# Petition for Writ of Certiorari — Nye County v. United States

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition for Writ of Certiorari
- **Published:** January 1, 1992
- **Citation:** 503 U.S. 919

## Text

In The

Supreme Court of the United States
October Term, 1991

+

NYE COUNTY, NEVADA, AND BERNIE C. MERLINO,
NYE COUNTY ASSESSOR,

Petitioners,

VS.

UNITED STATES OF AMERICA,
Respondent.

.

Petition For Writ Of Certiorari To The
United States Court Of Appeals For The
Ninth Circuit

°

PETITION FOR WRIT OF CERTIORARI

- S

ARTHUR F. WEHRMEISTER
District Attorney

Nye County, Nevada

Post Office Box 593
Tonopah, Nevada 89049-0593
(702) 482-8166

Counsel of Record
for Petitioners

COCKLE LAW BRIEF PRINTING CO., (800) 225-6964
OR CALL COLLECT (602) 342-2831

QUESTION PRESENTED

Whether a state statute levying a possessory use tax
based upon the value of exempt government property
violates the federal government’s immunity from state
taxation under the Supremacy Clause of the United States
Constitution when the government property is made
available to and used by an independent contractor in a
business conducted for profit and the intent and effect of
the statute is to tax only the contractors possessory use.

il

TABLE OF CONTENTS

Page
QUESTIONS PRESENTED occccscccsncscsovvescees i
TABLE OF COMPUT RIG Gs ion be vkkerdcdedeeneekences ii
TABLE OF AUTHIORITING 6.6 cece cc cccseccveceeees iv
OPINION TRL ... 3 cvcssctaatinceeer esa eereies 1
JUREEGIIR, FIGS 6 6 cok scecvnsbuSeeerieis eer ceneneeee 2
CONSTITUTIONAL AND STATUTORY PROVI-
SU SPOUT OES on cc nccnuccueseamearevaeeesann 2
STATEMENT OF THE CAGGS «occ oc secnsavesuecns 2
REASONS FOR GRANTING THE WRIT ........... 8

I. Certiorari should be granted because the deci-
sion of the Court of Appeals creates an intoler-
able conflict with the decision of the Nevada
Supreme Court on the constitutionality of the
Pr rr er re teehee Pare 8

II. Certiorari should be granted because the Court
of Appeals, in direct conflict with decisions of
this Court, decided that a state taxing statute
violates governmental immunity from taxation
under the Supremacy Clause of the United States
CONGUAMYON. 2. oss 0cncsssteeed dase saaeneeeeaas 9

CONCLUSAMN « oiccccueves ¢cbpeued eee cayenne 15

APPENDIX A, Findings of Fact, Conclusions of
Law and Judgment of the District Court..... App. 1

APPENDIX B, Final Judgment of the District

Oo PEEPPPEEE SC App. 8
APPENDIX C, Decision of the Ninth Circuit Court
|) er erry ee App. 11

ill

TABLE OF CONTENTS - Continued

Page
PPENDIX D, Order of the Ninth Circuit Court of
Appeals Affirming the Decision of the District
a a Pep ee a ole bar ee App. 22

APPENDIX E, Order of the Ninth Circuit Court of

Appeals Denying the Petition for Rehearing. .App.

APPENDIX Ff, Article VI, clause 2 of the United

rr ceeseweneeenes App.

APPENDIX G, Nev. Rev. Stat. § 361.159........ App.

iv

TABLE OF AUTHORITIES

Page
Cases
City of Detroit v. Murray Corporation of America,
Pe a CU es cae serene eceseedaxenys 10, 11, 14
United States v. Boyd, 378 U.S. 39 (1964)....... 6, 8, 11

United States v. City of Detroit, 355 U.S. 466 (1958)
FoR UE CIRGVISUNEE EROCEVSRNN EERO edhe OKs 6, 8, 10, 11, 14

United States v. New Mexico, 455 U.S. 720 (1982) passim
United States v. State ex rel. Beko, 88 Nev. 76, 493

ee I Ne Aes cha ee a 8, 9
United States v. Township of Muskegon, 355 U.S.

ne en ee eon 8, 10, 11
CONSTITUTION
United States Constitution, Article VI, Clause 2...... 2
STATUTES
ee es SEED os ecu soy bow vce eee es es eee E Knee R anaes 2
es eS Ghosts SS ee a Re tas eas hae eee 2
Re a re eats es rcccecer eas Mere eeetiee 2

No.

r
In The

Supreme Court of the United States

October Term, 1991
¢

NYE COUNT’, NEVADA, AND BERNIE C. MERLINO,
NYE COUNTY ASSESSOR,

Petitioners,

VS.

UNITED STATES OF AMERICA,
Respondent.

¢

Petition For Writ Of Certiorari To The
United States Court Of Appeals For The
Ninth Circuit

o--

PETITION FOR WRIT OF CERTIORARI
¢

A writ of certiorari is respectfully sought by Nye
County, Nevada, to review the Court of Appeals decision
finding a state taxing statute as applied to a government
contractor unconstitutional because it violates the immu-
nity of the federal government from state taxation.

+

OPINION BELOW

The opinion of the Ninth Circuit Court of Appeals,
reported at 938 F.2d 1040, appears as Appendix C.

The Findings of Fact, Conclusions of Law and Judg-
ment and Final Judgment of the District Court are not
reported and appear as Appendices A and B, respectively.

+

JURISDICTION

The judgment of the Court of Appeals (App. D) was
entered July 15, 1991. A petition for rehearing was denied
on September 18, 1991 (App. E). The jurisdiction of the
lower federal courts was invoked under 28 U.S.C. §§ 1331
and 1345. This Court's jurisdiction is invoked under 28
U.S.C. § 1254(1).

CONSTITUTIONAL AND STATUTORY
PROVISIONS INVOLVED

This case involves the following constitutional provi-
sions and statutes:

I. Article VI, clause 2 of the United States Constitu-
tion, appears as Appendix F.

II. Nev. Rev. Stat. § 361.159, appears as Appendix G.

.

STATEMENT OF THE CASE

This case concerns the validity of a state taxing stat-
ute as applied to an independent government contractor,
Arcata Associates, Inc. (Arcata), performing its contract

with the United States Air Force on the electronic combat
ranges in Nye County, Nevada.!

Arcata is a corporation which provides certain tech-
nical services to the Air Force under a cost-plus contract
negotiated on a yearly basis. The services provided con-
sist of supplying civilian technicians who maintain and
operate sophisticated electronics property owned by the
Air Force. The property is used in military air combat
training exercises in which the pilots’ skills are measured
and scored by various electronic devices positioned at
different locations on the combat ranges. Arcata
employees spend approximately 75% of their time main-
taining the property and 25% operating the property.

Arcata owns none of the property it uses in the
performance of its contract with the Air Force and claims
no ownership interest therein. All of the property is fur-
nished directly to Arcata by the Air Force.

The Air Force reimburses Arcata for all the costs of
performing the contract. In addition, Arcata is paid an
annual fixed fee of 2% of the cost of performing the
contract that year. The contract also provides for up to an
additional 6% to be paid Arcata as a performance bonus.
The exact amount paid depends on a subjective evalua-
tion by the Air Force of Arcata’s performance. For the

' The combat ranges are within a large area withdrawn
from public entry and used exclusively for national purposes
such as Air Force bombing and training ranges and nuclear
device development and testing. The withdrawal comprises
about 65% of the total area of Nye County, Nevada. The
combat ranges are commonly referred to as the Tonopah Test
Range.

years 1983-1989, the yearly cost of performing the con-
tract averaged approximately $6,747,000.00. Arcata has
received a performance bonus every year.?

Nev. Rev. Stat. § 361.159, authorizes Nye County to
levy a tax on Arcata’s use of exempt government-owned
personal property used in the performance of its contract
with the Air Force. Computation of the tax is based on
the value of the personal property and the percentage of
time Arcata uses the property during the tax year. Value
of the property and percent of use are declared by Arcata
on declaration forms supplied by Nye County and Nye
County relies on Arcata’s declarations in computing the
tax. The Nye County Assessor accepts the declarations of
Arcata at face value. He makes no independent effort to
evaluate either the value of the property or the percent-
age of use declared by Arcata.

The tax is computed by applying the county tax rate
to the assessed value of the property.? Nye County is not
taxing any Ownership interest under Nev. Rev. Stat.
§ 361.159, neither the government’s nor Arcata’s.

The practical result of the application of the tax is
that Arcata is taxed only for its actual use of the property,
regardless of whether that use is 1% or 100% during the
tax year. The property itself is not taxed. Arcata pays the

2 The record does not disclose the exact dollar amount of
the bonuses or the percentage of the cost of performing the
contract that the bonuses represent.

3 Assessed value is 35% of the value of the property as
declared by Arcata.

tax, not the Air Force.4 The amount of taxes in contro-
versy paid by Arcata is $127,444.03 for the fiscal years
1983-1984 through 1988-1989.

On July 11, 1986, the United States filed suit against
Nye County and the Nye County Assessor seeking a
declaratory judgment and injunctive relief against the
assessment of any additional taxes against Arcata under
Nev. Rev. Stat. § 361.159, and reimbursement of taxes
paid by Arcata for the years 1983-1989.

At trial, the evidence established that Arcata has
considerable discretion in carrying out its duties under
the contract. The evidence also established that Arcata
has no ownership interest in the government property it
uses to perform the obligations of its contract. The evi-
dence also established that Nye County only taxes
Arcata’s actual percentage of use of the property based
entirely upon the declarations submitted by Arcata as to
the value of the property and the percentage of time
during the tax year that Arcata uses the property.

In addition, the evidence clearly showed that the tax
is only applied upon Arcata’s possessory use of the prop-
erty and is not an ad valorem property tax based upon the
value of the property.

The trial court concluded that Nye County could not
impose a tax on Arcata because Arcata has no personal
ownership or beneficial interest in the property since the
contract conveys no property interest to Arcata, and,

4 Arcata is reimbursed by the Air Force for the cost of the
tax under the terms of the “cost-plus” contract.

therefore, the tax imposed is an ad valorem property tax_
on the United States which is prohibited by the Suprem-
acy Clause of the United States Constitution. App. 6-7.

This ruling appears to be in direct conflict with the
evidence presented at trial.

On appeal Nye County argued that both the lan-
guage and the application of Nev. Rev. Stat. § 361.159 was
designed to tax only the possessory use of United States
property by an independent contractor carrying on a
business conducted for profit.

Nye County argued that prior decisions of this Court
starting with U.S. v. City of Detroit, 355 U.S. 466 (1958),
and culminating with U.S. v. New Mexico, 455 U.S. 720
(1982), have uniformly held that a state is not forbidden
from taxing the possessory use by an independent con-
tractor of United States owned property regardless of
whether the tax is measured by the value of the United
States’ property and regardless of whether the contractor
has any ownership or leasehold interest in the govern-
ment’s property.

This court has held that the only instance where
constitutional immunity would apply is when the facts
clearly establish that the contractor is so incorporated
into the government structure as to become an instru-
mentality of the United States. U.S. v. Boyd, 378 U.S. 39
(1964).

In this case, the United States conceded that Arcata
was not an agent or instrumentality of the federal govern-
ment. App. 12.

The Court of Appeals, in a 2-1 decision, affirmed the
ruling of the trial court holding that Nev. Rev. Stat.
§ 361.159 “effectively lays an ad valorem general property
tax on property owned by the United States.” App. 16.

The majority, while stating that they do not “exalt
form over substance” held “that when a statute says it
taxes property it probably does. And when it says it
doesn’t, it probably doesn’t.” App. 15.

The majority stated that since the language of Nev.
Rev. Stat. § 361.159 taxes the user “in the same amount
and to the same extent as though the lessee or user were
the owner of the property,” that the tax is a property tax
on property owned by the United States and therefore
violates the constitutional immunity of the United States
from state taxation. App. 15-16.

In a strongly worded dissent, Judge Noonan correctly
noted:

that tax immunity is appropriate in only one
circumstance: when the levy falls on the United
States itself, or an agency or instrumentality so
closely connected to the government that the
two cannot realistically be viewed as separate
entities, at least insofar as the activity being
taxed is concerned.

App. 17.

Judge Noonan said “New Mexico defined the
approach that should be taken today to a state tax on an
entity using property of the United States.” App. 16.

Judge Noonan noted that the Nevada statute
expressly exempts property of the United States from

taxation and that there is no intention by the State to tax
property of the United States. New Mexico, he further
noted, held that it is irrelevant that the economic burden
of the tax might ultimately fall on the government and
that it is also irrelevant that the contractor owns none of
the property being used.

Nye County’s petition for a rehearing and suggestion
for rehearing en banc was denied.

+

REASONS FOR GRANTING THE PETITION

I. Certiorari should be granted because the decision of

the Court of Appeals creates an intolerable conflict

~ with the decision of the Nevada Supreme Court on
the constitutionality of the statute.

Prior to 1988 this case would have been before this
Court by direct appeal.

Shortly after Nevada implemented Nev. Rev. Stat.
§ 361.159, the United States challenged in the Nevada
courts the constitutional validity af the tax as applied to
independent contractors using exempt government prop-
erty to perform their contracts with the government on
federal land within Nye County, Nevada. United States v.
State ex rel. Beko, 88 Nev. 76, 493 P.2d 1324 (1972).

The Nevada Supreme Court upheld the constitu-
tionality of the statute as written, and as applied, relying
on this Court’s decisions in Boyd, City of Detroit, and
United States v. Township of Muskegon, 355 U.S. 484 (1958),
in finding that a contractor’s use of government property
in connection with commercial activities carried on for

profit is a separate and distinct taxable activity on which
the state could properly levy a use tax. Beko, 88 Nev. at 83.

In the instant case the Court of Appeals decision
specifically held that the tax “is an ad valorem tax on
property of the United States and as such it is unconstitu-
tional” because it is violative of the right of the federal
government to be free from state taxation. App. 16.

This decision creates an intolerable conflict between
the Court of Appeals and the highest court of the State of
Nevada regarding the right of the state to levy use taxes
on government contractors conducting business within
the state.

Further, this decision creates the potential for a mul-
tiplicity of suits because every government contractor
performing a cost-plus contract with the United States
anywhere in the State of Nevada may now sue for a
refund of taxes paid under the statute since the Beko
decision in 1972.

Review by this Court is appropriate to resolve the
intolerable conflict between the Nevada Supreme Court
decision upholding the constitutionality of the statute
and the Court of Appeals decision invalidating the stat-
ute under the Supremacy Clause.

II. Certiorari should be granted because the Court of
Appeals, in direct conflict with decisions of this
Court, decided that a state taxing statute violates
governmental immunity from taxation under the
Supremacy Clause of the United States Constitu-
tion.

This case presents an extremely important question
concerning the authority of a state to tax government

10

contractors operating within the state and the federal
government’s immunity from state taxation.

The statute involved here, Nev. Rev. Stat. § 361.159,
levies a tax on the use by independent government con-
tractors of otherwise exempt federal government prop-
erty.

This Court has previously decided a number of cases
which presented the issue of whether a state may consti-
tutionally levy a use tax on an independent contractor
who uses exempt government property to perform its
contract.

The benchmark case in this area is United States v.
City of Detroit, 355 U.S. 466 (1958), in which this Court
held that a state may constitutionally levy a use tax on an
independent government contractor’s use of exempt gov-
ernment property used in the performance of its contract.
The Court held that such a tax may be based on the value
of the property being used and that the tax is not uncon-
stitutional merely because the economic burden of the tax
will ultimately fall on the United States.

In a companion case, United States v. Township of
Muskegon, 355 U.S. 494 (1958), this Court also held that it
is immaterial to the constitutionality of a state taxing
statute that the contractor has no leasehold or other own-
ership interest in the property being used and that it is
also immaterial that the contractor does not use the prop-
erty to supply goods or services to anyone other than the
United States.

Further in City of Detroit v. Murray Corporation of
America, 355 U.S. 489 (1958), this Court, in addressing the

11

issue of whether the language of the statute is more
important than the legislative intent and the actual appli-
cation and effect of the statute, said it looks only to the
practical effect of the tax and not its definition or the
descriptive words which may be applied to it:

As applied - and of course that is the way [the
tax] must be judged - the taxes here imposed a
levy on a private party possessing government
property which it is using or possessing in the
course of its own business.

Id. at 493.

Later, in United States v. Boyd, 378 U.S. 39 (1964), this
Court reaffirmed the principles laid down in City of
Detroit, Township of Muskegon, and Murray Corporation,
holding that the use by a contractor of otherwise exempt
government property in connection with the contractor’s
commercial activities carried on for profit is a separate
and distinct taxable activity.

The latest decision of this Court which has examined
the constitutional limits on a state’s ability to impose use
taxes on independent government contractors using gov-
ernment property to perform their contracts was United
States v. New Mexico, 455 U.S. 720 (1982).

In New Mexico, this Court again reaffirmed the princi-
ples laid down in City of Detroit, Township of Muskegon,
Murray Corporation, and Boyd.

Further in New Mexico, this Court said that conferring
immunity on a contractor is appropriate in only one
circumstance:

12

What the Court’s cases leave room for, then, is
the conclusion that tax immunity is appropriate
in only one circumstance: when the levy falls on
the United States itself, or on an agency or
instrumentality so closely connected to the Gov-
ernment that the two cannot realistically be
viewed as separate entities, at least insofar as
the activity being taxed is concerned.

Id. at 735. “To resist the state’s taxing power, a private
taxpayer must actually stand in the government's shoes.”
Id. at 736.

As previously indicated, the United States conceded
that Arcata is not an agent or instrumentality of the
government. Therefore the relationship between the
United States and Arcata is one which creates distinctly
separate entities. As pointed out by Judge Noonan:

... Arcata conducts the military games for its
own profit. In the terms expressly used by New
Mexico Arcata is engaged in “commercial activ-
ity carried on for profit.” [Cite omitted.] Conse-
quently, Arcata does not enjoy immunity from
Nye County’s tax.

App. 19.

To this Court, then, the only issue is whether or not
the contractor can be considered an instrumentality or
constituent part of the federal government.

In this case, the Court of Appeals apparently did not
consider this to be the issue since the majority found the
Nevada statute unconstitutional merely because the
amount of the tax is based on the value of the exernpt
property- being used by the contractor.

13

In addition, the majority of the Court of Appeals
appeared to believe that if Arcata had no ownership
interest in the property, or did not use the property to
supply goods or services to another party other than the
government, for a profit, then Arcata had no beneficial
use of the property and therefore was not engaging in
any taxable activity.

The resuliing decision of the Court of Appeals is
therefore directly contrary to the criteria set out by this
Court to be used in evaluating the constitutionality of a
State taxing statute.

Lastly, the Court of Appeals concluded that the
wording of a tax statute is more important than the intent
of the legislators and the actual application and effect of
the statute. To the majority, in this case, the language of
Nev. Rev. Stat. § 361.159 which imposes the tax on a
private user of otherwise exempt property, “in the same
amount and to the same extent as though the lessee or
user were the owner of the property”, is more important
than examining the intent of the statute, the way the
Statute is applied, and the actual effect of the tax on the
contractor.

This conclusion was correctly characterized by Judge
Noonan in his dissent as follows:

It is difficult to imagine a more wooden and
technical approach than that taken by the major-
ity in finding constitutional significance in the
language used by the state to describe its tax.

App. 21.

14

In Murray Corporation it was made clear to the lower
courts that they “must look through form and behind
labels to substance” in determining whether a tax violates
the government’s constitutional immunity. 355 U.S. at
492. The Court of Appeals in this case ignored this
Court’s guidance as set forth in New Mexico and its prede-
cessors. It was suggested by this Court in New Mexico
that:

If political or economic considerations suggest
that a broacer immunity rule is appropriate,
“such complex problems are ones which Con-
gress is best qualified to resolve.”

455 US. at 744, citing City of Detroit, 355 U.S. at 474. The
Court further suggested that the government should not
request the courts to establish as a constitutional rule
something it was unable to obtain statutorily from Con-
gress. Id.

This is precisely what the United States has obtained
by the Ninth Circuit’s decision in this case. This decision
significantly expands the narrow constitutional limits of
governmental immunity under the Supremacy Clause.

Such an expansion should only be accomplished by
Congressional action. To do otherwise will produce dele-
terious effects far beyond the circumstances of this partic-
ular case.

The conflict between the right of the United States to
be free from state taxation and the concomitant right of
the states to levy taxes on government contractors doing
business within their borders raises a substantial federal
question which has a significant impact on the public at
large.

15

Review is appropriate to examine the conflict
between the Ninth Circuit Court of Appeals decision in
this case with prior decisions of the Supreme Court.

*

CONCLUSION

For the reasons set fourth above, a writ of certiorari
should issue to review the decision of the Ninth Circuit
Court of Appeals on these issues.

Respectfully submitted,

ARTHUR F. WEHRMEISTER
District Attorney
Nye County, Nevada

Counsel of Record
for Petitioners

App. 1

APPENDIX A
UNITED STATES DISTRICT COURT
DISTRICT OF NEVADA

UNITED STATES OF CV-S-86-670-HDM
AMERICA,

_— FINDINGS OF FACT,
v. CONCLUSIONS OF
NYE COUNTY, NEVADA LAW, and JUDGMENT
and BERNIE C. MERLINO, .
Nye County Assessor, (Filed Sept. 1, 1989)

Defendants.

/

FINDINGS OF FACT

1. The plaintiff, United States, commenced this
action to secure a declaratory judgment that taxes
assessed by Nye County, Nevada, under the provisions of
section 36.159 [sic] of the Nevada Revised Statutes,
infringe upon the immunity of the United States from
state and local taxation, and are, therefore, unconstitu-
tional. The complaint also seeks a refund of taxes that
have been paid to the defendant, Nye County, by the
contractor, Arcata, for the fiscal years 1983 through 1988.

2. The plaintiff, United States, is a corporate sover-
eign and body politic.

3. The defendant, Nye County, Nevada, is a political
subdivision of the State of Nevada and is within the
jurisdiction of this court, and its officials, employees, and
agents have taken the actions and issued the assessments
complained of in the complaint in this action.

App. 2

4. The defendant, Bernie Merlino, is the County
Assessor of Nye County, and is charged by Nevada law
with the assessment of property and collection of taxes
imposed on personal property under the provisions of
Nev. Rev. Stat. § 361.159 (1987).

5. The United States Air Force operates the Tolicha
Peak Electronic Combat Range and Tonopah Electronic
Combat Range in Nye County, Nevada.

6. Arcata Associates (Arcata) was awarded a cost
reimbursement contract with four renewable annual
option periods commencing in 1980. The latest renewal
was for the fiscal years 1986-1990. Arcata operates
grounds systems associated with the simulated Soviet
defense systems when and as directed by Air Force per-
sonnel.

7. Payments under the contracts include a base fee,
a performance award fee, and reimbursement of the costs
of performing the contract.

8. All of the equipment used by Arcata is owned by
the United States. There is a certain amount of electronic
test equipment and vehicles leased by Arcata, but this
leased property is owned by non-exempt commercial
entities and is not in dispute in this litigation.

9. Neither the Arcata contract with the Air Force
nor any agreement, nor any deed, lease, conveyance,
license, or any other document confers on Arcata any
estate, leasehold, license, permit, or any other right, title,
or interest in the government-furnished property.

10. Arcata does not pay, and is not obligated to pay,
any rent, fee, charge, or any other consideration in

App. 3

exchange for its operation or maintenance of the property
owned by the Air Force.

11. The contract provides that Arcata operates and
maintains the equipment in accordance with the direction
of the Air Force.

12. All of the work performed by Arcata is per-
formed for the Air Force. Arcata does not use any of the
property for any purpose other than the performance of
work for the Air Force at the direction of the Air Force
under the contract. Arcata does not have the right to use
the equipment or property for its own account or for its
own business and derives no profits from the property
except under the terms of the services contract.

13. The risk of loss of all of the property is solely on
the United States as the owner of the property, except in
instances of any willful misconduct or lack of good faith
on the part of Arcata.

14. The contract also provides that the United States
may terminate the contract for its convenience at any
time with or without notice to Arcata.

15. Afcata’s only access and control over the prop-
erty is at the direction of the United States at such times
and places and in such manner as specified by the United
States.

16. Arcata cannot exclude Air Force personnel or
other contractors from operating or maintaining any of
the equipment.

17. Under the provisions of the contract, the United
States is obligated to reimburse Arcata for any taxes paid

App. 4

by Arcata on property owned by the United States in
performing Arcata’s contract.

18. The fees paid to Arcata are not related to the
value of the property it operates and maintains. Arcata is
paid a base fee and a performance award fee that is based
on the Air Force’s evaluation of Arcata’s response to the
requirements of the Air Force in connection with opera-
tions and maintenance.

19. Arcata has paid taxes to Nye County under
protest as follows: for the year 1983-1984, $11,852.24; for
the period 1984-1985, the sum of $18,952.94; for the year
1985-1986, the sum of $12,191.77; for the year 1986-1987,
the sum of $6,014.15; for the year 1987-1988, the sum of
$45,968.61; and for the year 1988-1989, the sum of
$32,434.32.

20. Arcata has no beneficial use of the property of
the United States that it operates and maintains.

21. To the extent these findings of fact are deemed
to be conclusions of law they shall constitute conclusions
of law.

CONCLUSIONS OF LAW

1. This court has jurisdiction pursuant to Sections
1331 and 1345 of Title 28 of the United States Code.

2. The United States has a direct pecuniary interest
in this action and has standing to bring this suit. United
States v. Dekalb County, 729 F.2d 738, 741-42 (11th Cir.
1984).

App. 5

3. Nevada Revised Statute § 361.159, under which
Nye County has imposed the tax in question here, pro-
vides in pertinent part:

Personal property exempt from taxation
which is leased, loaned or otherwise made avail-
able to and used by a natural person, association
or corporation in connection with a business
conducted for profit is subject to taxation in the
same amount and to the same extent as though
the lessee or user were the owner of the prop-
erty. ...

4. A state may not, under the supremacy clause,
impose a tax on the United States upon property of the
United States. McCulloch v. Maryland, 17 U.S. 316 (1819);
United States v. New Mexico, 455 U.S. 720 (1982); United
States v. Colorado, 627 F.2d 217 (10th Cir. 1980), aff’d mem.
sub nom. Jefferson County, Colo. v. United States, 450 U.S.
901 (1981).

5. A state may impose an ad valorem tax on federal
property in the possession of a third party who holds
under a lease or bailment. The tax, however, must be
restricted to the beneficial interest the third party has in
the taxed property. The mere use of the property under a
service or management contract does not create a taxable
beneficial interest in the third party. United States v. Colo-
rado, 460 F. Supp. 1184 (D. Colo. 1978), aff'd, 627 F.2d 210
(10th Cir. 1980), aff’d mem. sub nom Jefferson County, Colo.
v. United States, 450 U.S. 901 (1981); United States v. Alle-
gheny County, 322 U.S. 174 (1944); United States v. New
Mexico, 455 U.S. 720, 741 at n.14 (1982); United States v.
Fresno, 429 U.S. 452, 466 at n.15 (1977); United States v.

App. 6

Anderson County, Tenn., 761 F.2d 1169 (6th Cir. 1985), cert.
denied, 474 U.S. 919 (1985).

6. Arcata has no personal ownership or beneficial
interest in the federally owned property which Arcata
uses in the performance of its personal services contract.
The record reflects that Arcata does not own or lease the
property. The property is used by Arcata to discharge its
responsibilities to the government pursuant to a services
contract between the Air Force and Arcata.

7. The express terms of the contract between the Air
Force and Arcata conveys no property interest to Arcata
of any real or tangible personal property located at the
Air Force combat range in Nye County, Nevada. United
States v. Jackson County, Mo., 696 F. Supp. 479, 484 (W.D.
Mo. 1988).

8. Here, the Air Force has reserved such control
over the activities of Arcata that Arcata is a servant of the
United States. Arcata has access to the equipment only
for the purpose of operating and maintaining the equip-
ment at the direction of the Air Force.

9. The contract between the Air Force and Arcata
grants Arcata a license to enter the Air Force combat
range to operate and maintain the Air Force equipment.
Id. at 486. The court cannot conclude that the provisions
of Nev. Rev. Stat. § 361.159 (1987) permit a tax to be
imposed on the functions engaged in by Arcata under its
service contract with the Air Force.

10. Having so found, the court concludes the impo-
sition of an ad valorem tax on the property the subject of
this litigation for the tax years in controversy in this case

App. 7

is a tax on the United States and is prohibited by the
supremacy clause. McCulloch v. Maryland, 17 U.S. 316
(1819).

11. To the extent these conclusions of law are
deemed to be findings of fact, they shall constituted [sic]
findings of fact.

Therefore, it is hereby ORDERED that:

1. Plaintiff's motion for summary judgment is
GRANTED;

2. The defendants are enjoined from assessing or
collecting the tax imposed by Nev. Rev. Stat. § 361 159;

3. The defendant shall refund to plaintiff taxes paid
for the year commencing July 1983; and

4. Plaintiff shall prepare a judgment consistent with
these findings and conclusions and submit the same to
the court within ten (10) days of the date of this order.

DATED this 28th day of August, 1989.

\

/s/ Howard D. McKibben

UNITED STATES
DISTRICT JUDGE

App. 8

APPPENDIX B
UNITED STATES DISTRICT COURT
DISTRICT OF NEVADA

UNITED STATES CV-S-86-670-HDM
OF AMERICA,
ristein, FINAL JUDGMENT
VS.
NYE COUNTY, |
NEVADA, et al., (Filed Oct. 6, 1989)
Defendants.

/

This matter having come on for trial on June 13, 1989,
and the court having considered the witnesses and
exhibits offered thereat, and having entered findings of
fact and conclusions of law, does hereby, pursuant to Rule
54 of the Federal Rules of Civil Procedure,

ORDER, ADJUDGE and DECREE that the United
States is entitled to declaratory judgment that:

The defendants may not impose the tax authorized
by Nev. Rev. Stat. § 361.159, on Arcata Associates, a
United States Air Force contractor, because Arcata has no
personal ownership or beneficial interest in the property
which it uses to perform its personal services contract
with the Air Force and because that contract conveys no
property interest to Arcata in the real and tangible per-
sonal property located in Nye County, Nevada, on the Air
Force Tolicha Peak and Tonopah Electronic Combat
Rangers; and, therefore, the ad valorem tax imposed by
the defendants is a tax on the United States which is

App. 9

prohibited by the Supremacy Clause of the United States
Constitution.

It is further ORDERED, ADJUDGED and DECREED
that the defendants, their successors in office, their
employees, agents, attorneys and all persons acting in
concert with them who shall receive notice thereof, are
permanently enjoined from assessing, imposing or col-
lecting from Arcata or the United States, ad valorem
personal property taxes pursuant to Nev. Rev. Stat.
§ 361.159, on the property of the United States located in
Nye County, Nevada, on the Air Force Tolicha Peak and
Tonopah Electronic Combat Ranges or on any alleged
“interest” of Arcata in that property.

It is further ORDERED, ADJUDGED and DECREED
that the defendant Nye County, Nevada, is liable in gen-
eral assumpsit to the United States for money had and
received in the total amount of $127,414.03 consisting of
ad valorem personal property taxes paid by Arcata and
reimbursed by the United States for the tax years 1983-84
through 1988-1989 as set forth below:

Amount of Date Tax Paid
Tax Year Tax Payment to Defendants
1983-84 $ 11,852.24 Jan. 23, 1984
1984-85 18,952.94 Oct. 1, 1984
1985-86 12,191.77 Oct. 1, 1985
1986-87 6,014.15 Sept. 25, 1986
1987-88 45,968.61 Nov. 25, 1987
1988-89 32,434.32 July 21, 1988

$127,414.03

App. 10

day of October , 1989

DATED this 5th

/s/ Howard D. McKibben
UNITED STATES
DISTRICT JUDGE

App. 11

APPENDIX C

UNITED STATES of America,
Plaintiff-Appellee,

V.

NYE COUNTY NEVADA; Bernie C.
Merlino, Nye County Assessor,
Defendants-Appellants.

No. 90-15128.

United States Court of Appeals,
Ninth Circuit.

Argued and Submitted April 8, 1991.
Decided July 15, 1991.

Appeal from the United States District Court for the
District of Nevada.

Before PREGERSON, NOONAN and THOMPSON,
Circuit Judges.

DAVID R. THOMPSON, Circuit Judge:

The United States chailenges Nye County’s imposi-
tion of a tax on Arcata Associates, Inc. (Arcata), a defense
contractor. The United States argues that the tax violates
the Constitution because it, in effect, is a tax upon prop-
erty of the United States. The district court entered judg-
ment for the United States, enjoined further assessments
of the tax by the County and adjudged the County liable
for the taxes previously paid. We hold that the tax Nye
County levied on Arcata is an ad valorem tax on property
owned by the United States government. As such, the
supremacy clause and McCulloch v. Maryland, 4 Wheat.
316, 4 L.Ed 579 (1819), render the tax unconstitutional. We
therefore affirm.

App. 12

FACTS

Arcata is an independent federal contractor.! It main-
tains and operates government-owned electronic equip-
ment used by the United States Alr Force to simulate
Soviet defense systems at the Tolicha Peak Electronic
Combat Range and the Tonopah Electronic Combat Range
in Nye County, Nevada. The Air Force uses these systems
and devices to train Air Force pilots. Pursuant to its
contract with Arcata, the United States reimburses Arcata
for all costs incurred by the company and, in addition,
pays Arcata a fixed base fee and a performance award fee
for its services.

The Air Force directs Arcata’s operation of all gov-
ernment-owned equipment. Arcata does not have the
right to use the equipment for its own account or busi-
ness. It has no property interest in the equipment. Its only
access to the equipment is at the time and place and in
the manner directed by the United States. Arcata cannot
exclude Air Force personnel or other contractors from
Operating or maintaining the equipment. The United
States can terminate its relationship with Arcata at will.

Nye County contends Arcata has a taxable interest in
the equipment. It assessed a personal property tax
against Arcata under Nev. Rev. Stat. 361.159, as if Arcata
were the owner of the equipment. The statute provides in
pertinent part:

' The United States concedes that Arcata cannot be consid-
ered an agent or instrumentality of the government.

App. 13

1. Personal property exempt from taxation
which is leased, loaned or otherwise made avail-
able and used by a natural person, association
or corporation in connection with a business
conducted for profit is subject to taxation in the
same amount and to the same extent as though
the lessee or user were the owner of the prop-
3) Ae

Unpaid taxes under this statute do not become a lien
on the property but are an obligation of the lessee or user.
Id. § 361.159.2. For tax years 1983-84 through 1988-89
taxes assessed against Arcata under the statute totaled
$127,414.03. Arcata paid these taxes under protest. The
United States reimbursed Arcata as required by Arcata’s
contract. It then sued Nye County to recover the taxes, to
obtain a declaratory judgment that assessment of the
taxes was unconstitutional, and to enjoin further assess-
ment. After a bench trial, the district court entered judg-
ment in favor of the United States. Nye County appeals.

DISCUSSION

The unconstitutionality of Nye County’s tax is best
understood by comparing it to tax measures that have
survived, and those that have perished, in the face of ad
valorem challenges. The survivors have been tax measures
imposed on an isolated possessory interest or on a benefi-
cial use of United States property. The perished have
been tax measures levied on the property itself

Of the survivors, United States v. County of Fresno, 429
U.S. 452, 97 S.Ct. 699, 50 L.Ed.2d 683 (1977), illustrates a
possessory use tax. There, California taxed possessory

App. 14

interests in federally owned housing held by federal for-
est rangers. The Supreme Court refused to invalidate the
tax, holding that, to the extent a state can isolate a private
person’s property interest in property owned by the
United States, the state can tax the interest. Id. at 462, 97
S.Ct. at 704-05.

A beneficial use tax was at issue in United States v.
New Mexico, 455 U.S. 720, 102 S.Ct. 1373, 71 L.Ed.2d 580
(1982). There the Court upheld the tax because it was
measured by the gross receipts of the lessee. The Court
concluded: “In effect, the gross receipts tax operates as a
tax on the sale of goods and services.” Id. at 727, 102 S.Ct.
at 1379. In United States v. City of Detroit, 355 U.S. 466, 78
S.Ct. 474, 2 L.Ed.2d 424 (1958), the amount of the tax was
computed with reference to the value of the United States
property used by the lessee, but because the tax reached
only the lessee’s beneficial use, the tax was upheld. The
Court stated: “A tax for the beneficial use of property, as
distinguished from a tax on the property itself, has long
been a commonplace in this country.” City of Detroit, 355
U.S. at 470, 78 S.Ct. at 476.

Tax measures which have perished under an ad val-
orem challenge are exemplified by United States v. Colo-
rado, 627 F.2d 217 (10th Cir. 1980), summarily aff'd sub nom.
Jefferson County v. United States, 450 U.S. 901, 101 S.Ct.
1335, 67 L.Ed.2d 325 (1981), and United States v. Hawkins
County, 859 F.2d 20 (6th Cir. 1988). In Colorado, the Tenth
Circuit, after stressing that the contractor in the case held
no leasehold interest in the government property, invali-
dated the tax. The tax could not be upheld because “the
State of Colorado [sought] to impose a tax on [the con-

tractor] to be measured by the value of the [United States

App. 15

land]... .” 627 F.2d at 220. Similarly, in Hawkins County,
the Sixth Circuit invalidated a Tennessee tax statute
because it “fairly cannot be said to impose a tax on [the
private entity’s] beneficial use; instead, the statute
describes an ad valorem tax on an interest in real prop-
erty.” Hawkins County, 859 F.2d at 23.

The teaching of the foregoing cases is that the word-
ing of a tax measure is significant. This does not mean we
exalt form over substance. It means that when a statute
says it taxes property it probably does. And when it says
it doesn’t, it probably doesn’t. In County of Fresno, the
Court upheld California’s levy of a tax on the possessory
interest of federal employees. In New Mexico, the Court
upheld New Mexico’s tax on the gross receipts of an
entity that used federal land. In City of Detroit, the Court
upheld a tax on a private entity’s beneficial use of United
States property even though the beneficial use was mea-
sured by the value of the property. In none of these cases
was the property itself the subject of the tax.

In contrast, the Nevada statute under which Nye
County seeks to impose its tax against Arcata taxed the
user “in the same amount and to the same extent as
though the lessee or user were the owner of the prop-
erty.” Nev. Rev. Stat. § 361.159. Here, the property
belongs to the United States. Arcata has no leasehold
interest in it, but merely has the privilege, terminable at
the will of the government, to use the property at the
time and place and in the manner directed by the United
States. Nye County makes no attempt to segregate and
tax any possessory interest Arcata may have in the prop-
erty, or Arcata’s beneficial use of the property. Nye
County simply taxes Arcata as if it were the owner of the

App. 16

property. The tax effectively lays “an ad valorem general
property tax on property owned by the United States.”
Colorado, 627 F.2d at 221. As the Sixth Circuit concluded
in Hawkins County:

Whether or not the Tennessee legislature had in
mind a tax on beneficial use, it unquestionably
did not describe one when it enacted the statute
in question. Since [the contractor] has been
determined not to have a real property interest
in the facility, Tennessee’s attempt to tax [the
contractor] resulted in what was, in reality, a tax
upon the United States itself.

Hawkins County, 859 F.2d at 24.

While Nye County could no doubt enact a statute
taxing a lessee’s possesory interest in, or a user’s benefi-
cial use of, property owned by the United States, the
statute under which it levied taxes against Arcata is not
such a tax measure. The Nye County tax is an ad valorem
tax on property of the United States and as such it is
unconstitutional. The judgment of the district court is
AFFIRMED.

NOONAN, Circuit Judge, dissenting:

The classic case in this area is, of course, McCulloch v.
Maryland, 4 Wheat. 316, 4 L.Ed. 579 (1819). The path from
McCulloch to United States v. New Mexico, 455 U.S. 720, 102
S.Ct. 1373, 71 L.Ed.2d 580 (1982), has been neither
straight nor clear. The precedents have been “confusing”.
Id. at 733, 102 S.Ct. at 1382. The lines drawn were “exces-
sively delicate.” Id. at 730, 102 S.Ct. at 1381. New Mexico
defined the approach that should be taken today to a
state tax on an entity using property of the United States.

App. 17

Less than ten years after New Mexico was decided by a
unanimous Court, however, the present majority embarks
again on the course that New Mexico tried to block of
letting “wooden formalism” determine the great constitu-
tional issue of the allocation of taxing power between the
federal government and the states.

In so many words, the Court in New Mexico declared
that “where a use tax is involved, immunity cannot be
conferred simply because the State is levying the tax on
the use of federal property in private hands.” Id. at 734,
102 S.Ct. at 1383. “In such a situation the contractor’s use
of the property ‘in connection with commercial activities
carried on for profit,’ is ‘a separate and distinct taxable
activity.’ ” Id. at 734-35, 102 S.Ct. at 1382-83, quoting
United States v. Boyd, 378 U.S. 39, 44, 84 S.Ct. 1518,
1521-22, 12 L.Ed.2d 713 (1964). The Court concluded in
New Mexico that “tax immunity is appropriate in only one
circumstance: when the levy falls on the United States
itself, or an agency or instrumentality so closely con-
nected to the Government that the two cannot real-
istically be viewed as separate entities, at least insofar as
the activity being taxed is concerned.” United States v.
New Mexico, 455 U.S. at 735, 102 S.Ct. at 1383.

In the present case the United States argues that the
levy falls on an instrumentality so closely connected to
the Government that the two cannot realistically be
viewed as separate entities. The United States relies
heavily on a dictum in a footnote in United States v.
County of Fresno, 429 U.S. 452, 97 S.Ct. 699, 50 L.Ed.2d 683
(1977). In County of Fresno the Court sustained a Califor-
nia tax on houses rented to Forest Service employees but
stated that it would be different if there was a tax

App. 18

imposed on a Forest Service employee for a fire ax that he
used only in performing his job; in that case the tax
would be on property the employee did not use fer his
“beneficial personal use” and on property that was not
part of his profit or his salary. Id. at 466 n. 15, 97 S.Ct. at
707 n. 15. The United States argues that just as the Forest
Service employee cannot be taxed on his fire ax, even
though by its use he earns his salary, so Arcata cannot be
taxed on the military equipment it uses, although from its
use it derives a profit. What Arcata is doing when it runs
the military games is to act as the United States. Arcata
has, the Government contends, “no beneficial personal

””

use.

Two other courts have reached the same conclusion
as to analogous taxes. See United States v. Colorado, 627
F.2d 217 (10th Cir. 1980), summarily aff'd sub nom.; Jefferson
County v. United States, 450 U.S. 901, 101 S.Ct. 1335, 67
L.Ed.2d 325 (1981); United States v. Hawkins County, 859
F.2d 20 (6th Cir. 1988). In each of these cases the tax
exceeded the profit of the contract. But, the United States
notes, what was decisive for the Tenth Circuit in the
Colorado case was not the amount of the tax but that the
effect of the tax was “to lay an ad valorem general prop-
erty tax on property owned by the United States.” United
States v. Colorado, 627 F.2d at 221. A similar analysis was
followed by the Sixth Circuit. United States v. Hawkins
County, 859 F.2d at 23.

The Government's spirited presentation demon-
strates how old distinctions can be refurbished and con-
fusion engendered despite the bright line laid down by
New Mexico. Rejecting the Government’s argument, |
observe that in New Mexico itself the contractors were

App. 19

managing Government laboratories, which the Govern-
ment could have managed itself but chose not to do so.
The Court observed that the Government “resists using
its own employees for the tasks at hand . . . because it
seeks to tap the expertise of industry.” United States v.
New Mexico, 455 U.S. at 737, 102 S.Ct. at 1384. As a
consequence, the Court observed: “In contrast to federal
employees, Sandia and its fellow contractors cannot be
termed ‘constituent parts’ of the Federal Government.”
Id. at 740, 102 S.Ct. at 1386. No “complete” “congruence
of professional interests” existed between the Govern-
ment and the contractors. Id. The contractors were pri-
vately owned corporations in which the Government had
no ownership interest. Jd. The Government in our case
has pointed to no distinction between Sandia in New
Mexico and Arcata as a privately owned corporation
whose professional interests are not completely congru-
ent with the Government’s.

The Government’s reliance on the illustration of the
Forest Service employee's fire ax is misplaced. The for-
ester carries his ax to carry out a governmental function,
not for commercial profit. In contrast, Arcata conducts
the military games for its own profit. In the terms
expressly used by New Mexico Arcata is engaged in “com-
mercial activity carried on for profit.” Id. 455 U.S. at 733,
102 S.Ct. at 1382. Consequently, Arcata does not enjoy
immunity from Nye County’s tax.

The majority’s acquiescence in the Government's
contentions and its apparently justified reliance on the
Colorado case are undermined by the way the Supreme
Court analyzed that case in New Mexico itself. The Court
said:

App. 20

While a use tax may be valid only to the extent
that it reaches the contractor’s interest in Gov-
ernment-owned property, cf. City of Detroit. v.
Murray Corp., 355 U.S. [489], at 494 [78 S.Ct. 458,
461, 2 L.Ed.2d 441 (1958)]; United States v. Colo-
rado, 627 F.2d 217 (CA10 1980), summarily aff’d
sub nom. Jefferson County v. United States, 450
U.S. 901 [101 S.Ct. 1335, 67 L.Ed.2d 325] (1981),
there has been no suggestion here that the con-
tractors are being taxed beyond the value of
their use.

Id. 455 US. at 741 n. 14, 102 S.Ct. at 1386 n. 14. In short,
the Supreme Court gave a different rationale for United
States v. Colorado from that given by the Tenth Circuit -
the rationale that a tax exceeding the value of the use was
unconstitutional. At the same time the Court charac-
terized the tax at issue as “a use tax,” not an ad valorem
tax on property. The majority offers no reason why
exactly the same analysis should not apply to the entirely
analogous Nevada tax at issue in this case.

The Nevada Property Tax Statute expressly exempts
the property of the United States from taxation.
Nev.R.Stat. § 361.050. No intention on the part of the state
to infringe federal sovereignty and to tax the United
States is present. It is irrelevant that the economic burden
of the tax under these cost-plus contracts falls on the
United States. United States v. New Mexico, 455 U.S. at 734,
102 S.Ct. at 1382-83. It is irrelevant that Arcata, as the
district court found, is “the servant” of the United States.
Id. at 733, 102 S.Ct. at 1382. It is irrelevant that Arcata
owns none of the property used and that the United
States owns all of it. Id. at 738, 102 S.Ct. at 1384-85. The
United States, of course, has a sure remedy for any actual

App. 21

infringement on its sovereignty: Congress can declare the
contractor’s activity exempt. Id. at 744, 102 S.Ct. at 1388.
Once again a litigant is seeking “to establish as a constitu-
tional rule something that it was unable to obtain stat-
utorily from Congress.” Id.

In New Mexico, the Court warned that “an immunity
of constitutional stature” cannot rest “on such technical
considerations” as the way a contract was drawn between
the Government and its contractor. Id. at 737, 102 S.Ct. at
1384. While this caution was expressly directed at con-
tractual technicality, the Court in the same paragraph
warned against “the manipulation and wooden formal-
ism that occasionally have marked tax litigation.” /d. It is
difficult to imagine a more wooden and technical
approach than that taken by the majority in finding con-
stitutional significance in the language used by the state
to describe its tax. I respectfully dissent.

App. 22

APPENDIX D

UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

NO. 90-15128
CT/AG#: CV-86-0670-HDM
UNITED STATES OF (Filed
AMERICA Sep. 30, 1991)

Plaintiff-Appellee
v.

NYE COUNTY NEVADA;
BERNIE C. MERLINO,
Nye County Assessor

Defendants-Appellants

APPEAL FROM the United States District Court for
the District of Nevada (Las Vegas).

THIS CAUSE came on to be heard on the Transcript
of the Record from the United States District Court for

the District of Nevada (Las Vegas) and was duly submit-
ted.

ON CONSIDERATION WHEREOF, It is now here
ordered and adjudged by this Court, that the
judgment of the said District Court in this cause be, and
hereby is affirmed.

Filed and entered July 15, 1991

App. 23

APPENDIX E
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

UNITED STATES OF
AMERICA,

No. 90-15128

D.C. No.
CV-86-0670-HDM

ORDER

)
)
Plaintiff-Appellee,
)

NYE COUNTY NEVADA; (Filed Sep. 18, 1991)
)
)
)
)

V.

BERNIE C. MERLINO,
Nye County Assessor,

Defendants-Appellants.

Before: PREGERSON, NOONAN and THOMPSON, Cir-
cuit Judges.

A majority of the panel, as constituted above, has
voted to deny the petition for rehearing and to reject the
suggestion for rehearing en banc.

The full court has been advised of the suggestion for
en banc rehearing and no judge of the court has
requested a vote on the suggestion for rehearing en banc.
Fed. R. App. P. 35(b).

The petition for rehearing is DENIED, and the sug-
gestion for a rehearing en banc is REJECTED.

App. 24

APPENDIX F
I. Article VI, clause 2 of the United States Constitu
tion provides:

This constitution, and the Laws of the United
States which shall be made in Pursuance
thereof; and all Treaties made, or which shall be
made, under Authority of the United States,
shall be the supreme Law of the Land; and the
Judges in every State shall be bound thereby,
anything in the Constitution or Laws of any
State to the Contrary notwithstanding

App. 25

APPENDIX G

Il. Nev. Rev. Stat. § (NRS) 361.159 provides:

361.159 Exempt personal property subject to
taxation if used in business conducted for profit.

1. Personal property exempt from taxation
which is leased, loaned or otherwise made avail-
able to and used by a natural person, association
Or corporation in connection with a business
conducted for profit is subject to taxation in the
same amount and to the same extent as though
the lessee or user were the owner of the prop-
erty, except for personal property used in vend-
ing stands operated by blind persons under the
auspices of the bureau of services to the blind of
the rehabilitation division of the department of
human resources.

2. Taxes must be assessed to lessees or
users of exempt personal property and collected
in the same manner as taxes assessed to owners
of other personal property, except that taxes due
under this section do not become a lien against
the personal property. When due, the taxes con-
Stitute a debt due from the lessee or user to the
county for which the taxes were assessed and if
unpaid are recoverable by the county in the
proper court of the county

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385010_2300%3A1. Public record. Not legal advice.