United States v. Township of Muskegon, 355 U.S. 484 (1958)
Uploaded by
Scribd Government DocsUnited States v. Township of Muskegon, 355 U.S. 484 (1958)
Uploaded by
Scribd Government Docs355 U.S.
484
78 S.Ct. 483
2 L.Ed.2d 436
UNITED STATES of America, Appellant,
v.
TOWNSHIP OF MUSKEGON, a Municipal Corporation, et al.
CONTINENTAL MOTORS CORPORATION, Etc., Appellant,
v. TOWNSHIP OF MUSKEGON, a Municipal Corporation, et
al.
Nos. 37, 38.
Argued Nov. 14, 1957.
Decided March 3, 1958.
Mr. Roger Fisher, Washington, D.C., for appellant United States of
america.
Mr. Victor W. Klein, Detroit, Mich., for appellant Continental Motors
Corp.
Mr. Harold M. Street, Muskegon, Mich., for appellees.
Mr. Justice BLACK delivered the opinion of the Court.
As the Government points out in its jurisdictional statement 'this appeal
presents precisely the same basic question' as is raised in No. 26, United States
v. City of Detroit, 355 U.S. 466, 78 S.Ct. 474, also decided today. That
question is whether Public Act 189, of 1953, of the State of Michigan is
unconstitutional as applied to a corporation using government property in
connection with a business conducted for its own private gain.
In this case the United States owns a manufacturing plant at Muskegon,
Michigan. In 1952 it granted Continental Motors Corporation the right to use
this plant in the course of performing several supply contracts Continental had
with the Government. No rent was charged as such but Continental agreed not
to include any part of the cost of the facilities furnished by the Government in
the price of the goods supplied under the contracts.
3
On January 1, 1954, Continental was assessed a tax under Public Act 189. As
in No. 26, this tax was levied because of Continental's use of tax-exempt
property in its private business and was measured by the value of the exempt
property which it was then using. Continental refused to pay the tax and this
suit was brought by state authorities in a state court to recover the amount
assessed. The United States intervened, contending that the tax was invalid
because it imposed a levy on government property. But the lower court rejected
this contention and entered judgment for the plaintiffs. The Michigan Supreme
Court affirmed, 346 Mich. 218, 77 N.W.2d 799. We noted probable jurisdiction
of an appeal from this decision by both Continental and the United States, 352
U.S. 963, 77 S.Ct. 357, 1 L.Ed.2d 319, and now affirm the judgment below on
the basis of our decision in No. 26.
There are only two factual differences between this case and No. 26. First,
Continental is not using the property under a formal lease but under a 'permit';
second, Continental is using the property in the performance of its contracts
with the Government. We do not believe that either fact compels a different
result.
Constitutional immunity from state taxation does not rest on such insubstantial
formalities as whether the party using government property is formally
designated a 'lessee.' Otherwise immunity could be conferred by a simple stroke
of the draftsman's pen. The vital thing under the Michigan statute, and we think
permissibly so, is that Continental was using the property in connection with its
own commercial activities. The case might well be different if the Government
had reserved such control over the activities and financial gain of Continental
that it could properly be called a 'servant' of the United States in agency terms.
But here Continental was not so assimilated by the Government as to become
one of its constituent parts. It was free within broad limits to use the property as
it thought advantageous and convenient in performing its contracts and
maximizing its profits from them.
If under certain conditions the State can tax Continental for use of government
property in connection with its business conducted for profitand as set forth
in No. 26 we are of the opinion that it canthe fact that Continental was
carrying out a contract with the Government does not materially alter the case.
Continental was still acting as a private enterprise selling goods to the United
States. In a certain loose way it might be called an 'instrumentality' of the
United States, but no more so than any other private party supplying goods for
his own gain to the Government. In a number of cases this Court has upheld
state taxes on the activities of contractors performing services for the United
States even though they were closely supervised in performing these functions
by the Government. See, e.g., James v. Dravo Contracting Co., 302 U.S. 134,
58 S.Ct. 208, 82 L.Ed. 155; Alabama v. King & Boozer, 314 U.S. 1, 62 S.Ct.
43, 86 L.Ed. 3; Curry v. United States, 314 U.S. 14, 62 S.Ct. 48, 86 L.Ed. 9;
Wilson v. Cook, 327 U.S. 474, 66 S.Ct. 663, 90 L.Ed. 793.
7
The Curry case seems squarely in point. There a contractor acting pursuant to a
cost-plus contract with the United States purchased certain materials. These
materials were shipped to a government construction project where they were
used by the contractor in the performance of the contract. By agreement title to
the materials passed to the Government as soon as they were shipped by the
vendor. The State imposed a tax on the contractor, based on the value of the
materials, for using them after they had been delivered to the work site. This
Court unanimously upheld that state use tax, although it clearly amounted to a
tax on the use of government property in performing a government contract.
Affirmed.
Mr. Justice WHITTAKER, with whom Mr. Justice BURTON joins, dissenting.
10
Though the tax involved in these appeals rests upon the same Michigan statute
and generally the same legal principles as No. 26, United States v. City of
Detroit, 355 U.S. 466, 78 S.Ct. 474, also decided today, the facts are
sufficiently different to render this tax even more clearly unconstitutional than
the one there sustained.
11
Here the Government did not even lease nor rent its plant. It simply entered into
a contract with Continental providing that the latter would produce certain
military supplies at a price equal to its cost, plus a fixed fee; that the work
would be done in the Government's plant which was to be furnished without
rent (and also that the Government would furnish certain other facilities, and
might furnish certain materials, required to produce the supplies) and that
Continental would not include in its 'cost' for the supplies any charge for the
plant and other facilities and materials furnished by the Government.
12
Continental, thus, had no leasehold estate, tenancy, or other property interest in
the plant; and the right to use the plant belonged to and was provided by the
Government as a part of the facilities which, under the contract, it was to
furnish for production of the supplies. It thus seems plain to us that the
Government itself was actually using its plant in the full and only sense that the
'Government,' being an abstraction, can ever use its military plants. United
States v. Allegheny County, 322 U.S. 174, 187188, 64 S.Ct. 908, 915916,
88 L.Ed. 1209. Therefore, Continental not only had no estate in this real estate
to be taxed, but, moreover, it had no independent right of use of the
Government's plant to be subjected to a use tax. We think it must follow, even
under the majority's interpretation of the law which we believe to be erroneous
that the tax here imposed by the State, however it may be viewed, is a direct
tax against the Government and is, hence, invalid.
13
For these reasons and also those stated in my dissenting opinion in No. 26, as
well as those stated in my dissenting opinion in City of Detroit v. Murray
Corporation, 355 U.S. 511, 475, 78 S.Ct. 462, 479, also decided today, I
dissent, and would reverse the decision and judgment below.
14
For concurring opinions of Mr. Justice FRANKFURTER and Mr. Justice
HARLAN, see 355 U.S. 489, 505, 78 S.Ct. 486, 492.
