United States v. Boyd

PETITIONER: United States , et al.
RESPONDENT: B. J. Boyd, Commissioner
LOCATION: Oak Ridge, Tennessee

DECIDED BY: Warren Court (1962-1965)

CITATION: 378 US 39 (1964)
ARGUED: Apr 20, 1964 / Apr 21, 1964
DECIDED: Jun 15, 1964
GRANTED: Oct 14, 1963

Archibald Cox, Jr. - for the appellant
Milton P. Rice - for the appellee
R. R. Kramer - for the appellant

Facts of the case

In 1955, Tennessee amended a statute that was based on the Atomic Energy Act and allowed the Atomic Energy Commission (AEC) and its contractors to operate without paying sales tax. Under the amended statute, contractors must pay a contractor’s tax, regardless of the source or destination of the product. Union Carbide Corp, H.K. Ferguson Co. — both of which hold AEC contracts — and the AEC sued Tennessee to recover the sales and contractor’s tax.

The trial court dismissed the suit due to the existing statute, and the plaintiffs appealed. The Tennessee Supreme Court upheld state’s right to collect a contractor’s tax, but found that the companies should be reimbursed for the sales tax.


Does the imposition of the contractor’s tax violate the federal immunity from state taxation?

Media for United States v. Boyd

Audio Transcription for Oral Argument - April 21, 1964 in United States v. Boyd

Audio Transcription for Oral Argument - April 20, 1964 in United States v. Boyd

Earl Warren:

Number 185, United States et al., Appellants, versus B. J. Boyd, Commissioner.

Mr. Solicitor General.

Archibald Cox:

Mr. Chief Justice, may it please the Court.

This is an appeal by the United States and two government contractors from an adverse decision by the Supreme Court of Tennessee in an intergovernmental immunity tax case.

The question presented is whether Tennessee may constitutionally asses a tax upon the use of Government property in the operation of the Government's Oak Ridge atomic energy facilities, the operation for the sole account of the Government by contractors who engaged to supply managerial skills and services without risk of loss or hope of profit beyond the flat fee for their services and overhead expenses.

The facts of the case are essentially very simple.

The Atomic Energy Act of 1946 and 1954 contemplate that production facilities, like Oak Ridge, will be owned by the United States or technically, by the Atomic Energy Commission as agent for the United States.

But they authorized the Commission to draw upon private industry for managerial skill and administrative services and the like by entering into management contract of bringing those services and skills to service for the Government's account.

The identity of the contractors at any given facility may change from time to time or it maybe continuous, as indeed it has in the case of Union Carbide here.

In the present case, Carbide and Ferguson were the contractors at Oak Ridge at all times material to this proceeding.

The Carbide contract can be summarized in four points.

I shall refer to it in a little more detail in the course of the argument but it's enough for now, I think, simply to mention these highlights.

The first place, Carbide undertakes, and this is frankly the language of the contract, to manage, operate and maintain the plants in accordance with instructions from the Atomic Energy Commission.

The character of the work done, impart the schedule of production entirely, is determined by the Atomic Energy Commission.

Carbide, in effect, undertakes to run the plants, not to sell anything to the Government and except in the sense of running the plants not even to make anything that it is to deliver to the Government.

Indeed, the contract expressly stipulates that Carbide makes no representation or warranty whatsoever and assumes no responsibility or obligation that the plants can be operated successfully.

It just goes in there and supplies its services.

Third, I would emphasize that all the plant and facilities, all the equipment, all the materials and product belong to the Government in every substantial sense.

The working capital leave and this is supplied by the Government.

Carbide doesn't bring any of its money to the enterprise.

It all comes from special government bank accounts on which it withdrew.

All the risks are on the Government.

And fourth, it should be noted that what Carbide receives is a flat fee for performing what I call leave services.

The fee covers its profit and in addition, it covers salaries of corporate officials, a certain amount of backup administrative services for them in the home office and perhaps other branch offices and a certain amount of overhead.

I suppose it's theoretically possible, perhaps practically possible that Carbide can increase the amount of its net income a little bit by curtailing the amount of corporate officers and services that goes to this or the amount of overhead.

But that is the only conceivable way that -- that Carbide can affect its net income.

In all other respects, it's exactly like a salary and that is certainly small.

This was, in other words, essentially in undertaking the supply management services for a fee in operating the properties of the United States subject to such directions as the United States chose to give and for the sole use and benefit of the public or of the United States.

Ferguson's contract was essentially similar, although it related to modification of the facilities in the nature of construction work rather than to their operation in terms of producing products or research.

And it involved the kind of services that are preformed under other construction contracts.But here again, the only undertaking you will find when you read the contract was to supply services for a fee.