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Keywords

contractappealcorporation

contractappeallevy

Related Cases

City of Detroit v. Murray Corp. of America, 355 U.S. 489, 78 S.Ct. 458, 2 L.Ed.2d 441

Facts

In 1952, Murray Corporation was a subcontractor for the manufacture of airplane parts for the United States. Under the terms of their contract, title to materials acquired by Murray vested in the United States upon partial payments made to Murray. On January 1, 1952, the City of Detroit and the County of Wayne assessed taxes against Murray based on the value of these materials, which led to Murray paying the taxes under protest and subsequently suing for a refund. The United States intervened in support of Murray's claim.

On January 1, 1952, the City of Detroit and the County of Wayne, Michigan, each assessed a tax against Murray which in part was based on the value of materials and work in process in its possession to which the United States held legal title under the title-vesting provisions of the subcontract.

Issue

Did the taxes assessed against Murray for materials, which were owned by the United States, violate the federal government's constitutional immunity from state taxation?

Did the Government, by the terms of the ‘partial payment’ provisions of the subcontracts, become ‘vest(ed)’ with ‘title’ to all elements of property and incidents of ownership in the materials referred to prior to the assessment date, or did it thereby acquire ‘title’ thereto only as security and, thus, become only a lienor?

Rule

The Supreme Court determined that state taxes imposed on a private party possessing government property do not violate the federal government's constitutional immunity, as long as the tax is not levied directly against the government or its property.

However in passing on the constitutionality of a state tax ‘we are concerned only with its practical operation, not its definition or the precise form of descriptive words which may be applied to it.’

Analysis

The Court analyzed the nature of the tax imposed on Murray, concluding that it was a tax on the possession and use of property rather than a direct tax on government property. The Court emphasized that the practical operation of the tax was what mattered, not the labels or definitions used. Since the tax was assessed against Murray, a private corporation, and not the United States, it did not infringe upon the federal government's immunity.

As applied—and of course that is the way they must be judged—the taxes involved here imposed a levy on a private party possessing government property which it was using or processing in the course of its own business.

Conclusion

The Supreme Court reversed the decision of the Court of Appeals, holding that the taxes did not violate the Constitution and remanded the case for further proceedings consistent with its opinion.

The judgment of the Court of Appeals is reversed and the cause is remanded for further proceedings not inconsistent with this opinion.

Who won?

The United States prevailed in this case as the Supreme Court ruled that the taxes assessed against Murray did not infringe upon the federal government's constitutional immunity.

The majority now reverses the Court of Appeals and reinstates the assessment and tax.

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Comptroller of Treasury of Maryland v. Wynne, 575 U.S. 542, 135 S.Ct. 1787, 191 L.Ed.2d 813, 83 USLW 4309, 15 Cal. Daily Op. Serv. 4798, 2015 Daily Journal D.A.R. 5402, 25 Fla. L. Weekly Fed. S 233

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