RESPONDENT: State Tax Commission
LOCATION: United States District Court of Maryland
DOCKET NO.: 755
DECIDED BY: Warren Court (1967-1969)
CITATION: 392 US 339 (1968)
ARGUED: Apr 22, 1968
DECIDED: Jun 17, 1968
Facts of the case
Media for First Agricultural National Bank or Berkshire County v. State Tax Commission
Audio Transcription for Oral Argument - April 22, 1968 in First Agricultural National Bank or Berkshire County v. State Tax Commission
Number 755, First Agricultural National Bank of Berkshire County, appellant versus State Tax Commission.
Mr. Kessel, you may proceed with your argument.
Ronald H. Kessel:
Mr. Chief Justice and may it please the Court.
The appellant, the First Agricultural National Bank of Berkshire County is a national bank chartered under Title 12, the United States Code as such just one of 19 national banks conducting banking operations in the Commonwealth.
For over two years, it has paid under protest, Massachusetts sales and use taxes on purchases of tangible personal property for its own use.
Immediately prior to the enactment of the sales and use tax statute of the appellant request of the appellee, the State Tax Commission, for a ruling or an emergency regulation that it was exempt from these taxes, no such ruling was issued.
However, emergency regulation number 6 was promulgated which stated that the sales lease or rental of tangible personal property of the national banks and to Federal Savings and Home Loan Associations was subject to the sales and use taxes.
The appellant filed a fail for declaratory release seeking in substance that it was exempt from these taxes.
The case was reserved and reported without decision to the Supreme Judicial Court for the Commonwealth of Massachusetts for the issues which are raised on this appeal were passed on by that Court.
There are five issues in the case.
Two of them relate to the nature of the Massachusetts sales tax and one of the natures of that tax is probably reviewable by this Court.
Three of them relate to the tax immune status of the national banks.
The third -- the first is whether Section 548 of Title 12 prohibits the imposition of a sales and use tax on purchases by the appellant.
If this Court should decide that issue affirmative why then none of the other tax immunity issues need be reached.
If, however, this Court should decide as the appellant submits it should not, that Section 548 is a purely permissive statute.
Why then the second immunity issue is raised, that is whether after long standing congressional reliance and acceptance of the decisions of this Court which have held at a several states are wholly without power to levy any tax direct or indirect on national banks except as Congress permits, whether those decisions should be reexamined.
Only if this Court should decide that these decisions should be sole reexamined is the pure constitution -- constitutional issue presented.
That is whether national banks, the federal instrumentalities should continue to enjoy the constitutional protection from state taxation, again, except this Congress permits.
Inherent in the nature of our federalism, is a necessity of accommodating the affairs of the nation and the power of the several states to tax.
Congress is fashioned its accommodation in Section 548.
Section 548 provides that the several states can levy taxes on national bank shares, dividends there from and on the income of national banks and taxes measured by a recording the income of these banks in addition to real estate taxes.
Section 548 does not permit the levying of a sales and use tax.
Despite the language of Section 548 and despite the overwhelming authority of the decisions of this Court, the appellee now urges upon this Court that the appellant is subject to state sales and use taxes.
The original predecessor to Section 548 was enacted in 1864, one year after the National Banking System was created.
The debates prior to the enactment of this section indicate that the Congress was well aware that it was making a decision into determining the sculpt of permissible state taxation of national banks which was a purely legislative market and was not one of constitutional dimension.
For example, one of the objects of the 1864 Legislation was to encourage the conversion of not state banks international banks.
Congress knew that any types of protection for the national banks would encourage such conversions.
This objective is of course one of legislator policy.
The congressional debates further indicate that the Congress is well aware of the decision of the McCulloch versus Maryland and of the constitutional provision against a tax on national banks.
For this reason, we're fully conscious that in setting forth the permissible mode of state taxation they were determining the outer limits beyond which the state could not tax.