Sullivan v. United States (395 U.S. 169)/Opinion of the Court

The issue raised by this appeal is whether § 514 of the Soldiers' and Sailors' Civil Relief Act prohibits Connecticut from imposing its sales and use taxes on servicemen stationed there who are residents or domiciliaries of other States. The United States instituted this action in federal court against the appropriate Connecticut officials on behalf of the aggrieved servicemen. The District Court entered a declaratory judgment that the federal statute prevents collection of the sales and use taxes from such servicemen, and the Court of Appeals affirmed. We noted probable jurisdiction of this appeal.

The sales and use taxes imposed by the Connecticut Education, Welfare and Public Health Tax Act are typical of those enacted by the vast majority of States. A tax of 3 1/2% is levied on the gross receipts from sales of tangible personal property at retail within the State. Although the retailer is liable for payment of the tax, he is required to pass it on to purchasers by adding it to the original sales price of all items sold. The use tax is imposed at the same rate on 'the storage, use or other consumt ion' in the State of tangible personal property purchased from any retailer. The use tax provisions designed to reach the use or consumption in the State of property purchased outside it -exempt all transactions which are subject to the sales tax. And while the consumer is liable directly to the State for the use tax, he can discharge his liability by paying it to the retailer if the retailer is 'engaged in business' within the State and therefore required to collect the use tax. The use tax is also imposed upon purchasers of motor vehicles, boats, or airplanes from non-retailers. The amount of any tax under the Act is reduced by whatever sales or use tax has already been collected 'by any other state or political subdivision thereof.' Finally, the Act commands that all proceeds of the sales and use taxes 'shall be allocated to and expended for public health, welfare and education purposes only.'

By stipulation and affidavits in the District Court, the parties offered some examples of the imposition of these taxes on naval personnel stationed in Connecticut but domiciled elsewhere. Lieutenant Schuman, a Nebraska domiciliary, and Commander Carroll, a Michigan domiciliary, bought used motorboats from nonretailers in Connecticut and were assessed a use tax. Schuman paid the tax under protest, and Carroll has refused to pay, each claiming that he is exempt under the Soldiers' and Sailors' Civil Relief Act. Lieutenant Commander Shaffer and Commander Foster, who are domiciled in Pennsylvania and Texas respectively, each purchased a new car; the Connecticut retailer collected and paid the sales tax. Foster registered his car in Texas, which also exacted a sales or use tax. Finally, Commander Roloff, whose home State is Wisconsin, purchased a used car in Florida and paid that State a 2% sales tax. When he registered the car in Connecticut, he was assessed and paid the use tax, with credit for the Florida sales tax.

As enacted in 1942, § 514 of the Soldiers' and Sailors' Civil Relief Act provided that for purposes of any state 'taxation in respect of any person, or of his (personal) property, income, or gross income,' he shall not be deemed to have lost his residence or domicile in his home State or acquired a residence in any other State 'solely by reason of being absent (from home) in compliance with military or naval orders.' Clarifying language was added in 1944 to provide that for purposes of taxation in respect of personal property, the 'personal property shall not be deemed to be located or present in or to have a situs for taxation in such State.' Also in 1944 Congress enacted a special subsection for automobiles: servicemen are exempt from 'licenses, fees, or excises imposed in respect of motor vehicles or the use thereof' if they have paid such levies in their home States. Finally, in 1962, Congress added the provision that § 514 applies to property in any tax jurisdiction other than the serviceman's home State, 'regardless of where the owner may be serving' in compliance with military orders.

We think it clear from the face of § 514 that state taxation of sales to servicemen is not proscribed. A tax on the privilege of selling or buying property has long been recognized as distinct from a tax on the property itself. And while § 514 refers to taxes 'in respect of' rather than 'on' personal property, we think it an overly strained construction to say that taxation of the sales transaction is the same as taxation 'in respect of' the personal property transferred. Nor does it matter to the imposition of the sales tax that the property 'shall not be deemed to be located or present in or to have a situs for taxation' in Connecticut. The incidence of the sales tax is not the property itself or its presence within the State. Rather it is the transfer of title for consideration, a legal act which can be accomplished without the property ever entering the State. Had Congress intended to include sales taxes within the coverage of § 514, it surely would not have employed language so poorly suited to that purpose as 'taxation in respect of the personal property.'

It is contended on behalf of the servicemen that, even if § 514 does not encompass sales taxes, at least it prohibits taxation of the use of personal property. Not only are use taxes said to fall literally within the meaning of the phrase 'taxation in respect of the personal property,' but § 514 specifically refers in two places to property 'or the use thereof.' Moreover, it is argued, the sole jurisdictional basis of the use tax is the location of the personal property in Connecticut; yet imposition of a tax with such incidence on a serviceman contravenes the command of § 514 that his personal property 'shall not be deemed to be located or present in or to have a situs for taxation in such State.' While we agree that use taxes are not so clearly excluded by the language of § 514 as are sales taxes, neither do we believe that they are clearly included. And consideration of the purpose and legislative history of § 514 along with its language and other factors has led us to the conclusion that Congress did not intend to free servicemen stationed away from home from the sales or use taxes of the host State.

The legislative history of the 1942 enactment and the 1944 and 1962 amendments of § 514 reveals that Congress intended the Act to cover only annually recurring taxes on property-the familiar ad valorem personal property tax. Thus, the reports advert to the possibility that servicemen ordered to move around the country-as they were increasingly during World War II-might have their property taxed by more than one State 'within the same calendar year.' And the reports throughout refer explicitly to 'personal-property taxes on property.' The language of these reports is simply irreconcilable with the proposition that Congress thought the Act would apply to a tax which, like the sales or use tax, does not apply annually to all personal property within the State but is imposed only once and then only when there has been a retail sales transaction.

The absence of any reference to sales and use taxes in the history of § 514 is particularly illuminative of legislative intent when considered in the light of Congress' full awareness of such state taxes and their relationship to federal interests. Sales and use taxes were prevalent by 1942, and Congress had dealt specifically with them only two years earlier. In the 1940 Buck Act, Congress provided that the States have 'full jurisdiction and power to levy and collect' sales and use taxes in 'any Federal area,' except with respect to the sale or use of property sold by the United States or its instrumentalities through commissaries, ship's stores, and the like. If nothing else, this statute illustrates that Congress in 1942 was fully cognizant of state sales and use taxes and identified them by name when it wanted to deal with them. Moreover, it is unlikely that Congress, which had in 1940 expressly authorized sales and use taxation of servicemen everywhere on federal military reservations except post exchanges, would two years later have exempted so many of them from such taxes by means of such imprecise language as that of § 514 of the Soldiers' and Sailors' Civil Relief Act. And since servicemen can apparently purchase all the necessities and many of the luxuries of life tax-free at military commissaries, Congress may reasonably have considered the occasional sales and use taxes that servicemen might have to pay an insignificant burden, as compared with annual ad valorem property taxes, and consequently not deserving of the same exemption.

Section 514 does not relieve servicemen stationed away from home from all taxes of the host State. It was enacted with the much narrower design 'to prevent multiple State taxation of the property.' And the substantial risk of double taxation under multi-state ad valorem property taxes does not exist with respect to sales and use taxes. Like Connecticut, nearly every State which levies such taxes provides a credit for sales or use taxes paid on the transaction to another State. Of course it is true, as we held in Dameron v. Brodhead, 345 U.S. 322, 73 S.Ct. 721, 97 L.Ed. 1041, that § 514 prevents imposition of ad valorem property taxes even though the serviceman's home State does not tax the property. But the predominant legislative purpose nonetheless remains highly relevant in determining the scope of the exemption, and the absence of any significant risk of double taxation under state sales and use taxes generally is therefore strong evidence of congressional intent not to include them in § 514.

The language of § 514 does not undec ut our conclusion that Congress did not proprose to exempt servicemen from sales and use taxes. The appellees, like the courts below, make much of the reference at two places in the section to property 'or the use thereof.' This phrase first appeared in the 1944 addition of subsection (2)(b):

'When used in this section, * *  * (b) the term 'taxation'      shall include but not be limited to licenses, fees, or excises imposed in respect to motor vehicles or the      use thereof: Provided, That the license, fee, or excise      required by the State *  *  * of which the person is a resident      or in which he is domiciled has been paid.'

The second reference to 'use' did not appear until the addition to subsection (1) of the following sentence in 1962:

'Where the owner of personal property is absent from his     residence or domicile solely by reason of compliance with      military or naval orders, this section applies with respect      to personal property, or the use thereof, within any tax      jurisdiction other than such place of residence or domicile,      regardless of where the owner may be serving in compliance      with such orders *  *  * .'

We think that, in light of the clear indications of congressional intent discussed above, the most sensible inference to be drawn from this language is that the only taxes on the use of property from which servicemen are exempted are the special registration taxes imposed annually by all States on the use of motor vehicles. Indeed, this interpretation is supported by the structure of § 514 itself. There is no reference to 'use' of property in those portions of subsection (1) which set out the basic exemption and in which Congress would naturally have been expected to mention use taxes had it meant to include them. Moreover, subsection (2)(b) does not say that for purposes of § 514 'taxation' includes 'licenses, fees, or excises' on the use of all personal property except those in respect to motor vehicles for which such fees have not been paid at home. Rather it says that 'taxation' includes such levies only on motor vehicles when they have been paid at home. Thus, as we held in California v. Buzard, 382 U.S. 386, 86 S.Ct. 478, 15 L.Ed.2d 436, subsection (2)(b) does not encompass ordinary revenue-raising excise or use taxes, but is limited to 'those taxes which are essential to the functioning of the host State's licensing and registration laws in their application to the motor vehicles of nonresident servicemen.' Id., at 395, 86 S.Ct., at 484. The Court held in Buzard that § 514 exempted servicemen from the California tax on automobiles, not because it was an excise tax on use covered by subsection (2) (b), but rather because it was not such a tax. The so-called 'license fee' there in question was an annual tax in the amount of 2% of the assessed market value of the car-a levy which was indistinguishable from the annually recurring ad valorem taxes that § 514 was designed to cover.

It is thus evident that in subsection (2)(b) Congress was dealing solely with a unique form of state 'tax'-the motor vehicle registration fee. Because such fees are not always clearly classifiable as property taxes, servicemen would not be exempted from many of them by subsection (1) of § 514. Since annually recurring license fees raise much the same risk of double taxai on to transitory military personnel as do property taxes, Congress evidently decided in 1944 to extend the exemption of § 514 to include motor vehicle registration fees as well as property taxes. From 1944 to 1962 the only reference in § 514 to 'use' of property was found in subsection (2)(b). And, in view of the narrow purpose of that subsection and the absence for 20 years of any other reference to 'use' in § 514, we cannot believe the repetition of that word in the 1962 amendment-described by Congress as a mere clarification of the existing law -can be deemed to have added all use taxes to the coverage of the statute. The 1962 amendment merely reflected the prior reference to the 'use' of motor vehicles in subsection (2)(b).

Finally, we find unpersuasive the appellees' contention that, since the Connecticut use tax can be applied only with respect to personal property used within the State, its imposition on servicemen away from home cannot be squared with the declaration of § 514 that 'personal property shall not be deemed to be located or present in or to have a situs for taxation in such State.' That clause is modified by the opening words of the sentence-'(f)or the purposes of taxation in respect of the personal property.' Section 514, therefore, does not in terms relieve servicemen from every state tax which is somehow dependent on the presence of personal property within the State. Rather, it provides only that a State cannot justify imposing the taxes to which § 514 was initially intended to apply-annually recurring ad valorem property taxes-on the ground of the property's presence within the State.

This construction is confirmed by the explanation which Congress itself gave for the addition in 1944 of the language on which the appellees rely:

'The purpose of the proposed legislation is to clarify the     intent of section 514 of the Soldiers' and Sailors' Civil      Relief Act *  *  *. When that provision of law was added to the     act to relieve persons in service from liability of double      taxation by being moved from one State to another under      orders, it was intended that it should apply to      personal-property taxes as well as to income taxes. As     presently constituted, it primarily affects taxes in respect      to income and other taxes based on residence or domicile, but      it does not prevent the State of 'temporary residence' from      taxing tangible personal property actually located in such      State so long as the tax does not depend on residence or      domicile. A few States have taken the position that tangible     personal property of military personnel who are only      temporarily within their jurisdiction does not acquire a      situs for taxation, but it has been held that section 514 of      the act as now written does not affect the right of a State      to assess personal-property taxes on property within its      jurisdiction.'

The 1944 amendment, therefore, had only the limited purpose 'to clarify' Congress' original intent to cover 'personal-property taxes on property,' not to expand the exemption in a manne which would include sales or use taxes.

For these reasons we hold that § 514 of the Soldiers' and Sailors' Civil Relief Act does not exempt servicemen from the sales and use taxes imposed by Connecticut. Accordingly, the judgment is

Reversed.