Washington v. United States

Background

The State of Washington imposes a sales and use tax on retail sales and consumer uses of tangible personal property. In 1941 the State shifted the tax incidence for construction so owners, not contractors, paid tax on completed projects. In 1975 Washington changed the law again to require contractors working on federally owned projects to pay tax on materials. The federal government sued, lower courts ruled for the government, and the Court of Appeals affirmed.

Reasoning

The core question was whether Washington’s 1975 tax changes unlawfully discriminated against the federal government to evade the Constitution’s protection of federal immunity from state taxation. The Court reviewed prior decisions and concluded the tax is part of a single statewide sales-tax scheme applied at the same rate to transactions across the State. Because the tax is integrated into the general tax structure and does not impose a heavier economic burden on the federal government than on others, the Court found no unconstitutional discrimination and reversed the Court of Appeals.

Real world impact

The decision allows Washington to collect sales and use taxes from contractors on federally owned construction projects and ends the lower courts’ blocking of that collection and refund relief. Federal contractors and the federal government may face different billing and administrative practices, and contractors may adjust contract prices to account for tax treatment. Congress, the Court noted, remains free to adopt a different rule.

Dissents or concurrances

Justice Blackmun, joined by three colleagues, dissented, arguing the 1975 law singled out contractors who deal with the federal government and thus unlawfully circumvents federal tax immunity.