United States v. Tax Comm'n of Miss.
Headline: Mississippi may not force out-of-state liquor suppliers to collect a wholesale markup from military base stores; the Court struck down the markup as an unconstitutional state tax on federal instrumentalities.
Holding: The Court held that Mississippi’s Regulation 25 imposes an unconstitutional state tax because the wholesale markup legally falls on United States instrumentalities, so the State may not compel distillers to collect that markup from military installations.
- Stops Mississippi from forcing distillers to invoice military clubs for a 17–20% markup.
- Protects military post exchanges and officers’ clubs from state-imposed wholesale taxes.
- Allows recovery claims for markups paid under protest to proceed.
Summary
Background
The dispute involves the United States and the Mississippi State Tax Commission. Mississippi’s Regulation 25 required out-of-state liquor distillers to invoice and collect a wholesale markup (about 17–20%) from military post exchanges, officers’ clubs, and similar nonappropriated fund activities on four bases in Mississippi, then remit the markup to the State. The United States paid the sums under protest and sued for a declaration that the markup was an unconstitutional tax on federal instrumentalities.
Reasoning
The core question was whether the markup functioned as a state tax on federal instrumentalities. The Court concluded the markup operates like a sales tax that must be passed on to the military purchasers. Prior decisions and the Buck Act show that when a State requires a tax be collected from purchasers, the legal incidence falls on those purchasers. Section 107(a) of the Buck Act preserves federal immunity from state taxes on the United States and its instrumentalities. The Twenty-first Amendment did not override that immunity. For these reasons, Regulation 25’s markup is an unconstitutional state tax on federal instrumentalities.
Real world impact
The ruling prevents Mississippi from forcing distillers to collect and remit the wholesale markup on sales to military base clubs and stores. It protects post exchanges, officers’ clubs, and similar facilities on both exclusive and concurrent-jurisdiction bases from this state tax. The opinion reversed the lower court and affects markups already collected under protest.
Dissents or concurrances
Justices Douglas and Rehnquist dissented, joining the reasons stated in Justice Douglas’s earlier dissent in the prior decision of this case, as noted by the Court.
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