B-72432, JANUARY 6, 1948, 27 COMP. GEN. 372

B-72432: Jan 6, 1948

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TAXES - STATE - INCOME - WITHHOLDING FROM SALARIES OF FEDERAL EMPLOYEES INASMUCH AS THE PROVISIONS OF OREGON INCOME TAX LAW REQUIRING EMPLOYERS TO DEDUCT AND RETAIN ONE PERCENT OF EMPLOYEES' SALARIES OR WAGES AND PAY THE AMOUNT WITHHELD TO THE STATE TAX COMMISSION HAVE THE EFFECT OF IMPOSING A DIRECT BURDEN UPON THE UNITED STATES. INSOFAR AS THE MATTER OF THE WITHHOLDING AND PAYMENT BY THE FEDERAL GOVERNMENT OF SUCH TAX IS CONCERNED. THE WITHHOLDING FEATURE OF SAID INCOME TAX LAW IS NOT FOR APPLICATION IN CASE OF PAYMENTS OF SALARY OR WAGES TO FEDERAL EMPLOYEES. AS FOLLOWS: THIS OFFICE IS IN RECEIPT OF THE FOLLOWING TELEGRAM FROM THE UNITED STATES MARSHAL FOR THE DISTRICT OF OREGON: " NEW OREGON STATE LAW EFFECTIVE JANUARY FIRST.

B-72432, JANUARY 6, 1948, 27 COMP. GEN. 372

TAXES - STATE - INCOME - WITHHOLDING FROM SALARIES OF FEDERAL EMPLOYEES INASMUCH AS THE PROVISIONS OF OREGON INCOME TAX LAW REQUIRING EMPLOYERS TO DEDUCT AND RETAIN ONE PERCENT OF EMPLOYEES' SALARIES OR WAGES AND PAY THE AMOUNT WITHHELD TO THE STATE TAX COMMISSION HAVE THE EFFECT OF IMPOSING A DIRECT BURDEN UPON THE UNITED STATES, INSOFAR AS THE MATTER OF THE WITHHOLDING AND PAYMENT BY THE FEDERAL GOVERNMENT OF SUCH TAX IS CONCERNED, THE WITHHOLDING FEATURE OF SAID INCOME TAX LAW IS NOT FOR APPLICATION IN CASE OF PAYMENTS OF SALARY OR WAGES TO FEDERAL EMPLOYEES.

COMPTROLLER GENERAL WARREN TO THE ATTORNEY GENERAL, JANUARY 6, 1948:

THERE HAS BEEN BROUGHT TO MY ATTENTION A LETTER DATED JANUARY 2, 1948, FROM YOUR ADMINISTRATIVE ASSISTANT TO THE DIVISION OF INVESTIGATION OF THIS OFFICE, AS FOLLOWS:

THIS OFFICE IS IN RECEIPT OF THE FOLLOWING TELEGRAM FROM THE UNITED STATES MARSHAL FOR THE DISTRICT OF OREGON:

" NEW OREGON STATE LAW EFFECTIVE JANUARY FIRST, 1948, REQUIRED ONE PERCENT STATE INCOME TAX DEDUCTION ON ALL PAYROLLS KINDLY INSTRUCT WHETHER THESE DEDUCTIONS SHOULD BE MADE ON FEDERAL PAYROLLS FOR BENEFIT OF THE STATE.'

A COPY OF THE LEGISLATION IS NOT AVAILABLE AT THIS TIME AND IT IS UNDERSTOOD THAT YOUR OFFICE IS ENDEAVORING TO SECURE A COPY. KINDLY ADVISE AS TO WHAT ACTION, IF ANY, SHOULD BE TAKEN IN RESPECT TO THE HANDLING OF PAYROLLS INVOLVING EMPLOYEES LOCATED IN THE STATE OF OREGON.

THE PROVISIONS OF THE OREGON INCOME TAX LAW HERE INVOLVED--- SECTION 110- 1620 (A), OREGON COMPILED LAWS ANNOTATED--- STIPULATE, SO FAR AS HERE MATERIAL, THAT:

EVERY EMPLOYER AT THE TIME OF THE PAYMENT OF WAGES, SALARY, BONUS OR OTHER EMOLUMENT TO ANY EMPLOYEE SHALL DEDUCT AND RETAIN THEREFROM AN AMOUNT EQUAL TO 1 PERCENT OF THE TOTAL AMOUNT OF SUCH WAGES, SALARY, BONUS OR OTHER EMOLUMENT COMPUTED WITHOUT DEDUCTION FOR ANY AMOUNT WITHHELD, AND SHALL, QUARTERLY, ON OR BEFORE THE THIRTIETH DAY OF APRIL, JULY, OCTOBER AND JANUARY PAY OVER TO THE ( STATE TAX) COMMISSION THE AMOUNT SO DEDUCTED AND RETAINED FROM WAGES, SALARY, BONUS OR OTHER EMOLUMENT PAID TO ANY EMPLOYEE DURING THE PRECEDING THREE MONTHS.

IN VIEW OF THE WELL SETTLED CONSTITUTIONAL PRINCIPLE WHICH PRECLUDES THE REGULATION OR CONTROL BY A STATE, OR POLITICAL SUBDIVISION THEREOF, OF THE UNITED STATES IN THE EXERCISE OF ITS GOVERNMENTAL FUNCTIONS (SEE MAYO, ET AL. V. UNITED STATES, 319 U.S. 441; JOHNSON V. MARYLAND, 254 U.S. 51; OHIO V. THOMAS, 173 U.S. 276), AND SINCE IT IS OBVIOUS THAT THE EFFECT OF THE PROVISIONS OF THE OREGON TAX LAW HERE INVOLVED, SO FAR AS THE MATTER OF THE WITHHOLDING AND PAYMENT BY THE FEDERAL GOVERNMENT OF THE TAX IN QUESTION IS CONCERNED, IS SUCH AS TO IMPOSE A DIRECT BURDEN UPON THE UNITED STATES, IT MUST BE CONCLUDED THAT THE WITHHOLDING FEATURE OF THE OREGON INCOME TAX LAW IS NOT FOR APPLICATION IN THE CASE OF PAYMENTS OF SALARY OR WAGES TO FEDERAL EMPLOYEES. CONSEQUENTLY, PAYMENT SHOULD BE MADE OF THE SALARY OR WAGES DUE TO EMPLOYEES OF YOUR DEPARTMENT WITHOUT THE DEDUCTION OF AN AMOUNT REPRESENTING THE OREGON INCOME TAX.