2. The contracts which the respondents have with the United
States, and the performance thereunder, are Commission "activities"
which § 9(b) exempts from state taxation. Pp.
342 U. S.
233-236.
192 Tenn. 150,
239
S.W.2d 27, affirmed.
In suits brought by respondents to recover amounts paid as state
sales and use taxes and to enjoin future collections, the State
Supreme Court held that the challenged taxes were prohibited by §
9(b) of the Atomic Energy Act of 1946. 192 Tenn. 150,
239
S.W.2d 27. This Court granted certiorari. 342 U.S. 847.
Affirmed, p.
342 U. S.
236.
Page 342 U. S. 233
MR. JUSTICE DOUGLAS delivered the opinion of the Court.
The Retailers' Sales Tax Act of Tennessee, Tenn. Acts 1947, c.
3, imposes a sales tax on the sale of goods in Tennessee and a use
tax on the use within the state of goods purchased elsewhere.
Tennessee collected these taxes from respondents, who paid them
under protest and then brought these suits to recover them and to
enjoin future collections. Two of the respondents are private
companies who are contractors for the Atomic Energy Commission and
who paid use taxes; two are merchants who paid sales taxes on sales
to those contractors and who passed the taxes on to them. The use
taxes and the sales taxes were on articles used by the contractors
in the performance of their contracts with the Commission.
The Tennessee Supreme Court held, by a divided vote,
Carbide
& Carbon Chemicals Corp. v. Carson, 192 Tenn. 150,
239
S.W.2d 27, that the challenged taxes, though not forbidden by
the Constitution, were prohibited by § 9(b) of the Atomic Energy
Act of 1946, 60 Stat. 765, 42 U.S.C. § 1809(b). The cases are here
on certiorari. 342 U.S. 847.
Sec. 9(b) provides in part that
"The Commission, and the property, activities, and income of the
Commission, are hereby expressly exempted from taxation in any
manner or form by any State, county, municipality, or any
subdivision thereof."
The constitutional power of
Page 342 U. S. 234
Congress to protect any of its agencies from state taxation,
Pittman v. Home Owners' Corporation, 308 U. S.
21;
Federal Land Bank of St. Paul v. Bismarck Lumber
Co., 314 U. S. 95, has
long been recognized as applying to those with whom it has made
authorized contracts.
See Thomson v. Pacific R.
Co., 9 Wall. 579,
76 U. S.
588-589;
James v. Dravo Contracting Co.,
302 U. S. 134,
302 U. S.
160-161. Certainly the policy behind the power of
Congress to create tax immunities does not turn on the nature of
the agency doing the work of the government. The power stems from
the power to preserve and protect functions validly authorized,
Pittman v. Home Owners' Corp., supra, at
308 U. S. 33 --
the power to make all laws necessary and proper for carrying into
execution the powers vested in the Congress. U.S.Const. Art. I, §
8, cl. 18. Hence, if the present contracts which the respondent
contractors have with the United States, and the performance
thereunder, are "activities" within the meaning of § 9(b) of the
Act, the immunity is clear. Our view is that they are, and that the
judgments below must be affirmed.
Respondent Roane-Anderson manages the government-owned town of
Oak Ridge, Tennessee; Carbide and Carbon Chemicals operates the Oak
Ridge plants for the production of fissionable materials. Their
contracts antedate the Atomic Energy Act of 1946, having been
originally entered into with the Manhattan District of the Corps of
Engineers. Pursuant to § 9(a) of the Act, these contracts were
transferred by Executive Order [
Footnote 1] to the Commission. The question whether the
Commission should be empowered to employ private contractors in
performance of its functions, or whether the Commission should
itself be the entrepreneur, was an issue of national policy much
discussed and debated at the time the legislation was before the
Congress. One
Page 342 U. S. 235
measure, which had the backing of the War Department, would have
authorized the Commission to lean heavily on private enterprise for
performance of its functions. [
Footnote 2] Another measure, originating in the Senate and
after extensive revisions becoming the Atomic Energy Act of 1946,
contained no provision authorizing the use of contractors to the
extent here involved, required the Commission to produce its own
fissionable materials in its own plants by its own employees, and
directed the Commission to terminate contracts previously made for
the production of fissionable materials. [
Footnote 3] But that bill was materially altered so as
to adopt as the national policy the use of
"management contracts for the operation of Government-owned
plants so as to gain the full advantage of the skill and experience
of American industry. [
Footnote
4]"
Accordingly, § 4(c)(2) of the Act authorizes the Commission
"to make, or to continue in effect, contracts with persons
obligating them to produce fissionable material in facilities owned
by the Commission."
And § 9(a) authorizes the transfer to the Commission of all
contracts concerning the production of fissionable material. The
use of private contractors is therefore one of the ways in which
the Commission is authorized to manage its affairs. Its activities
may, in other words, be performed by it directly or through the
agencies of private enterprise.
Congress uses the word "activities" in various sections of the
Act, and seems each time to give it a broad sweep. The
Congressional or Joint Committee constituted under § 15 is directed
to study "the activities" of the Commission. The reports which the
Commission is directed to submit to Congress pursuant to § 17
concern its "activities."
Page 342 U. S. 236
Section 9(b) authorizes the Commission to make payments to state
and local governments in lieu of property taxes in those areas "in
which the activities of the Commission are carried on and in which
the Commission has acquired property" previously subject to local
taxation. In none of these sections do we find any suggestion that
"activities" is used in a narrow sense to describe less than all of
the functions of the Commission. The meaning of "activities" as
applied either to an individual or to a government agency may be
broad enough to include what is done through independent
contractors as well as through agents. Certainly where the pattern
of conduct visualized by the Act is the use of independent
contractors or agents from the field of private enterprise, the
inference is strong that "activities" means all authorized methods
of performing the government function. We find no contrary evidence
from the legislative history.
In view of this conclusion, we find it unnecessary to reach the
problems of implied constitutional immunity involved in
James
v. Dravo Contracting Co., supra, and
Alabama v. King &
Boozer, 314 U. S. 1.
Affirmed.
MR. JUSTICE BLACK took no part in the consideration or decision
of this case.
[
Footnote 1]
Executive Order No. 9816, Dec. 31, 1946, 12 Fed.Reg. 37.
[
Footnote 2]
See H.R.Rep.No.1186, 79th Cong., 1st Sess.
[
Footnote 3]
See S.1717 reprinted in Hearings before the Senate
Special Committee on Atomic Energy, 79th Cong., 2d Sess., pp.
1-9.
[
Footnote 4]
S.Rep.No.1211, 79th Cong., 2d Sess., p. 15.