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UNITED STATES ET AL. v. BOYD

decided: June 15, 1964.

UNITED STATES ET AL
v.
BOYD, COMMISSIONER



APPEAL FROM THE SUPREME COURT OF TENNESSEE.

Warren, Black, Douglas, Clark, Harlan, Brennan, Stewart, White, Goldberg

Author: White

[ 378 U.S. Page 40]

 MR. JUSTICE WHITE delivered the opinion of the Court.

In Carson v. Roane-Anderson Co., 342 U.S. 232, it was held that § 9 (b) of the Atomic Energy Act*fn1 barred the collection of the Tennessee sales and use tax in connection with sales to private companies of personal property used by them in fulfilling their contracts with the Atomic Energy Commission. In 1953, Congress repealed the statutory immunity for activities and properties of the AEC contained in § 9 (b) in order to place Atomic Energy Commission contractors on the same footing as other contractors performing work for the Government.*fn2 In 1955 Tennessee amended its statute by adding a contractor's use tax which imposes a tax upon contractors using property in the performance of their contracts with others, irrespective of the ownership of the property and of the place where the goods are purchased. This tax, at the sales and use tax rate, is measured by the purchase price or fair market value of the property used by the contractor and is to be collected only when a sales tax on local purchases or a compensating use tax on out-of-state goods has not previously been collected in connection with the same property.*fn3

[ 378 U.S. Page 41]

     Union Carbide Corp. and H. K. Ferguson Co. have contracts with the Atomic Energy Commission relating to work and services to be performed at the Oak Ridge, Tennessee, complex. Carbide's contract obligates it to manage, operate and maintain the Oak Ridge plants and facilities in accordance with such directions and instructions not inconsistent with the contract as the Commission deems necessary to issue from time to time. In the absence of applicable instructions, Carbide is to use its best judgment, skill and care in all matters pertaining to performance. Carbide is charged with the duty of procuring materials, supplies, equipment and facilities although the Government retains the right to furnish any of these items. Payment for purchases is to be made with government funds, and title to all property

[ 378 U.S. Page 42]

     passes directly from the vendor to the United States.*fn4 Carbide is generally free to make purchases up to $100,000 without prior approval.

Although Carbide exercises considerable managerial discretion from day to day in performing the contract, the Commission retains the right to control, direct and supervise the performance of the work and has issued directions and instructions governing large areas of the operation. Carbide has no investment in the Oak Ridge facility and at the time of this litigation employed some 12,000 employees and supervisors to perform the contract. Its annual fee, renegotiated periodically, was $2,751,000 at the time of suit.

The Ferguson contract was a contract to perform construction services relating both to new facilities and to the modification of the existing plant. The contract called for performing those projects ordered by the Commission. Ferguson also operated under instructions and directions of the AEC, it owned none of the property used in the performance of its contract and its purchases of property were handled in a manner similar to that

[ 378 U.S. Page 43]

     employed in the case of Carbide except that Ferguson was free to purchase without the consent of the Commission only up to $10,000. Ferguson's compensation is negotiated twice a year on the basis of the value of the services Ferguson performed during the preceding six months, a fee of $20,000 having been paid for the six months preceding suit.

Tennessee collected from Carbide and Ferguson a sales and contractor's use tax upon purchases made by them under their contracts with the Commission. The companies and the AEC sued to recover these taxes claiming that their collection infringed upon the implied constitutional immunity of the United States. The Tennessee Supreme Court refused to permit the collection of the sales tax*fn5 but sustained the collection of the contractor's use tax. This tax, it was held, is imposed upon the use by a contractor of tangible personal property whether the title is in him or in another, and whether or not the other has immunity from state taxation. The contractor's tax "was intended to be and is a tax upon the use per se by such a contractor. . . . The tax is on [his] private use for [his] own profit and gain, and not a tax directly upon the Government." 211 Tenn 139, 163, 164, 363 S. W. 2d 193, 203, 204. We noted probable jurisdiction to resolve ...


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