hand, the Coast
Guard or the officials of the Veterans' Hospital, because they are
instrumentalities of government and cannot function naked and
unfed, hitherto having been held entitled to have their bills for
food and clothing cut down so far as their butchers and tailors
have been taxed on their sales, and I had not supposed that the
butchers and tailors could omit from their tax returns all receipts
from the large class of customers to which I have referred. The
question of interference with government, I repeat, is one of
reasonableness and degree, and it seems to me that the interference
in this case is too remote.
Metcalf v. Mitchell,
269 U. S. 514.
MR. JUSTICE BRANDEIS and MR. JUSTICE STONE agree with this
opinion.
MR. JUSTICE McREYNOLDS, dissenting.
I am unable to think that every man who sells a gallon of
gasoline to be used by the United States thereby becomes a federal
instrumentality, with the privilege of claiming freedom from
taxation by the state.
The doctrine of immunity is well established, but it ought not
to be extended beyond the reasons which underlie it. Its
limitations well pointed out fifty years ago in
Railroad
Company v. Peniston, 18 Wall. 5,
85 U. S.
30-31:
"It cannot be that a state tax which remotely affects the
efficient exercise of a federal power is, for that reason alone,
inhibited by the Constitution. To hold that would be to deny to the
states all power to tax persons or property. Every tax levied by a
state withdraws from the reach of federal taxation a portion of the
property
Page 277 U. S. 226
from which it is taken, and, to that extent, diminishes the
subject upon which federal taxes may be laid. The states are, and
they must ever be, coexistent with the national government. Neither
may destroy the other. Hence, the federal Constitution must receive
a practical construction. Its limitations and its implied
prohibitions must not be extended so far as to destroy the
necessary powers of the states, or prevent their efficient
exercise."
MR. JUSTICE STONE concurs in these views.