Gerald C. Mann




    Agricultural  & Mechanical       Opinion No. O-4617
    College of Texas                 Re:   Collection    of inspection   tax
    College Station, Texas           on fertilizer    distributed    in Texas
                                     by the Agricultural      Adjustment
    Attention:  G. S. Fraps          Administration.
    State Chemist.
    Dear Sir:
                 You request an opinion of this Department on the ques-
    tion whether the inspection    tax imposed by Texas law on commer-
    cial fertilizers    sold in Texas may be collected    from the Agricul-
    tural Adjustment Administration,    which distrtbutes     in Texas to
    Texas farmers fertilizers    purchased by it outside of Texas.
               Texas Revised Criminal Statutes,     1925, Arts. 1709
    through 1720, and Civil Statutes,     Arts. 94 through 108, regulate
    the sale of commercial fertilizer,within      the State of Texas.  TO
    defray expenses of inspection     and enforcement of these regula-
    tory laws, an inspection   fee of 253 per ton is provided for com-
    mercial fertilizer  “sold or exposed, or offered for sale in this
    State” by “all corporations,    firms or persons”.
               The Agricultural    Adjustment Kdministration   is a federa,
    agency or instrumentality.      From your letter  and accompanying
    documents it appears that the A.A.A. is distributing       to farmers
    in Texas commercial fertilizer     purchased by the A.A.A. outside
    of Texas, in the following     manner: The farmer is furnished
    fertilizer  on the basis of a price of so much per hundred pounds.
    To the extent of the quantity of fertilizer      furnished the farm-
    er at the stipulated    price, when the farmer makes application
    for his Agricultural    Conservation Payment the amount of fertil-
    izer theretofore   furnished to him by the B.A.A. is deducted from
    that payment.
                 This activity of the A.A.A.   is authorized   by 16 U.S.C.
    1940 ed.    590h(b), which provides:
                I’(b)   Subject to the limitations   provided in sub-
         section     (a) of this section,  the Secretary shall have
         power to carry out the purposes specified        in clauses
         Cl), (21, (31, (41, and (5’) of section 7(a) by making
         payments or grants of other aid to agricultural         pro-
         ducers, including tenants and sharecroppers,        in amounts
         determined by the Secretary to be fair and reasonable
Agricultural   & Mechanical    College   of Texas,   page 2    (O-4617)


     in connection with the effeottidtion          of such purposes
     during the year with respect to which such payments
     or grants are made, and measured by (1) their treat-
     ment or use of their land, or a partthereof,              for
     soil restoration,      soil conservation,      or the preven-
     tion of erosion;      (2) changes in the use of their land;
     (3) their equitable       share, as determined by the Secre-
     tary, of the normal national production of any commod-
     ity or commodities required for domestic consumption;
     or (4) their equitable        share, as determined by the
     Secretary,    of the national production of any commodity
     or commodities required for domestic consumption and
     exports adjusted to reflect         the extent ‘to which their
     utilization    of cropland on the farm conforms to farm-
     ing practices    which the Secretary determines will
     best effectuate     the purposes specified        in section 7
     (a); or (5) any combination of the above.              In arid or
     semiarid sections,       (1) and (2) above shall be con-
     strued to cover water conservation           and the beneficial
     use of water on individual        farms, including measures
     to prevent run-off,       the building of check dams and
     ponds, and providing facilities          for applying water to
     the land.     In determining the amount of any payment
     or grant measured by (1) or (2) the Secretary shall
     take into consideration        the productivity     of the land
     affected    by the farming practices        adopted during the
     year with respect to which such payment is made. In
     carrying out the provisions         of this section in the
     continental    United States,      the Secretary is directed
     to utilize    the services     of local and State committees
     selected    as hereinafter     provided.     The Se cre.tary shall
     designate local administrative         areas as units for ad-
     ministration    of programs under this section.           No such
     local area shall include more than one county or parts
     of different    counties.      Farmers within any such local
     administrative     area, and participating        or cooperating
     in programs administered within such area, shall elect
     annually from among their number a local committee of
     not more than three members for such area and shall
     also elect annually from among their number a delegate
     to a county convention for the election            of a county
     committee.     The delegates from the various local areas
     in the county shall,        in a county convention,      elect,
     annually, the county committee for the county which
     shall consist of three members who are farmers’in               the
     county.     The local committee shall select a secretary
     and may utilize     the county agricultural        extension
     agent for such purpose.         The county committee shall
     select a secretary who may be the county agricultural
     extension ag.ent . If such county,agricultural             exten-
     sion apent shall not have been elected secretary               of
Agricultural    & Mechanical      College     of Texas,     page 3      (O-4617)


      such committee, he shall be ex officio                 a-.member
                                                                     - of
     the county commi.ttee.             The county agricultural        ex-
      tension agent shall not have the power to vote.                      In
      any~county in which there is only one local committee
     the local committee shall also be, the county committee.
      In each State there shall~be a State committee for the
      State composed of not less than three or more than five
     farmers who are legal residents               of the State and who
      are appointed by the Secretary.               The State director
      of the Agricultural          Extension Service shall be ex of-
     ficio     a member of such State committee.                The ex officio
     members of the, county and State committees shall be in
      addition t‘o the number of members of such committees
     hereinbefore        specified.        The Secretary shall make such
     regulations       as are necessary relating           to the selection
      and exercise       of the functions       of the respective        commit-
     tees, and to the administr,ation,               through such commit-
     tees, .of such programs.              In carrying out the provisions
      of this section,         the Secretary--shall,         as far as prac-
      ticable,    protect the interests           of tenants and share-
      cropper,s; is authorized to utilize              the agri,cultural        ex-
      tension service and other approved agencies;                   shall
      accord such recognition            and encouragement to producer-
      owned~and producer-controlled             cooperative      associations
      as will be in harmony with the policy toward coopera-
      tive associations          set forth in existing        Acts of Con-
      gress and as will tend to promot’e efficient                 methods of
     marketing and distribution;              shall not have power to ac-
      quire any land ore any right or interest                therein;     shall,
      in every practicable           manner, protect the interests            of
      small producers;         and shall in every practical           way en-
      courage, and provide for soil-conserving                and soil-rebuild-
      ing practices       rather than the growing of soil-depleting
      crops.     Rules and regulations          governing payments or
      grants under this subsection             shall be as simple and di-
     rect as ,possible,          and, wherever practicable,          they shall
     be classified        on two bases:        (a) ,Soil-depleting         crops
      and practices,        (b) soil-building        crops and practices.
     Notwithstandins         anv other provision         of law. in making
      available    conservation         materials consistin?       of seeds;
     seed ino,culants.         fertilizers.     liming and other sou-
      conditionina       mate’rials.     trees. or slants.       or in making
     available     s ;il;c;n;e;;-           or soil-buildins      servic,es.     to
      asricultura        D 0 u e        under this subsection.        the Secre-
      tarv mav make oavments. in advance of determination                       of
     gerformance bv the producers.              to aersons . who fill . uur-  -
     ‘chase orders coverins, aaoroved conservation                 materials
     pr coverinn soil-conservinn              or soil-building       services,
     fu ni hed to D oducers at not to exceed a fair Drice
     fi~edsin     accordance with reaulations             to be orescribed
Agricultural   & Mechanical   College   of Texas,   page 4   (O-4617)


     Jw the acretarv. or who mnbr            Servicesto the Set-
     retarv    in uverina     to producers    aDDroved COIISB~VB-




            The agricultural   conservation  program in which the
United States is engaged is designed to conserve the soil~re-
sources of the U. S. Section 8, clause 1, of the Constitution
of the U. S. confers upon the Congress the power “to lay and
collect   taxes, duties,   imposts, and excises,   to . :. . provide
for the . . . general welfare of the United States;        . . .I1
The power exercised by the Congress in the establishment         of the
Soil Conservation Program is the power necessarily        implied from
the power thus expressly conferred by the Constitution,         to wit,
the right to expend the “taxes, duties,      imposts, and excises”
collected   for the purpose of promoting “the general welfare of
the United States”.
             It may well be doubted that the distribution          of the
fertilizer     in Texas by the A.A.A. constitutes      a “sale”,    within
the purview of our State laws.         It would seem that the fertilizer
is “granted” to the farmer in advance of performance of the con-
ditions    entitling    him to a cash grant or payment; that the fer-
tilizer    grant is in lieu of the cash grant, and that the price
or value of the fertilizer.       is established  in order that the
amount of cash to be deducted from the cash grant or payment may
be determined.        Whether this constitutes   a sale, within the mean-
ing of the Texas law, we find unnecessary to determine, for we
are of the opinion that, even though the transaction             is a sale,
the inspection       tax or fee cannot be collected    from the Federal
agency.
           It is a familiar princi le     established   since McCulloch
v. Maryland, 4 Wheat. 316 (U.S. 18193, that the States cannot
interfere  with, burden or impede the Federal government or its
authorized instrumanta~ities    in the exercise    of any of the pow-
ers vested by the Constitution     of the United States in the Con-
gress of the United States.     The principle   has been announced
most frequently   in those cases involving    an attempt to collect
a State tax from a Federal instrumentality.        It has, however,
equal application   to the enforcement of State regulatory      laws
against Federal instrumentalities.      Johnson v. Maryland, 254 U.S.
51; Hunt TV. U.S., 278 U.S. 96; Arizona v. California,       et al, 283
U.S. 423; Ohio v. Thomas, 173 U,S. 276; Easton v. Iowa, 188 U.S.
220; Ex parte Willman, 277 Fed. 819; Posey v. T.V.A., 93 F.(2)
726; United States v. Query, 21 Fed.Supp. 784.          ~.
./.   ^




          Agricultural   & Mechanical   College   of Texas,   page 5   (O-4617)


                 The exaction presently    involved is an inspection   fee,
      rather than a tax.    But whether it be a tax or an inspection
      fee, an exertion of the taxing power or of the police power of
      the State, it operates directly    and immediately upon the Fed-
      eral instrumentality   in the exercise    of the power conferred
      upon it by the Congress, and directly      burdens the lnstrumental-
      ity in the exercise   of that power.    The agency of the United
      States is immune from and cannot be required to pay the fee or
      tax involved.
                  The fee or tax cannot be justified      by reasoning that
      there is no real burden because the instrumentality         might pass
      the fee or tax on to the farmer by increasing        the price of the
      fertilizer,   or might require those from whom it purchases the
      fertilizer   outside of the State to comply with Texas regulations.
      Tstith equal plausibility    every state tax on Federal activities
      might be justified      by the observation  that no real burden exists
      because the amount of the State tax may be passed on by the Fed-
      eral government through the collection       of increased Federal
      taxes.
                  The situation   here is not to be confused with the cases
      where the burden or regulation      affects   the Federal instrumental-
      ity only remotely or indirectly,       as in the case where the tax
      or regul&tion operates directly      upon a private person or corpor-
      ation not an instrumentality      or agent of the Federal government.
      See Alabama v. King & Boozer, 314 U.S. 1; James v. Dravo Con-
      tracting   Co., 302 U.S. 134. Thus a private person, firm, or
      corporation    selling  commercial fertilizer    to the Agricultural
      Adjustment Administration     in Texas is subject to its laws; the
      fact that the sale is made to the Federal instrumentality          does
      not clothe the vendor with the immunity possessed by the vendee.
                  Likewise, we are not to be understood as holding that
      employees of the United States and its agencies secure a general
      immunity from State laws while engaged in the performance of
      their duties.    Such State regulations    as affect only incidentally
      the mode of carrying out those duties may well apply to the em-
      plz;e;~s of Federal Instrumentalities     (see Johnson v. Maryland,
              ; the.immunity, however, does extend to those regulations
      which directly   impede or burden the employee in the discharge
      of his Federal duties.
                                              Yours very truly
      APPROVED   JUL 13, 1942                 ATTORNEY  GENERALOF TEXAS
      /s/ Gerald C. Mann                     By /si R. W. Fairchild
      ATTORNEY   GENERAL  OF TEXAS            R. W. Fairchild, Assistant
      APPROVED:OPINION COMMITTEE
      BY:         BWB, CHAIRMAN
      RWrmp:wb
