United States v. Boyd, 378 U.S. 39 (1964)

United States v. Boyd

No. 185

Argued April 20-21, 1964
Decided June 15, 1964
378 U.S. 39

APPEAL FROM THE SUPREME COURT OF TENNESSEE

Syllabus

The appellants seek a refund of sales and use taxes imposed by the State of Tennessee on contractors using tangible personal property in the State in the performance of the contract. The contractor’s use tax is assessed no matter who has title to the property, or whether the titleholder is subject to a sales or compensating use tax, unless such taxes have been paid thereon. The appellant contractors have "cost plus fixed fee" management and construction contracts with the Atomic Energy Commission at Oak Ridge, Tennessee, under which the United States holds title to any property used in connection with the performance of the contract. The State Supreme Court held the sales tax could not be collected, but upheld the contractor’s use tax, finding that the appellant companies were independent contractors, and taxable on their private use, for gain, of government-owned property.

Held:

1. The use of government-owned property by a federal contractor, in connection with commercial activities, for his profit or gain, is a separate taxable activity, even if the tax is finally borne by the United States. Pp. 44-48.

(a) It is not material whether the contractor is making products for sale to the Government or is furnishing services. P. 46.

(b) The appellant contractors, operating for profit on a cost-plus basis, did not become instrumentalities of the United States, and thus partake of governmental immunity. Pp. 47-48.

2. Although payment of use taxes will increase the cost of the atomic energy program, Congress was aware of the problem when it repealed § 9(b) of the Atomic Energy Act in 1953. Pp. 49-51.

211 Tenn. 139, 363 S.W.2d 193, affirmed.