United States v. California State Board of Equalization

The California State Board of Equalization raises three issues in this appeal: (1) whether the district court erred in holding that the legal incidence of the California sales tax falls on the United States; (2) whether the district court incorrectly concluded that the imposition of the sales tax on United States’ leases invidiously discriminates against the United States and its lessors; and (3) whether certain other portions of the district court’s judgment are unsupported by the record. We affirm the district court’s decision that the California sales tax is unconstitutional as to leases of tangible personal property to the United States because the legal incidence of the sales tax falls on the United States. In light of this holding, we find it unnecessary to reach the discrimination issue. Certain portions of the district court’s judgment are unsupported by the record and are therefore vacated.

FACTS

Since August 1, 1965 the United States has leased data processing and other equipment from lessors in California. The State of California, through the State Board of Equalization (SBE), has imposed a sales tax on these transactions based on the gross rentals paid by the United…