City of Detroit v. Murray Corp. of America

Background

A private company, Murray Corporation, built airplane parts under subcontracts from two prime contractors working for the United States. The subcontracts said that when the company received partial payments, title to work in process and materials vested in the United States even though Murray kept possession. On January 1, 1952, Detroit and Wayne County assessed personal property taxes that included the value of those materials. Murray paid under protest and sued for a refund; the District Court and Court of Appeals ruled for Murray before the case reached this Court.

Reasoning

The main question was whether Michigan’s tax, assessed against Murray for possessing materials to which the United States held title, violated federal immunity from state taxation. The majority looked at how the tax operated in practice rather than its label. The Court said the tax was imposed on Murray, a private party using government-owned property for its own private gain, not directly on the United States or on federal property. The majority relied on related decisions and noted there was no discrimination against the Government and no clear interference with federal functions. The Court reversed the Court of Appeals and sent the case back for further proceedings consistent with that view.

Real world impact

As a practical matter, states can impose taxes on private businesses that possess or use federal-owned materials in their operations, even when title rests with the Government. The opinion notes the Government may feel some economic burden and that Congress remains the proper body to set broader policy for contractors and state taxes.

Dissents or concurrances

Several Justices dissented, arguing the taxed items were federal property and that treating an ad valorem property tax as a user or possessory tax blurs important legal distinctions and weakens immunity protections.