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United States v. California State Board of Equalization … (1982)

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Taxes Imposed on United States Contractors Are Valid; Legal Incidence of Tax Did Not Fall on United States

The Board collected use taxes from lessors who leased personal property to United States contractors, and the United States reimbursed the contractors for the taxes. The United States sought to recover the taxes paid. The U.S. District Court entered judgment in favor of the United States.

The U.S. Court of Appeals, Ninth Circuit, reversed and held in favor of the Board. Even though the contractors were acting as designated agents of the United States in executing the leases, and even though the United States bears the economic burden of the tax, the tax is valid if the legal incidence of the tax is not imposed on the United States itself.

Here the legal incidence of the tax falls on the contractors, who are not performing governmental functions, but rather are engaged in commerce for their own economic advantage. United States v. California State Board of Equalization (9th Cir. 1982) 683 F.2d 316.