              Obligation of the Office of the Vice President
              to Pay State or City Accommodations Taxes

T he Office o f the Vice Presidency is immune from state taxation by virtue o f the
   Supremacy Clause o f the Constitution, and is thus not required to pay a state or city
   accom modations tax on hotel bills for which it is billed directly.

                                                                             November 19, 1981
 MEMORANDUM OPINION FOR THE DEPUTY COUNSEL TO
             T H E VICE PRESIDENT

   This responds to your request for our opinion whether the Office of
the Vice President (OVP) is required to pay accommodations taxes
imposed pursuant to state law or city ordinance. The situation which
has occasioned your inquiry is that in which OVP reserves a block of
rooms for an official trip, is billed by and pays directly to the hotel.
The hotel has sought to collect as well a state or city accommodations
tax imposed on all hotel bills.1 Under familiar principles of constitu­
tional law, neither states nor cities may tax an instrumentality of the
federal government. Thus OVP is, in the circumstances you describe,
not required to pay the tax.
   Since the early days of the Republic, the Supreme Court “has ad­
hered to the rule that States may not impose taxes . . . the legal
incidence of which falls on the Federal Government.” United States v.
County o f Fresno, 429 U.S. 452, 459 (1977) citing M'Culloch v. Mary­
land, 17 U.S. (4 Wheat.) 316 (1819). See, e.g., United States v. Mississippi
Tax Comm'n, 421 U.S. 599 (1975); First Agricultural Nat. Bank v. Tax
C om m ’n, 392 U.S. 339 (1968); Kern-Limerick, Inc. v. Scurlock, 347 U.S.
110 (1954). The federal government’s immunity from state taxation is
“inherent in the Supremacy Clause of the United States Constitution,”
and no levy may thus be imposed upon any of its activities without its
consent. United States v. County o f Fresno, supra, 429 U.S. at 453.
   To be sure, the Court has also recognized the propriety of state taxes
in certain situations where the economic incidence of the tax may be

    1 You have enclosed as an example of such a tax the Illinois Hotel Operators’ Occupation Tax Act,
which by its terms applies to all persons renting rooms “even if the person paying for the room may
be a governm ent agency or instrumentality (Federal, State or Local, or even a foreign government).”
It is not significant for the constitutional issue that this tax is expressly imposed on instrumentalities of
the federal government.

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said to fall on the federal government. For example, in United States v.
County o f Fresno, supra, the Court ruled that a state may tax federal
employees on their possessory interests in housing owned and supplied
to them by the federal government as part of their compensation. In
doing so, it noted that “[s]o long as the tax is not directly laid upon the
Federal Government, it is valid if nondiscriminatory . . . or until Con­
gress declares otherwise.” 429 U.S. at 460. See also Graves v. New York
ex rel. O ’Keefe, 306 U.S. 466 (1939) (states may tax federal employee’s
wages); James v. Dravo Contracting Co., 302 U.S. 134 (1937) (state may
tax gross receipts of federal contractor); City o f Detroit v. Murray Corp.,
355 U.S. 489 (1958) (state may tax private contractor’s use of govern­
ment-owned property). These cases make clear, however, that a state or
city tax is proper only if “[t]he ‘legal incidence’ of the tax . . . falls
neither on the Federal Government nor on federal property,” and only
if it does not “threaten[ ] to obstruct or burden a federal function.” 429
U.S. at 464.
   Because the state and city accommodations taxes described in your
letter would fall directly on an agency of the federal government and
“burden a federal function,” OVP has no obligation to pay them.2
                                                       T heodore        B. O l s o n
                                                   Assistant Attorney General
                                                    Office o f Legal Counsel




   2 We note that the federal procurement regulations expressly state that “purchases made by the
Government itself are exempt from State and local sales and use taxes. . .          41 C.F.R. § 1-11.302
(1980). Government agencies are directed to make use of this exempt status “to the fullest extent
available. .     Id. It is true that under current administrative practice federal employees who secure
and pay for hotel rooms while traveling on government business may be taxed, on the theory that the
government is not a party to the transaction, even though the government is obligated to reimburse
the employee for all of his expenses See, e.g., 55 Comp. Gen. 1278 (1976). We do not doubt that this
practice could be changed to require that federal employees be exempted from state or local taxes in
such situations.

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