A-79655, AUGUST 18, 1936, 16 COMP. GEN. 150

A-79655: Aug 18, 1936

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

IT IS IN THE INTEREST OF THE UNITED STATES FOR THE DEPARTMENT OF AGRICULTURE TO ADVERTISE FOR BIDS FOR THE PURCHASE OF SURPLUS OUTPUT OF MILK PRODUCTS FROM DAIRY HERDS MAINTAINED FOR EXPERIMENTAL PURPOSES. THE HERD IS MAINTAINED FOR THE PURPOSE OF CONDUCTING FEEDING. IT IS REPRESENTED BY THE DAIRY HUSBANDMAN IN CHARGE OF THE BUREAU OF DAIRY INDUSTRY INTERESTS AT THE FIELD STATION THAT . BUTTERFAT SOLD LOCALLY (PRESUMABLY IN THE VICINITY OF HUNTLEY) IS WORTH 27 CENTS PER POUND. WHILE THE BILLINGS DISTRIBUTORS WILL PAY US 43.5 CENTS BECAUSE OF THE FUNCTIONING OF THE MILK CONTROL BOARD.'. HE INDICATES FURTHER THAT HE IS IN RECEIPT OF "A LETTER FROM THE COMMISSIONER OF THE MONTANA MILK CONTROL BOARD.

A-79655, AUGUST 18, 1936, 16 COMP. GEN. 150

TAXES - STATE - MILK DEALERS' LICENSE AND SALES - SALES BY BUREAU OF DAIRY INDUSTRY, AGRICULTURE DEPARTMENT A STATE MAY NOT IMPOSE A PRODUCERS' LICENSE TAX ON THE BUREAU OF DAIRY INDUSTRY, DEPARTMENT OF AGRICULTURE, IN CONNECTION WITH THE MAINTENANCE OF A DAIRY HERD FOR THE PUBLIC INTEREST, NOR A TAX ON THE SALE OF THE PRODUCTS INCIDENTAL THERETO. IT IS IN THE INTEREST OF THE UNITED STATES FOR THE DEPARTMENT OF AGRICULTURE TO ADVERTISE FOR BIDS FOR THE PURCHASE OF SURPLUS OUTPUT OF MILK PRODUCTS FROM DAIRY HERDS MAINTAINED FOR EXPERIMENTAL PURPOSES.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE SECRETARY OF AGRICULTURE, AUGUST 18, 1936:

THERE HAS BEEN CONSIDERED THE QUESTION PRESENTED IN YOUR LETTER OF AUGUST 6, 1936, AS FOLLOWS:

THE BUREAU OF DAIRY INDUSTRY OF THIS DEPARTMENT MAINTAINS A DAIRY HERD AT THE BUREAU OF PLANT INDUSTRY FIELD STATION AT HUNTLEY, MONT. THE HERD IS MAINTAINED FOR THE PURPOSE OF CONDUCTING FEEDING, BREEDING, AND MANAGEMENT EXPERIMENTS. HERETOFORE, THE SURPLUS MILK FROM THE DAIRY HERD HAS BEEN SOLD TO DISTRIBUTORS IN THE CITY OF BILLINGS, MONT. IT IS REPRESENTED BY THE DAIRY HUSBANDMAN IN CHARGE OF THE BUREAU OF DAIRY INDUSTRY INTERESTS AT THE FIELD STATION THAT ,BUTTERFAT SOLD LOCALLY (PRESUMABLY IN THE VICINITY OF HUNTLEY) IS WORTH 27 CENTS PER POUND, WHILE THE BILLINGS DISTRIBUTORS WILL PAY US 43.5 CENTS BECAUSE OF THE FUNCTIONING OF THE MILK CONTROL BOARD.' HE INDICATES FURTHER THAT HE IS IN RECEIPT OF "A LETTER FROM THE COMMISSIONER OF THE MONTANA MILK CONTROL BOARD, ADVISING THAT AS WE NOW SELL BUTTERFAT TO ONE OF THE DISTRIBUTORS OF THE BILLINGS AREA, IT WILL BE NECESSARY FOR THE GOVERNMENT TO OBTAIN A PRODUCER'S LICENSE COSTING $10.00 * * *.' HE ALSO POINTS OUT IN HIS CORRESPONDENCE THAT "WE COULD PROFITABLY SELL CREAM ON THE BILLINGS MARKET OR RATHER * * * CONTINUE TO SELL OUR CREAM IN BILLINGS AND THEREFORE SHOULD OBTAIN A LICENSE," BUT HE IS IN DOUBT AS TO WHETHER "GOVERNMENT REGULATIONS WILL PERMIT SUCH AN EXPENDITURE.'

SECTION 9 OF THE ACT ESTABLISHING THE MILK CONTROL BOARD AND EMPOWERING IT TO EXERCISE CONTROL OVER DAIRY INTERESTS IN MONTANA, PROVIDES THAT---

"ALL DEALERS IN ANY MARKET DESIGNATED BY THE BOARD SHALL KEEP SUCH RECORD AS THE BOARD DIRECTS. THE BOARD SHALL COLLECT FROM EACH LICENSED DEALER AN ANNUAL FEE NOT TO EXCEED $10 FOR EACH DEALER SUBDIVISION AS DEFINED ABOVE. THE BOARD SHALL ASSESS EACH DISTRIBUTOR AND/OR PRODUCER- DISTRIBUTOR ONE CENT (1 CENT) PER HUNDRED WEIGHT ON ALL FLUID MILK SOLD BY SAID DISTRIBUTOR AND/OR PRODUCER-DISTRIBUTOR. WHICH AMOUNT TO BE COLLECTED AT SUCH TIME AND IN SUCH MANNER AS SHALL BE DESIGNATED BY THE BOARD AND SAID ASSESSMENT TO BE USED ONLY AS IT BECOMES NECESSARY TO DEFRAY THE EXPENSES OF THE BOARD * * *.'

A "PRODUCER" IS DEFINED AS "ANY PERSON WHO PRODUCES MILK FOR FLUID CONSUMPTION WITHIN THE STATE, SELLING SAME AT WHOLESALE TO A DISTRIBUTOR.'

A "DEALER" IS DEFINED AS "ANY PRODUCER, DISTRIBUTOR, OR PRODUCER DISTRIBUTOR.'

THERE IS, THEREFORE, SEEMINGLY NO DOUBT AS TO THE STATUS OF THE BUREAU OF DAIRY INDUSTRY AS A PRODUCER OR DEALER IN MILK IN MONTANA AND THAT IT IS CONSEQUENTLY SUBJECT TO THE LICENSE FEE PRESCRIBED BY THE ACT IN QUESTION. THE COMMISSIONER OF THE MONTANA MILK CONTROL BOARD STATES THAT "IT IS OUR PERSONAL OPINION THAT ALL AGENCIES, REGARDLESS OF WHETHER THEY ARE STATE OR FEDERAL, SHOULD BE LICENSED UNDER THE MILK CONTROL BOARD WHEN THEY ARE OPERATING UNDER ANY OF THE DIVISIONS AS OUTLINED IN THE LAW ESTABLISHING THE MONTANA MILK CONTROL BOARD.' THERE SEEMS TO BE NO ESCAPE FROM THE CONCLUSION THAT THE FEDERAL GOVERNMENT IS LIABLE AS A PRODUCER- DEALER FOR THE PAYMENT IN QUESTION UNDER THE WELL RECOGNIZED RULE THAT WHERE EITHER THE STATE OR THE FEDERAL GOVERNMENT EXERCISES A PROPRIETARY OR NONGOVERNMENTAL FUNCTION, PARTICULARLY WHERE EITHER AGENCY ENTERS UPON THE FIELD OF BUSINESS COMPETITION, THE CONSTITUTIONAL PROHIBITION AGAINST EITHER GOVERNMENT TAXING THE OTHER DOES NOT APPLY.

THE QUESTION UPON WHICH THE DEPARTMENT REQUESTS YOUR ADVICE IS WHETHER THE APPROPRIATION FOR THE BUREAU OF DAIRY INDUSTRY IS AVAILABLE FOR THE PURPOSE OF PAYING THE LICENSE FEE IN QUESTION. FOR YOUR GUIDANCE IN CONNECTION WITH THIS MATTER, MAY WE REFER YOU TO THE ACT OF MAY 29, 1924 (U.S.C., TITLE 7, SECS. 401-404), ESTABLISHING THE BUREAU OF DAIRY INDUSTRY, AND TO THE APPROPRIATION ITEM FOR THE BUREAU IN PUBLIC, NO. 637, 74TH CONGRESS,"AN ACT MAKING APPROPRIATIONS FOR THE DEPARTMENT OF AGRICULTURE AND FOR THE FARM CREDIT ADMINISTRATION FOR THE FISCAL YEAR ENDING JUNE 30, 1937, AND FOR OTHER PURPOSES.' IT IS BELIEVED THAT, INASMUCH AS BY SUBSCRIBING TO THE LICENSE FEE IN QUESTION THE SURPLUS MILK CAN BE SOLD AT A SUBSTANTIAL PRICE ADVANTAGE TO THE GOVERNMENT, THERE IS AN OBLIGATION ON THE PART OF THIS DEPARTMENT TO SUBMIT THE MATTER FOR YOUR ADVICE, REMINDING YOU OF THE POSSIBILITY OF ALLOWING THE PAYMENT OF THE FEE IN QUESTION FROM THE ,GENERAL ADMINISTRATIVE EXPENSES" OR THE "DAIRY INVESTIGATIONS" ITEMS IN THE 1937 FISCAL YEAR APPROPRIATION FOR THE BUREAU, SUPRA. IT IS APPARENT THAT THE GOVERNMENT WILL SUFFER A MONETARY LOSS IF, UNDER THE APPROPRIATION IN QUESTION, THIS DEPARTMENT IS UNABLE TO SUBSCRIBE TO THE LICENSE FEE.

IF THE FOREGOING APPROPRIATION IS DEEMED UNAVAILABLE FOR THE PAYMENT OF THE FEE IN QUESTION, MAY WE ASK YOU TO CONSIDER THE POSSIBILITY OF DEFRAYING THE COST OF THE FEE FROM THE PROCEEDS RECEIVED FROM THE SALE OF THE MILK BEFORE SUCH PROCEEDS ARE DEPOSITED TO THE CREDIT OF MISCELLANEOUS RECEIPTS. IN THIS CONNECTION WE INVITE YOUR ATTENTION TO THE ACT OF JUNE 8, 1896, 29 STAT. 268, AS AMENDED BY THE ACT OF JUNE 10, 1921, 42 STAT. 24, RELATING TO THE PAYMENT OF EXPENSES INCIDENT TO THE SALE OF PUBLIC PROPERTY FROM THE PROCEEDS DERIVED FROM SUCH SALE.

A THOROUGH REVIEW OF THE DECISIONS EMANATING FROM YOUR OFFICE HAS NOT REVEALED A PRIOR RULING UPON A QUESTION OF THIS KIND, AS IT RELATES TO THE AVAILABILITY OF AN APPROPRIATION FOR THE PURPOSES SPECIFIED, AND THE DECISIONS YOU HAVE RENDERED UNDER THE STATUTES RELATING TO THE SALE OF GOVERNMENT PROPERTY ARE NOT SUFFICIENTLY IN POINT TO WARRANT OUR TAKING A DEFINITE STAND WITH RESPECT TO THE PAYMENT OF THE FEE FROM THE PROCEEDS.

THE RIGHT OF THE UNITED STATES IN ITS SOVEREIGN CAPACITY TO ACQUIRE, OWN, OPERATE, AND DISPOSE OF PROPERTY FREE FROM ANY BURDEN OF TAXATION BY A STATE OR POLITICAL SUBDIVISION THEREOF IS TOO WELL ESTABLISHED TO REQUIRE DISCUSSION. AS SAID BY THE COURT IN UNITED STATES V. CLALLAM COUNTY, WASHINGTON, 283 FED. 645, AT PAGE 649, AFFIRMED 263 U.S. 341---

* * * IN MCCULLOCH V. MARYLAND, 4 WHEAT. (17 U.S.) 316, 4 L.ED. 579, IN SUBSTANCE IT WAS HELD THAT NEITHER THE PROPERTY OF THE UNITED STATES, NOR ANY INSTRUMENTALITY IN CARRYING FORWARD ITS LAWFUL POWERS MAY BE TAXED BY A STATE, AND THIS RULE HAS NOT BEEN DEPARTED FROM. * * *

IT HAS BEEN HELD, LIKEWISE, THAT A STATE CANNOT IMPOSE A TAX IN THE NATURE OF A LICENSE OR OCCUPATIONAL TAX UPON THE BUSINESS OF AN AGENCY OR INSTRUMENT OF THE FEDERAL GOVERNMENT. CHOCTAW, OKLAHOMA AND GULF R.R. CO. V. HARRISON, 235 U.S. 292; ALASKA V. ANNETTE ISLAND PACKING COMPANY, 289 FED. 671; CALIFORNIA V. CENTRAL PACIFIC RY. CO., 127 U.S. 1. IN RAILROAD COMPANY V. PENISTON, 18 WALL. 5, IT WAS HELD THAT WHILE UNDER CERTAIN CONDITIONS THE PROPERTY OF AGENCIES OF THE FEDERAL GOVERNMENT MAY BE TAXED BY A STATE, THE TAX UPON THEIR OPERATIONS, BEING A DIRECT OBSTRUCTION TO THE EXERCISE OF FEDERAL POWERS, MAY NOT BE. CF. 14 COMP. GEN. 798.

IT WAS HELD IN PORT ANGELES WESTERN RY. CO. V. CLALLAM COUNTY, WASHINGTON, 36 FED./2D) 956, AFFIRMED 44 FED./2D) 28, THAT WHERE THE PROPERTY OF THE UNITED STATES IS TAKEN FROM ITS SOVEREIGN RELATION AND PLACED IN PRIVATE ENTERPRISE FOR GAIN, WITH THE AGREEMENT THAT IT SHALL BE ASSIGNED TO A PRIVATE CORPORATION FOR GAIN, THE IMMUNITY FROM TAX SO FAR AS THE INTEREST OF THE PRIVATE CORPORATION IS CONCERNED HAS NO APPLICATION, AND THIS APPEARS TO BE THE RULE ESTABLISHED BY THE DECISIONS. SUCH A SITUATION, HOWEVER, IS NOT PRESENT HERE. THE BUREAU OF DAIRY INDUSTRY OF THE DEPARTMENT OF AGRICULTURE IS AN INSTRUMENTALITY OF THE UNITED STATES ESTABLISHED BY ACT OF CONGRESS. ITS FUNCTIONS ARE WHOLLY PUBLIC IN CHARACTER, AND ITS OPERATIONS AND EXPERIMENTS ARE CONDUCTED FOR THE PUBLIC INTEREST. ALL OF ITS PROPERTY IS PUBLIC PROPERTY, AND FUNDS DERIVED FROM INCIDENTAL SALES OF THE MILK PRODUCTS HERE INVOLVED ARE PUBLIC FUNDS FOR DISPOSITION IN THE PUBLIC BEHALF ACCORDING TO THE REQUIREMENTS OF LAW. THERE IS NO ELEMENT OF PRIVATE GAIN IN ITS OPERATION AND NO REMOVAL FROM ITS SOVEREIGN RELATION MERELY BY REASON OF THE FACT THAT IN THE COURSE OF ITS CONDUCT THERE IS PRODUCED SURPLUS PROPERTY OF THE GOVERNMENT SUBJECT TO SALE. MOREOVER, THE CONGRESS HAS RECOGNIZED THAT DISPOSAL OF SURPLUS PROPERTY AND PRODUCTS IS NECESSARILY INCIDENTAL TO THE PROPER FUNCTIONING OF THE DEPARTMENT OF AGRICULTURE, FOR THE ACT OF MARCH 4, 1915, 38 STAT. 1114, SPECIFICALLY CONFERS UPON THE SECRETARY OF AGRICULTURE AUTHORITY TO SELL IN THE OPEN MARKET, OR TO EXCHANGE FOR OTHER LIVESTOCK, SUCH ANIMALS OR ANIMAL PRODUCTS AS CEASE TO BE NEEDED IN THE WORK OF THE DEPARTMENT. (SEE, ALSO, THE ACT OF AUG. 10, 1912, 37 STAT. 274.) SUCH MANNER OF DISPOSAL DOES NOT APPEAR TO BE AFFECTED BY THE ACT OF MAY 29, 1924, 43 STAT. 243, ESTABLISHING THE BUREAU OF DAIRYING--- SUCH ACT SPECIFICALLY AUTHORIZING THE SECRETARY OF AGRICULTURE TO TRANSFER TO THE BUREAU OF DAIRYING SUCH ACTIVITIES OF THE DEPARTMENT OF AGRICULTURE AS HE MAY DESIGNATE WHICH RELATE PRIMARILY TO THE DAIRY INDUSTRY.

THERE APPEARS NO ROOM FOR DOUBT THAT THE SALE OF THE PRODUCTS HERE UNDER CONSIDERATION IS NECESSARILY INCIDENTAL TO THE EXERCISE OF THE FEDERAL POWERS OF THE BUREAU OF DAIRYING. THERE IS, THEREFORE, NO LEGAL SANCTION FOR THE STATE OF MONTANA TO IMPOSE A LICENSE TAX ON THE BUREAU, OR TO IMPEDE OR OBSTRUCT ITS OPERATIONS IN ANY WAY. IT FOLLOWS THAT PUBLIC MONEYS ARE NOT AVAILABLE FOR THE PAYMENT OF SUCH A LICENSE TAX TO THE STATE OF MONTANA, AND THIS IS APPLICABLE AS WELL TO THE PROCEEDS OF THE SALE OF THE MILK PRODUCTS, WHICH ARE REQUIRED TO BE DEPOSITED INTO THE TREASURY AS MISCELLANEOUS RECEIPTS WITHOUT ANY ABATEMENT OR DEDUCTION. (SEE SECS. 3617 AND 1618, REV. STAT.)

THERE IS FOR CONSIDERATION HERE THE REQUIREMENT THAT WHERE SURPLUS PROPERTY OF THE UNITED STATES IS SOLD, SUCH SALE SHOULD BE AFTER ADVERTISING FOR BIDS, WITH THE ACCEPTANCE OF THE BEST PRICE OFFERED. WHILE THE ACTS CITED, SUPRA, AUTHORIZE THE SALE OF ANIMALS OR ANIMAL PRODUCTS "IN THE OPEN MARKET," IT WOULD APPEAR TO THE INTEREST OF THE UNITED STATES TO ADVERTISE FOR BIDS FOR THE PURCHASE OF THE SURPLUS OUTPUT OF MILK PRODUCTS OF THE STATION FOR THE FISCAL YEAR OR SUCH PORTION THEREOF AS MAY ADMINISTRATIVELY BE DETERMINED TO BE MOST ADVANTAGEOUS, AND TO ACCEPT THE BEST PRICE OBTAINABLE AS A RESULT OF SUCH ADVERTISEMENT.