The opinion
Hon, .Robert S. Calvert Opinion No, V-916,
Comptroller of Public Accounts
Austin, Texas Re: IS a club operated by civil-
ian employees of the army’
on an army post subject to
occupation tax.
Dear Mr, Calvert:
You present for the opinion of this office the liability
of the civilian club operated by the civilian employees of the lyote
Air Force Base at Pyote, Texas, for certain occupation taxes im-
posed by Article 7047, V,C.S.
Specifically. there are involved six slot machines, a
six-lane bowling alley, and a theatre, all taxable under different
section? of Article 7047, V,C.S., unless they are exempt under the
facts submitted by reason of Federal immunity, Concededlly, all
these activities are operated by a club organized and prom&d by
the civilian employees of a Federal Air Base at Pyote, Texas, and
all are operated upon the military reservation. This fact alone,
bowever, is not sufficient to afford Federal immunity frem taxation
by the State.
There are two conditions under which Federal immuni-
ty from taxation by the State must be recognized. The first is where
jurisdiction over the territory involved has been uncondffionally ced-
ed by ihe State to the Federal Government, Surplus Trading Co. v.
Cook, 281 U.S. 647, 50 S.Ct, 455, 74 L.E, 1091 (lY30); and, second,
%lZi% the tax is against a Federal instrumentality without cbngres-
sional consent, Admittedly, the first condition does not prevail here,
The only question, therefore, is whether the club is such a Federal
instrumentality as to be immune from the imposition of the taxes
here involved.
The case closest to that under consideration is Standard ’
Oil Co. of California v. Johnson, 316 U.S. 481 (1942). There Cali-
forniapting to impose a license tax on the privilege of dis-
tributing motor vehicle fuel when this fuel was sold by the distribu-
tor to Post Exchanges. The California statute made the tax inappli-
cable “*to any motor vehicle fuel sold to the government of the United
States or any department thereof. *’
Hon. Robert S. Calvert. Page 2 (V-916)
The tests used by the court in the above case in deter-
mining the status of post exchanges would seem to be applicable in
determining the status of the civilian activities involved in this case,
since the Air Force Judge Advocate claims that:
‘“It has been determined that the facilities men-
tioned are operated by the Civilian Welfare Fund on
the base, set up under authority of AR 210-100 dated 15
February 1946. No part of the profit from the operation
of said activities inures to the benefit of any individual.
This fund is supervised and controlled by the Depart-
ment of the Air Force and is a non-appropriated fund
consisting of cash and other assets accumulated to fi-
nance welfare activities for all civilians regularly em-
ployed at the base.
‘“Since the above elements are present the activity
is a federal one and consequently considered to be an in-
strumentality of the Government and, as such, entitled
to all the privileges and immunities thereof.”
The tests used in the Standard Oil Case, supra, are set
out as follows:
“‘On July 25, 1895, the Secretary of War, under
authority of Congressional enactments promulgated
regulations providing for the establishment of post ex-
changes. These reg,ulations have since been amended
from time to time and the exchange has become a regu-
lax feature of Army posts. That the establishment and
control of post ex~ohanges have been in accordance with
regulations rather than specific statutory directions
does not alter their status, for authorized War Depart-
ment regulations have the force of law.
“Congressional recognition that the activities of
post exchanges are governmental has been irequent.
Since 1903, Congress has repeatedly made substantial
appropriations to be expended under the direction of
the Secretary of War for construction, equipment, and
maintenance of suitable buildings for post exchanges.
In 1933 and 1934, Congress ordered certain moneys
derived from disbanded exchanges to be handed over
to the Federai Treasury. And in 1936, Congress gave
consent to state taxation of gasoline sold by or through
post exchanges, when the gasoline was not for the ex-
clusive use of the United States.
Hon. Robert S, Calvert, Page 3 (V-916)
“‘The commanding officer of an Army Post, sub-
ject to the regulations and the commands of his own
superior officers, has complete authority to establish
and maintain an exchange. He details a post exchange
office to manage its affairs. This officer and the com-
manding officers of the various company units make up
a council which supervises exchange activities. None
of these officers receives any compensation other than
his regular salary. The object of the exchanges is to
provide convenient and reliable sources where soldiers
can obtain their ordinary needs at the lowest possible
prices. Soldiers, their families, and civilians employed
on military posts here and abroad can buy at exchanges.
The government assumes none of the financial obliga-
tions of the exchange. But government officers, under
government regulations, handle and are responsible for
all funds of the exchange which are obtained from the
companies or detachments composing its membership.
Profits, if any, do not go to individuals. They are used
to improve the soldiers’ mess, to provide various types
of recreation, and in general to add to the pleasure and
comfort of the troops.“’
The court then said:
“‘From all of this, we conclude that post exchanges
as now operated are arms of the government deemed
by it essential for the performance of governmental func-
tions. They are integral parts of the War Department,
share in fulfilling the duties entrusted to it, and partake
of whatever immunities it may have under the constitu-
tion and federal statutes. In concluding otherwise the
Supreme Court of California was in error.”
In another case the court in construing a statute of South
Carolina somewhat similar to our statute here involved held that
an army post exchange was a Federal instrumentality engaged in
governmentali functions, so that a State statute imposing a license
tax, graduated in accordance with volume of sales, upon every pcr-
son for the exercise of the privilege of engaging in selling such ar-
ticles as beer, wine, tobacco, soft drinks, playing cards. and candy,
and requiring the procurement by the licensee of a license for each
place oi business operated by him, wou Idbetlonal, as on
rnterterence wrth the activities of the United States, if enforced with
respect to the lawful selling activities of any army post exchange.
United States v. Query, 37 F. Supp. 972 (E.D.S.C. 1941, aff. 121 F.2d
631, cert. den. 514 U *S o 685). The taxes here involved, imposed un-
der our statute, are in the nature of license or excise taxes, and we
think the same rule pronounced by the court as to the South Carolina
statute would apply.
Hon. Robert S. Calvert, Page 4 (V-916)
Another case involving the South Carolina statute is
United States v. Query, 21 F. Supp. 784 (E.D.S.C. 1937). This was
an inJunction suit brought by the United States to enjoin the South
Carolina Tax Commissioner from collecting taxes imposed by a
South Carolina statute against a Civilian Conservation Corps &mp
exchange. The only difference that we perceive between a Civilian
Conservation Corps camp exchange and a civilian club of an army
air base is that a Civilian Conservation Corps camp exchange has
its existence by virtue of congressional legislation, Act June 28,
1937, 16 U.S.C.A. 584 et seq., whereas a civilian club of the army
has its existence by virtue of army regulations, This difference
is not material, for army regulationi have the force of law. Stand-
ard Oil Co. of California v. Johnson, supra. The injunction was
granted, and in the course of its opinion the court said:
\
‘“In performing its constitutional functions, the
United States must operate through an instrumentality
or agency. Here it operates through the agency of the
camp exchange as an integral part of the Civilian Con-
servation Corps. The tax falls directly upon the camp
exchange and the provisions of the state statute direct-
ly affect this instrumentality of the federal government
selected for the exercise of its powers. The state tax
in effect is upon the government’s transactions in the
exercise of its lawful power. The Civilian Conservation
Corps camp exchange is of such a character and so in-
timately connected with the exercise of the operation of
the Civilian Conservation Corps, the exercise of a pow-
er granted by the Act of Congress authorizedby the
Federal Constitution, that it is such a direct interfer-
ence with the functions of the government itself as to
be clearly beyond the taxing power of the state.
“‘The tax imposed is a license tax and not a prop-
erty one; being an excise tax it is laid on the enjoy-
ment of a privilege, and in the case at bar falls upon
the means by which the federal government undertakes
to perform its lawful function. The state statute places
within the hands of the Tax Commission the power to
retard, impede, and burden the operation of the Civil-
ian Conservation Corps camp exchange. The slightest
degree of such interference or burden is prohibited.”
We have examined AR 210-100 under which the civilian
club of the Pyote Air Base is set up and operated, and there appears
little, if anything, to distinguish it from a post exchange, which the
*,
. . .
, .
Hon. Robert S. Calvert, Page 5 (V-916)
courts have held to be a Federal instrumentality and, therefore;
exempt from State taxation. So long as such club continues to be
an instrumentality of the Federal Government, it is exempt from
the taxes in question by reason of Federal immunity, unless Con-
gress should consent to its being taxed.
SUMMARY
A civilian club organized,and maintained under
army regulations on an army post is a Federal instru-
mentality similar to post exchanges and is immune
from a State occupation tax without congressional con-
sent. Surplus Trading Co. v. Cook, 2g1 U.S. 647 (1930);
Standard Oil Co. of, California v. Johnson, 316 U.S. 481
‘(lY42); United States v. Query, 121 &‘.Zd 631; United
States v?Iiiery, 21 r’.w84 (1938); AR 2m
Yours very truly
ATTORNEYGENERALOFTRXAS
BY
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APPROVED
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