Alabama v. King & Boozer
Headline: Ruling allows Alabama to collect sales tax on building materials bought by contractors for a U.S. Army camp, finding contractors—not the federal government—are legally responsible for the tax.
Holding: The Court held that, under the cost-plus contracts and purchase arrangements, the contractors — not the United States — were the legal purchasers of the lumber and therefore subject to Alabama’s sales tax.
- Allows states to collect sales taxes from contractors buying materials for federal projects.
- Makes contractors, not the Government, legally responsible when they order and pay for supplies.
- Limits claims that government reimbursement alone creates federal tax immunity.
Summary
Background
King and Boozer sold lumber to private contractors who were building an Army camp under cost-plus contracts with the United States. Alabama’s law imposed a 2% sales tax on sellers but required sellers to add and collect the tax from the purchaser. The contractors ordered and paid for the lumber, were later reimbursed by the Government, and the state assessed the tax on the transaction.
Reasoning
The core question was whether the transaction was effectively a Government purchase immune from state tax. The Court examined the contract terms and the actual practice: contractors bought in their own names, the orders stated they did not bind the United States, contractors paid the sellers, and the Government merely reimbursed them after delivery and acceptance. The Court concluded the contractors were the legal purchasers under Alabama law, so the tax legally fell on them rather than on the United States, and did not violate federal immunity.
Real world impact
The decision affirms that states may collect such taxes from private contractors who order and pay for materials for federal projects when the contract makes the contractor the purchaser. It rejects the idea that the Government’s reimbursement or inspection automatically makes the Government the buyer for tax purposes. Congress has not enacted special protections for cost-plus contractors, so affected parties rely on this constitutional ruling and on any future federal legislation.
Ask about this case
Ask questions about the entire case, including all opinions (majority, concurrences, dissents).
What was the Court's main decision and reasoning?
How did the dissenting opinions differ from the majority?
What are the practical implications of this ruling?