United States v. California State Board of Equalization

The United States brought this action to recover sales and use taxes on leases of personal property executed by Defense Department contractors. The taxes were collected by the California State Board of Equalization between 1973 and 1976 from lessors who leased personalty to contractors of the United States; the lessors passed on the tax liability to the contractor-lessees. The contractors were reimbursed in turn by the Department of Defense for the tax payments under a contractual cost plus fixed fee arrangement.

The United States contends that the sales and use taxes could not constitutionally be imposed because the contractors in question were acting as agents of the United States in executing the leases involved, and as a result the legal incidence of the taxes fell upon the United States as their principal. The district court granted summary judgment to the United States. We must reverse on the authority of the recent decision of the United States Supreme Court in United States v. New Mexico, - U.S. -, 102 S.Ct. 1373 , 71 L.Ed.2d 580 (1982).

That case involved the constitutionality of the application of New Mexico’s sales, use, and gross receipts taxes to private entities…