Charles Evans Hughes

“ But if it be assumed that the gross receipts tax may increase the cost to the government, that fact would not invalidate the tax. With respect to that effect, a tax on the contractor's gross receipts would not differ from a tax on the contractor's property and equipment necessarily used in the performance of the contract. Concededly, such a tax may validly be laid. Property taxes are naturally, as in this case, reckoned as a part of the expense of doing the work. Taxes may validly be laid not only on the contractor's machinery, but on the fuel used to operate it. ”

“ This is to ignore the direct bearing of the exaction on the transaction between the contractor and the government. The fact that the tax is laid upon him who contracts with the government rather than upon the contract as such, or the government itself, is immaterial. Every purchaser of government obligations is an independent contractor with the government. If the fact that the taxpayer is an independent contractor were significant, it would have validated every tax laid upon the ownership of government obligations or upon the interest received therefrom. ”

“ In other words, the power to destroy which may be the consequence of taxation is a reason why the right to tax should be confined to subjects which may be lawfully embraced therein, even although it happens that in some particular instance no great harm may be caused by the exercise of the taxing authority as to a subject which is beyond its scope.' Chief Justice Marshall denied the existence of the power. ”

“ As in the Panhandle Case, so in the present, the receipt of the thing contracted for constitutes the transaction by which the tax is measured and on which the burden rests. We may thus paraphrase what was there said: To use the value and amount of the goods and services furnished to the United States as a measure of the tax is in substance and effect to tax the transaction itself. The amount of the tax rises and falls in direct ratio to the contract value of the goods and services rendered to the government. This is to tax the sale; and that is to tax the United States. ”

“ In the exertion of the powers conferred upon it by the Constitution, the United States may, in its discretion, erect corporations for private gain and employ them as its instrumentalities. [13] No tax can be laid upon their franchises or operations, [14] but their local property [15] is subject to nondiscriminating state taxation. In contrast, the bestowal of benefits, rights, privileges, or immunities, or the imposition of duties by federal law upon a natural person or a corporation does not convert him or it into a federal agency exempt from uniform state excise or property taxes. ”

“ If the government, as guardian of an incompetent Indian, leases land to a mining company on a royalty consisting of a percentage of the gross proceeds derived from the sale of ores mined, a state ad valorem tax assessed to the lessee on the ores mined and in storage upon the leased land before any sale or segregation of the equitable interests of the government as guardian, is void as burdening and impeding an operation of the government. ”

“ As we have seen, the Solicitor General suggests that the tax should be sustained, although it lays a burden on the United States, because the burden is a 'normal tax burden' and the United States can bear it. The opinion of the court suggests the same thought, and adds that if West Virginia ever imposes a gross receipts tax uniform in its incidence, but inordinately heavy, Congress has power to relieve the government from such interference. ”

“ There is no ineluctable logic which makes the doctrine of immunity with respect to government bonds applicable to the earnings of an independent contractor rendering services to the government. That doctrine recognizes the direct effect of a tax which 'would operate on the power to borrow before it is exercised' (Pollock v. Farmers' Loan & Trust Co., supra) , and which would directly affect the government's obligation as a continuing security. ”

“ The possible importance of reserving to the state jurisdiction for local purposes which involve no interference with the performance of governmental functions is becoming more and more clear as the activities of the government expand and large areas within the states are acquired. There appears to be no reason why the United States should be compelled to accept exclusive jurisdiction or the state be compelled to grant it in giving its consent to purchases. ”

“ United States mails, troops, and munitions of war are carried upon almost every railroad. Telegraph lines are employed in the National service. So are steamboats, horses, stage-coaches, foundries, ship-yards, and multitudes of manufacturing establishments. They are the property of natural persons, or of corporations, who are instruments or agents of the General government, and they are the hands by which the objects of the government are attained. ”

“ The right of eminent domain inheres in the federal government by virtue of its sovereignty, and thus it may, regardless of the wishes either of the owners or of the states, acquire the lands which it needs within their borders. Kohl v. United States, 91 U.S. 367, 371, 372, 23 L.Ed. 449. In that event, as in cases of acquisition by purchase without consent of the state, jurisdiction is dependent upon cession by the state, and the state may qualify its cession by reservations not inconsistent with the governmental uses. ”

“ Indeed, the court itself is required to make such a one in the instant case in determining that payment for what the appellee manufactured for the government in Pittsburgh, Pa., did not constitute a gross receipt in West Virginia under the contract. The court has repeatedly been confronted with the problem whether a tax was in fact on the sale of a commodity or upon some prior dealing with it by the producer or supplier. While the distinctions drawn may seem somewhat nice, examination of the facts carries conviction that the distinctions are substantial. ”

“ We said (Id., at page 225 of 282 U.S., 51 S.Ct. 125, 127, 75 L.Ed. 304, 71 A.L.R. 1260) : 'The power to tax is no less essential than the power to borrow money, and, in preserving the latter, it is not necessary to cripple the former by extending the constitutional exemption of taxation to those subjects which fall within the general application of non-discriminatory laws, and where no direct burden is laid upon the governmental instrumentality, and there is only a remote, if any, influence upon the exercise of the functions of government.' Many illustrations were given. ”

“ Again the court has said: 'It is obvious that the same power which imposes a light duty can impose a very heavy one, one which amounts to a prohibition. Questions of power do not depend on the degree to which it may be exercised. If it may be exercised at all, it must be exercised at the will of those in whose hands it is placed. ”

“ Are the locks and dams in the instant case 'needful buildings' within the purview of clause 17? The state contends that they are not. If the clause were construed according to the rule of ejusdem generis, it could be plausibly contended that 'needful buildings' are those of the same sort as forts, magazines, arsenals, and dockyards ”

“ The decision in Fidelity & Deposit Co. of Maryland v. Pennsylvania, 240 U.S. 319, 36 S.Ct. 298, 60 L.Ed. 664, relied on as sustaining the instant exaction, neither rules nor aids in the decision of the present cause. ”

“ What was said by Mr. Justice Bradley, dissenting in Union P. Railroad Company v. Peniston, 18 Wall. 5, 38, 21 L.Ed. 787, when read in the light of its context, has no bearing upon the issue here presented. ”