Hon, .Robert S. Calvert                 Opinion   No, V-916,
Comptroller   of Public Accounts
Austin, Texas                           Re:   IS a club operated by civil-
                                              ian employees   of the army’
                                              on an army post subject to
                                              occupation tax.

Dear   Mr,   Calvert:

              You present for the opinion of this office the liability
of the civilian club operated by the civilian employees    of the lyote
Air Force Base at Pyote, Texas, for certain occupation taxes im-
posed by Article   7047, V,C.S.

               Specifically.   there are involved six slot machines,    a
six-lane   bowling alley, and a theatre, all taxable under different
section? of Article     7047, V,C.S.,   unless they are exempt under the
facts submitted by reason of Federal immunity,           Concededlly, all
these activities   are operated by a club organized and prom&d           by
the civilian employees       of a Federal Air Base at Pyote, Texas, and
all are operated upon the military reservation.         This fact alone,
bowever,    is not sufficient to afford Federal immunity frem taxation
by the State.

              There are two conditions under which Federal immuni-
ty from taxation by the State must be recognized.        The first is where
jurisdiction  over the territory    involved has been uncondffionally     ced-
ed by ihe State to the Federal Government,        Surplus Trading Co. v.
Cook, 281 U.S. 647, 50 S.Ct, 455, 74 L.E, 1091 (lY30);        and, second,
%lZi% the tax is against a Federal instrumentality        without cbngres-
sional consent,   Admittedly,    the first condition does not prevail here,
 The only question, therefore,    is whether the club is such a Federal
instrumentality   as to be immune from the imposition        of the taxes
here involved.

             The case closest to that under consideration    is Standard         ’
Oil Co. of California  v. Johnson, 316 U.S. 481 (1942).   There Cali-
forniapting              to impose a license tax on the privilege  of dis-
tributing motor vehicle fuel when this fuel was sold by the distribu-
tor to Post Exchanges.     The California  statute made the tax inappli-
cable “*to any motor vehicle fuel sold to the government    of the United
States or any department     thereof. *’
Hon. Robert   S. Calvert.     Page   2 (V-916)




             The tests used by the court in the above case in deter-
mining the status of post exchanges would seem to be applicable in
determining   the status of the civilian activities involved in this case,
since the Air Force Judge Advocate claims that:

             ‘“It has been determined     that the facilities  men-
      tioned are operated by the Civilian Welfare Fund on
      the base, set up under authority of AR 210-100          dated 15
      February     1946.   No part of the profit from the operation
      of said activities    inures to the benefit of any individual.
      This fund is supervised      and controlled by the Depart-
      ment of the Air Force and is a non-appropriated           fund
      consisting    of cash and other assets accumulated        to fi-
      nance welfare activities     for all civilians regularly     em-
      ployed at the base.

             ‘“Since the above elements are present the activity
      is a federal one and consequently      considered   to be an in-
      strumentality    of the Government   and, as such, entitled
      to all the privileges   and immunities    thereof.”

             The tests      used in the Standard   Oil Case,   supra,    are set
out as follows:

             “‘On July 25, 1895, the Secretary   of War, under
      authority of Congressional    enactments   promulgated
      regulations   providing for the establishment    of post ex-
      changes.    These reg,ulations have since been amended
      from time to time and the exchange has become a regu-
      lax feature of Army posts.     That the establishment    and
      control of post ex~ohanges have been in accordance       with
      regulations   rather than specific statutory directions
      does not alter their status, for authorized War Depart-
      ment regulations    have the force of law.

             “Congressional     recognition   that the activities   of
      post exchanges are governmental        has been irequent.
      Since 1903, Congress      has repeatedly made substantial
      appropriations    to be expended under the direction of
      the Secretary   of War for construction,      equipment, and
      maintenance    of suitable buildings for post exchanges.
      In 1933 and 1934, Congress       ordered certain moneys
      derived from disbanded exchanges         to be handed over
      to the Federai   Treasury.     And in 1936, Congress       gave
      consent to state taxation of gasoline sold by or through
      post exchanges,    when the gasoline was not for the ex-
      clusive use of the United States.
Hon. Robert   S, Calvert,    Page 3 (V-916)




               “‘The commanding       officer of an Army Post, sub-
      ject to the regulations       and the commands       of his own
      superior officers,       has complete authority to establish
      and maintain an exchange.           He details a post exchange
      office to manage its affairs.         This officer and the com-
      manding officers       of the various company units make up
      a council which supervises          exchange activities.      None
      of these officers receives        any compensation       other than
      his regular salary.        The object of the exchanges        is to
      provide convenient and reliable sources where soldiers
      can obtain their ordinary needs at the lowest possible
      prices.     Soldiers,   their families,   and civilians     employed
      on military posts here and abroad can buy at exchanges.
       The government       assumes     none of the financial obliga-
      tions of the exchange.         But government     officers,   under
      government       regulations,   handle and are responsible        for
      all funds of the exchange which are obtained from the
      companies       or detachments      composing   its membership.
      Profits,    if any, do not go to individuals.       They are used
      to improve the soldiers’ mess, to provide various types
      of recreation,     and in general to add to the pleasure and
      comfort of the troops.“’

              The court then said:

             “‘From all of this, we conclude that post exchanges
      as now operated are arms of the government         deemed
      by it essential   for the performance    of governmental  func-
      tions.   They are integral parts of the War Department,
      share in fulfilling the duties entrusted to it, and partake
      of whatever immunities      it may have under the constitu-
      tion and federal statutes.     In concluding otherwise the
      Supreme Court of California was in error.”

              In another case the court in construing a statute of South
Carolina somewhat similar to our statute here involved held that
an army post exchange was a Federal instrumentality             engaged in
governmentali functions,    so that a State statute imposing a license
tax, graduated in accordance       with volume of sales, upon every pcr-
son for the exercise    of the privilege    of engaging in selling such ar-
ticles as beer, wine, tobacco,      soft drinks, playing cards. and candy,
and requiring the procurement        by the licensee   of a license for each
place  oi business   operated by him, wou Idbetlonal,                   as on
rnterterence   wrth the activities    of the United States, if enforced with
respect to the lawful selling activities      of any army post exchange.
United States v. Query, 37 F. Supp. 972 (E.D.S.C.          1941, aff. 121 F.2d
631, cert. den. 514 U *S o 685).     The taxes here involved, imposed un-
der our statute, are in the nature of license or excise taxes, and we
think the same rule pronounced by the court as to the South Carolina
statute would apply.
Hon. Robert    S. Calvert,    Page 4 (V-916)




               Another case involving the South Carolina statute is
United States v. Query, 21 F. Supp. 784 (E.D.S.C.                1937).   This was
an inJunction suit brought by the United States to enjoin the South
Carolina Tax Commissioner           from collecting      taxes imposed by a
South Carolina statute against a Civilian Conservation                 Corps &mp
exchange.     The only difference      that we perceive between a Civilian
Conservation      Corps camp exchange and a civilian club of an army
air base is that a Civilian Conservation           Corps camp exchange has
its existence by virtue of congressional           legislation,    Act June 28,
1937, 16 U.S.C.A.       584 et seq., whereas a civilian club of the army
has its existence by virtue of army regulations,                This difference
is not material,     for army regulationi       have the force of law. Stand-
ard Oil Co. of California v. Johnson, supra.              The injunction was
granted, and in the course       of its opinion the court said:
                              \
               ‘“In performing    its constitutional     functions, the
       United States must operate through an instrumentality
       or agency.      Here it operates through the agency of the
       camp exchange as an integral part of the Civilian Con-
       servation Corps.       The tax falls directly upon the camp
       exchange and the provisions          of the state statute direct-
       ly affect this instrumentality        of the federal government
       selected for the exercise        of its powers.      The state tax
       in effect is upon the government’s           transactions     in the
       exercise    of its lawful power.       The Civilian Conservation
       Corps camp exchange is of such a character                 and so in-
       timately connected with the exercise            of the operation of
       the Civilian Conservation        Corps, the exercise         of a pow-
       er granted by the Act of Congress            authorizedby       the
       Federal Constitution,       that it is such a direct interfer-
       ence with the functions of the government             itself as to
       be clearly beyond the taxing power of the state.



              “‘The tax imposed is a license tax and not a prop-
       erty one; being an excise tax it is laid on the enjoy-
       ment of a privilege,   and in the case at bar falls upon
       the means by which the federal government        undertakes
       to perform   its lawful function.   The state statute places
       within the hands of the Tax Commission       the power to
       retard, impede, and burden the operation of the Civil-
       ian Conservation    Corps camp exchange.      The slightest
       degree of such interference     or burden is prohibited.”

               We have examined AR 210-100     under which the civilian
club of the Pyote Air Base is set up and operated, and there appears
little, if anything, to distinguish it from a post exchange, which the
                                                                                     *,
. .                                                                                       .
      , .

            Hon. Robert   S. Calvert,   Page   5 (V-916)




            courts have held to be a Federal instrumentality      and, therefore;
            exempt from State taxation.     So long as such club continues to be
            an instrumentality   of the Federal Government,    it is exempt from
            the taxes in question by reason of Federal immunity,       unless Con-
            gress should consent to its being taxed.

                                          SUMMARY

                          A civilian club organized,and    maintained under
                  army regulations     on an army post is a Federal instru-
                  mentality similar    to post exchanges and is immune
                  from a State occupation tax without congressional       con-
                   sent.  Surplus Trading Co. v. Cook, 2g1 U.S. 647 (1930);
                  Standard Oil Co. of, California    v. Johnson, 316 U.S. 481
                  ‘(lY42); United States v. Query,    121 &‘.Zd 631; United
                  States v?Iiiery,   21 r’.w84         (1938); AR 2m

                                                           Yours   very   truly

                                               ATTORNEYGENERALOFTRXAS




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