United States v. Bishop, 412 U.S. 346

412 U.S. 346

Case details

Citation

412 U.S. 346

Country

United States

Jurisdiction

Federal

Court

Supreme Court of the United States

Vote

7-2

Dissent

As (Justice)

Majority

Marshall (Justice), joined by Burger (Chief Justice), Brennan (Justice), Stewart (Justice), White (Justice), Blackmon (Justice), Powell (Justice)

Dissent

Douglas (Justice)

p. 346

UNITED STATES v. BISHOP

CERTIORARI TO THE UNITED STATBS COURT OF APPEALS FOR THE NINTH CIRCUIT

No. 71-1698. Argued January 16, 1973-Decided Jilay 29, 1973

Respondent was convicted of viola ting 26 U. S. C. § 7206 ( 1), which makes it a felony when one " [ w] illfully makes and subscribes any return ... which he does not believe to be true and correct as to every material matter," after the District Court refused a lesser-included-offense jury charge under § 7207, which makes it a misdemeanor when one "willfully delivers or discloses" to the Internal Revenue Service any return or document "known by him to be fraudulent or to be false as to any material matter." The Court of Appeals reversed on the ground that "willfully" as used in § 7206 implied an evil motive and bad faith, but the same word as used in § 7207 required only a showing of unreasonable, capricious, or careless disregard for the truth. Held: The word "willfully" has the same meaning in §§ 7206 (1) and 7207, connoting the voluntary, intentional violation of a known legal duty, and the distinction between the statutes is found in the additional misconduct that is essential to the violation of the felony provision; hence, the District Court properly refused the requested lesser-included-offense instruction based on respondent's erroneous contention that the word "willfully" in the misdemeanor statute implied less scienter than the same word in the felony statute. Pp. 350-361.

455 F. 2d 612, reversed and remanded.

BLACKMUN, .T., delivered the opinion of the Comt, in whirh BURGER, C. ,J., and BRENNAN, STEWART, ·WHITE, lVIARSHALL, PowELI,, and REHKQUIST, JJ., joined. DouGr,As, J., filed a dissenting statement, post , p. 362.

Richard B. Stone argued the cause for the United States. On the brief were Solicitor General Griswold, Assistant Attorney General Crampton, Deputy Solicitor General Lacovara, Keith A. Jones, and John P. Burke.

J. Richard Johnston argued the cause for respondent.

p. 347

V:NITED STATES v. BISHOP 347

With him on the brief were Neil F. Hor ton and Robert H. Solomon.

MR. .JusTICJi, BLACKMUN delivered the opinion of the Court.

Chapter 75, subchapter A, of the Internal Revenue Code of 1954, as amended, 26 U. S. C. §§ 7201-7241, is concerned with tax crimes. Sections 7201-7207, inclusive, which in the aggregate relate to attempts to evade or defeat tax, to failures to act, and to fraud, all include the word "willfully" in their respective contexts. Specifically, § 7206 is a felony statute and reads:

"§ 7206. Fraud and false statements.

"Any person who~ " ( 1) Declaration under penalties of perjury.

"Willfully makes and subscribes any return, statement, or other document, which contains or is verified by a written declaration that it is ma.de under the penalties of perjury, and which he does not believe to be true and correct as to every material matter ..

"shall be guilty of a felony and, upon conviction thereof, shall be fined not more than $5,000, or imprisoned not more than 3 years, or both, together with the costs of prosecution."

Section 7207 is a misdemeanor statute ' and reads: "7207. Fraudulent returns, statements, or other documents.

Title 18 U. S. C. § 1 defines felony a.nd misdemeanor: "§ 1. Offenses classified. "Notwithstanding any Act of Congress to the contrary: "(l) Any offense punishable by death or imprisonment for a term exceeding one year is 11 felony. "(2) Any other offense is a misdemeanor."

p. 348

Opinion of the Court. 412 U.S.

"Any person who willfully delivers or discloses to the Secretary or his delegate any list, return, account, statement, or other document, known by him to be fraudulent or to be false as to any material matter, shall be fined not more than $1,000, or imprisoned not more than 1 year, or both."

This case presents the issue of the meaning of the critical word "willfully" as it is employed in these two successive statutes. Is its meaning the same in each, or is the willfulness specified by the misdemeanor statute, § 7207, of somewhat less degree than the felony willfulness specified by § 7206?

Respondent, Cecil J. Bishop, was convicted by a jury on all three counts of an indictment charging him with felony violations of § 7206 ( 1) with respect to his federal income tax returns for the calendar years 1963, 1964, and 1965. The Court of Appeals, holding that a lesser-included-offense instruction directed to the misdemeanor statute, § 7207, was improperly refused by the trial judge, reversed the judgment of the District Court and remanded the case for a new trial. 455 F. 2d 612 (CA9 1972). Since the meaning of "willfully," as used in the tax crime statutes, has divided the circuits,2 we granted certiorari. 409 U. S. 841 ( 1972).

Compare United States v. Vitiello , 363 F. 2d 240, 243 (CA3 1966) (§§ 7201 and 7203), and Haner v. United States , 315 F. 2d 792, 794 (CA5 1963) (§ 7203), where the Ninth Circuit analysis was rejeetcd, with United States v. Fahey , 411 F. 2d 1213 (CA9), cert. denied, 396 U. S. 957 (1969) (§ 7203); Martin v. United States , 317 F. 2d 753 (CA9 1963) (§ 7203); Abdul v. United States , 254 F. 2d 292 (CA9 1958) (§§ 2707 (b) and (c) of the 1939 Code and §§ 7202 and 7203 of the 1954 Code). See also Janko v. United States , 281 F. 2d 156, 166-167 (CAS 1960), rev'd on confes.•ion of error by the Solicitor General, 366 U.S. 716 (1961) (§§ 7201 and 7207); Lumetta v. United States , 362 F. 2d 644, 646 n. 3 (CA8 1966) (§§ 7201 and 7203) ; Escobar v. United States , 388 F. 2d 661 (CA5 1967) , cert denied, 390 U.S. 1024 (1968) (§§ 7206 (1) and 7207). Other inconsistencies in intnprcting th(' word ''willfully" have compounded the confusion. Sec n. 8, infra. Cf. United States v. Lachmann , 469 F. 2d 1043 (CAl 1972) (§§ 7201 and 7203).

p. 349

We conclude that it was proper and correct for the District Court to refuse the lesser-included-offense instruction. In our view, the word "willfully" has the same meaning in both statutes. Consequently, we reverse and remand so that the Court of Appeals may nov,r proceed to consider the additional issues that court found it unnecessary to reach.

Mr. Bishop is a lawyer who has practiced his profession in Sacramento, California, since 1951. During that period, he owned an interest in a walnut ranch he and his father operated. In 1960 his secretary, Louise, married his father. The father died, and thereafter respondent's stepmother managed the ranch.

Respondent periodically sent checks to Louise. These were used to run the ranch, to pay principal on loans, and to make improvements.

Louise maintained a record of ranch expenditures and submitted an itemized list of these disbursements to respondent at the end of each calendar year. In his 1963 return respondent asserted as business deductions all amounts paid to Louise and, in addition, all the expenses Louise listed. This necessarily resulted in a double deduction for all ranch expenditures in 1963. Moreover, some of these expenditures were for repayment of loans and for other personal items that did not qualify as income tax deductions. In his 1964 and 1965 returns respondent similarly included nondeductible amounts among the ranch figures that were deducted.

The aggregate amount of improper deductions taken by respondent for the three taxable years exceeded p. 350$45,000. He enjoyed aggregate gross income for those years of about $70,000.

The incorrectness of the returns as filed for the three years was not disputed at trial. Transcript of Trial 869-872, 1148. Neither is it disputed here. Brief for Respondent 4.

III

Section 7206 ( 1), the felony statute, is violated when one " [ w] illfully makes and subscribes any return," under penalties of perjury, "which he does not believe to be true and correct as to every material matter." Respondent based his defense at trial on the ground that he was not aware of the double deductions asserted in 1963 or of the improper deductions taken in the three taxable years. He claimed that his law office secretary prepared the return schedules from his records and from the information furnished by Louise; he merely failed to check the returns for accuracy.

Respondent requested lesser-included-offense instructions based on the misdemeanor statute, § 7207. This tax misdemeanor is committed by one "who willfully delivers or discloses" to the Internal Revenue Service any return or document "known by him to be fraudulent or to be false as to any material matter." Respondent argued that the word "willfully" in the misdemeanor statute should be construed to require less scienter than the same word in the felony statute. App. 28. With the state of respondent's guilty knowledge in dispute. his proposed instructions would have allowed the jury to choose between a misdemeanor based on caprice or careless disregard and a felony requiring evil purpose. The trial judge declined to give the request~d instructions and, instead, gave an instruction only on the felony, requiring a finding by the jury that the defendant intended p. 351"with evil motive or bad purpose either to disobey or to disregard the law." App. 24.

After the guilty verdict on all counts was returned, respondent was sentenced to two years' imprisonment on each count, the sentences to run concurrently. The court, however, suspended all but 90 days of each sentence and placed respondent on probation for five years on condition that he pay a fine of $5,000. App. 31.

The Court of Appeals relied upon and followed, 455 F. 2d, at 614, a series of its own cases,3 particularly Abdul v. United States , 254 F. 2d 292 (1958), enunciating the proposition that the word "willfully" has a meaning in tax felony statutes that is more stringent than its meaning in tax misdemeanor statutes.• Our examination of these Ninth Circuit precedents in the light of this Court's decisions leads us to conclude that the Court of Appeals' opinion cannot be sustained by this asserted distinction between § 7206 ( 1) and § 7207.

A. The Ninth Circuit rule appears to have been evolved from language in this Court's opinion in Spies v. United States , 317 U. S. 492 ( 1943). In Spies the defendant requested an instruction to the effect that an affirmative act was necessary to constitute a willful attempt to evade or defeat a tax, within the meaning of § 145 (b) of the Revenue Act of 19:36. 49 Stat. 1703. The trial court

"United States v. Haseltine , 419 F. 2d 579, 581 (1970) (§§ i201 and 7203); United States v. Fahey, n. 2, supra; Eustis v. United States , 409 F. 2d 228 (1969) (§ 7203); Edwards v. United States , 375 F. 2d 862 (1967) (§§ 7201, 7203, and 7206 (2)); Martin v. United States, n. 2, supra; Abdul Y. United States, n. 2, supra.

4 One possible result of this distinction, of rourse, is that thr Government's burden in a misdemeanor case could be less than in a felony case.

p. 352

01linion of the Court 412 U.S.

refused the request. The Second Circuit affirmed. This Court reversed. \Ve were concerned in Spies \vith a felony statute, § 145 (b), applying to one "who willfully attempts in any manner to evade or defeat any tax," and with a companion misdemeanor statute,§ 145 (a), applying to one who "willfully fails to pay such tax, make such return, keep such records, or supply such information, at the time or times required by law or regulations." These statutes were the predecessors of the current §§ 7201 and 7203, respectively, of the 1954 Code. In distinguishing between the two offenses, the Court said:

"The difference between willful failure to pay a tax when due, which is made a misdemeanor, and willful attempt to defeat and evade one, which is made a felony, is not easy to detect or define. Both must be willful, and willful, as we have said. is a word of many meanings, its construction often being influenced by its context. United States v. Murdock , 290 U. S. 389. It may well mean something more as applied to nonpayment of a tax than when applied to failure to make a return. Mere voluntary and purposeful, as distinguished from accidental, omission to make a timely return might meet the test of willfulness. But in view of our traditio11al aversion to imprisonment for debt, we would not without the clearest manifestation of Congressional intent assume that mere knowing and intentional default in payment of a tax, where there had been no willful failure to disclose the liability, is intended to constitute a criminal offense of any degree. We would expect willfulness in such a case to include some element of evil motive and want of justification in view of all the financial circumstances of the taxpayer.

"Had § 145 (a) not included wi1lful failure to pay a tax, it would have defined as misdemeanors p. 353generally a failure to observe statutory duties to make timely returns, keep records, or supply information~ duties imposed to facilitate administration of the Act even if, because of insufficient net income, there were no duty to pay a tax. It would then be a permissible and perhaps a.n appropriate construction of § 145 (b) that it made felonies of the same willful omissions when there was the added element of duty to pay a tax. The definition of such non-payment as a misdemeanor, we think, argues strongly against such an interpretation." 317 U. S., at 497-498.

In Abdul the court considered an appeal by a taxpayer convicted of tax misdemeanors (§ 2707 (b) of the 1939 Code and § 7203 of the 1954 Code) based on failure to file but acquitted of tax felonies ( § 2707 ( c) of the 1939 Code and § 7202 of the 1954 Code) based on failure to account for and pay withholding taxes. The defense was inability to pay. The trial judge instructed the jury that the term "wilful" in the misdemeanor counts meant, among other things, "capriciously or with a careless disregard whether one has the right so to act," whereas the same word in the felony counts meant "with knowledge of one's obligation to pay the taxes due and with intent to defraud the Government of that ta.x by any affirmative conduct." 254 F. 2d, at 294. Relying on Spies, the Court of Appeals approved these instructions and concluded that

"the word 'wilful' as used in the misdrmeanor statute means something less when applied to a failure to make a return than as applied to a felony non-payment of a tax. This being true, then the words used in the instruction defining 'wilful' as relates to a misdemeanor adequately and clearly point up that difference." Ibid.

p. 354

Because of an error in the cross-examination of Abdul, his conviction was reversed. On retrial, he was again convicted. He appealed, and the judgment was affirmed. Abdul v. United States , 278 F. 2d 234 (CA9 1960). When Abdul sought certiorari, the Solicitor General conceded that the sentence under one of the counts could not stand and undertook to say that the Government would present to the District Court a motion for correction of the sentence. Certiorari, accordingly, was denied. Two Justices would have granted the writ to review the correctness of the charge "regarding the requirement of willfulness." 364 U. S. 832 (1960).

In the present case the Court of Appeals continued this Abdul distinction between willfulness in tax misdemeanor charges and willfulness in tax felony charges. Section 7207, it was said, requires only a showing of "unreasonable, capricious, or careless disregard for the truth or falsity of income tax returns filed," whereas § 7206 (1) "requires proof of an evil motive and bad faith." 455 F. 2d, at 615. The level of willfulness, thus, would create a disputed factual element that made appropriate a lesser-included-offense instruction.

B. The decisions of this Court do not support the holding in Abdul, and implicitly they reject the approach taken by the Court of Appeals. In Spies, the Court speculated, 317 U. S., at 495-498, that Congress could have distinguished between the regulatory aspects of the tax system, which call for compliance regardless of financial status, and the revenue-collecting aspects, which may place demands on a taxpayer he cannot meet. Since the antecedent of § 7203 (as does that section itself today) punished both failure to file and failure to pay as misdemeanors, the Court concluded that Congress had not drawn the line between felonies and misdemeanors on the basis of distinctions between the system's regulatory aspects and its revenue-collecting aspects. The reliance p. 355in Abdul on that hypothetical statutory scheme, discussed by this Court in Spies but found not in line with what Congress had actually done, was misplaced. Utilizing the unsupported Abdul distinction as a foundation, the Court of Appeals constructed the further general distinction between tax felonies and tax misdemeanors, a distinction also inconsistent with prior decisions of this Court.

In Berra v. United States , 351 U. S. 131 ( 1956), a defendant was convicted of violating the antecedent of § 7201, namely, § 145 (b) of the 1939 Code, a felony statute identical, for present purposes, with the section of the same number in the Revenue Act of 1936 at issue in Spies. The defendant claimed that he was entitled to a lesser-included-offense instruction based on § 3616 (a) of the 1939 Code, the antecedent of § 7207. The Court rejected this contention, concluding that the two sections of the 1939 Code then "covered precisely the same ground." 351 U. S., at 134. Implicit in this was the conclusion that the level of intent required for tax misdemeanors was not automatically lower than the level of intent required for tax felonies.

Although the misdemeanor statute, § 3616 (a), proffered by the defendant i11 Berra did not contain the word "willfully," the Berra facts were presented to the Court again in Sansone v. United States , 380 U.S. 343 (1965), when the misdemeanor statutes there in issue, §§ 7207 and 7203 of the 1954 Code, both contained the word "willfully."" In Sansone the Court rejected the argu-

5 The applicability of § 3616 (a) of the 1939 Code to income tax returns was not contested in Berra v. United States , 351 U. S. 131, 133 (19.56), but the Court soon held that that statute "did not apply to evasion of the income tax." Achilli v. United States, 35;~ U. S. 373, 379 (1957). In Sansone, however, statutory revisions effected by the enactment of the 1954 Code were held to make § 7207 applicable to income tax violations. Sansone v. United States , 380 U. S. 343, 347-349 (1965).

p. 356

356 OCTOBER TER~l, 1972

ment that a set of facts could exist that would satisfy the willfulness element in the § 7207 misdemeanor but not in the § 7201 felony:

"Given petitioner's material misstatement \vhich resulted in a tax deficiency, if, as the jury obviously found, petitioner's act was willful in the sense that he kne,v that he should have reported more income than he did for the year 1957, he was guilty of violating both §§ 7201 and 7207. If his action was not willful, he was guilty of violating neither." 380 U. S., at 353. The same analysis was applied to the requested lesser-included-offense instruction for§ 7203. Id., at 352. The clear implication of the decision in San.sone is that the word "willfully" possesses the same meaning in §§ 7201, 7203, and 7207. Sansone thus foreclosed the argument that the word "willfully" was to be given one meaning in the tax felony statutes and another meaning in the tax misdemeanor statutes.

The thesis relied upon by the Court of Appeals, therefore, was incorrect.

It would be possible, of course, that the word "willfully" was intended by Congress to have a meaning in § 7206 ( 1) different from its meaning in § 7207, and we turn now to that possibility.

We continue to recognize that context is important in the quest for the word's meaning. See United States v. Murdock , 290 U. S. 389, 394-395 (1933). Here, as in Spies, the "legislative history of the section [s] contains nothing helpful on the question here at issue, and we must find the answer from the [sections themselves] and [their] context in the revenue laws."6 317 U. S., p. 357at 495. We consider first, then, the sections themselves.

See H. R. Rep. No. 1337, 83d Cong., 2d Sess., A425 (1954); S. Rep. No. 1622, 83d Cong., 2d Sess., 602-603 ( 1954). The predecessor to § 7206 (1) was § 3809 (a) of the 1939 Code. The antecedent to § 7207 was, as we have noted above, § 3616 (a) of the 1939 Code. See Sansone , 380 U. S., at 347.

A. Respondent argues that both §§ 7206 (1) and 7207 apply to a fraudulent "return" and cover the same ground if the word "willfully" has the same meaning in both sections. Since "it would be unusual and we would not readily assume that Congress by the felony ... meant no more than the same derelictions it had just defined ... as a misdemeanor," 317 U. S., at 497, respondent concludes that Congress must have intended to require a more willful violation for the felony than for the misdemeanor.

The critical difficulty for respondent is that the two sections have substantially different express terms. The most obvious difference is that § 7206 ( 1) applies only if the document "contains or is verified by a written declaration that it is made under the penalties of perjury." No equivalent requirement is present in § 7207. Respondent recognizes this but then relies on the presence of perjury declarations on all federal income tax returns, a fact that effectively equalizes the sections where a federal tax return is at issue. See 26 U. S. C. § 6065 (a).7

This approach, however, is not persuasive for two reasons. First, the Secretary or his delegate has the power under § 6065 (a) to provide that no perjury declaration is required. If he does so provide, then § 7207 p. 358358 OCTOBER TER-11, 1972

"§ 6065. Verification of returns. " (a) Penalties of perjury. "Except as otherwise provided by the Secretary or his delegate, any return, declaration, statement, or other document required to be made under any provision of the internal revenue laws or regulation~ shall contain or be verified by a written declaration that it is made under the penalties of perjury." See also Treas. Reg. § 1.6065-1 (1972).

immediately becomes operative in the area theretofore covered by § 7206 ( 1). Second, the term "return" is not necessarily limited to a federal income tax return. A state or other nonfederal return could be intended and might not contain a perjury warning. If this type of return were submitted in support of a federal return, or in the course of a tax audit, § 7207 could apply even if § 7206 ( 1) could not.

There are other distinctions. The felony applies to a document that a taxpayer "[w]illfully makes and subscribes . . . and which he does not believe to be true and correct as to every material matter," whereas the misdemeanor applies to a document that a taxpayer "willfully delivers or discloses to the Secretary or his delegate . . . known by him . . . to be false as to any material matter." In the felony, then, the taxpayer must verify the return or document in writing, and he is liable if he does not affirmatively believe that the material statements are true. For the misdemeanor, however, a document prepared by another could give rise to liability on the part of the taxpayer if he delivered or disclosed it to the Service; additional protection is given to the taxpayer in this situation because the document must be known by him to be fraudulent or to be false.

These differences in the respective applications of §§ 7206 (1) and 7207 provide solid evidence that Congress distinguished the statutes in ways that do not turn on the meaning of the word "willfully." Judge Hastie, in analyzing this Court's holding in Spies, appropriately described this distinction as follows:

"Hmvever, this distinction is found in the additional misconduct which is essential to the violation of the felony statute . . . and not in the quality p. 359of willfulness which characterizes the wrongdoing." United States v. Vitiello , 363 F. 2d 240, 243 (CA3 1966). Thus the word "willfully" may have a uniform meaning in the several statutes without rendering any one of them surplusage. We next turn to context.

B. The hierarchy of tax offenses set forth in §§ 7201-7207, inclusive, utilizes the mental state of the offender as a guide in establishing the penalty. Section 7201, relating to attempts to evade or defeat tax, has been described and recognized by the Court as the "climax of this variety of sanctions" and as the "capstone of a system of sanctions which singly or in combination were calculated to induce prompt and forthright fulfillment of every duty under the income tax law and to provide a penalty suitable to every degree of delinquency." Spies , 317 U. S., at 497; Sansone , 380 U. S., at 350-351. The actor's mental state is described both by the requirement that acts be done "willfully" and by the designation of certain express elements of the offenses. In § 7201, for example, the Court has held that, by requiring an attempt to evade, "Congress intended some willful commission in addition to the willful omissions that make up the list of misdemeanors." Spies , 317 U. S., at 499. Similarly, in § 7207, the Government must show that the document was known by the taxpayer to be fraudulent or to be false as to a material matter.

All these offenses, except two subsections of § 7206, viz., subsections (3) and ( 4), require that acts be done "willfully." Although the described states of mind might be included in the normal meaning of the word "willfully," the presence of both an express designation and the simultaneous requirement that a violation be committed "willfully" is strong evidence that Congress used p. 360the word "willfully" to describe a constant rather than a variable in the tax penalty formula.8

The Court, in fact, has recognized that the word "willfully" in these statutes generally connotes a voluntary, intentional violation of a known legal duty. It has formulated the requirement of willfulness as "bad faith or evil intent," Murdock , 290 U.S., at 398, or "evil motive and want of justification in view of all the financial circumstances of the taxpayer," Spies , 317 U. S., at 498, or knowledge that the taxpayer "should have reported more income than he did." Sansone , 380 U. S., at 353. See James v. United States , 366 U. S. 213, 221 (1961); McCarthy v. United States, 394 U. S. 459, 471 (1969).

This longstanding interpretation of the purpose of the recurring word "willfully" promotes coherence in the group of tax crimes. In our complex tax system, uncertainty often arises even among taxpayers who earnestly wish to follow the law. The Court has said, "It is not the purpose of the law to penalize frank dif-fere!1ce of opinion or innocent errors made despite the

8 Semantic confusion sometimes has been created when courts disruss the express requirement of an "attempt to evade" in § 7201 as if it were implicit in the word "willfully" in that statute. This type of analysis produces language suggesting that "willfully" in § 7201 has a diffnent meaning from the same term in § 7203. See United States v. Ming , 466 F. 2d 1000, 1004 (CA7), cert. denied, 409 U. S. 915 (1972) (§§ 7201 and 7203); United States v. Matosky , 421 F. 2d 410 (CA7), cert. denied, 398 U. S. 904 (1970) (§ 7203); United States v. Haseltine , 419 F. 2d, at 581 ; Edwards v. United States , 37.5 F. 2d, at 867; United States v. Schipani , 362 F. 2d 825, 831 (CA2) , cert. denied, 385 U.S. 934 (1966). This Court may be somewhat responsible for this imprecision because r,. similar an:dysis was rmployed in Spies v. United Sta.tes, 317 U. S 492, 497-499 (1943). Greater clarity might well rrsult from an analysis that distin~nishes the express clements, such a.~ an "attempt to evade," prescribed by § 7201, from t.he uniform requirement of willfulness.

p. 361

exercise of reasonable care." Spies , 317 U. S., at 496. Degrees of negligence give rise in the tax system to civil penalties. The requirement of an offense committed "willfully" is not met, therefore, if a taxpayer has relied in good faith on a prior decision of this Court. James v. United States , 366 U. S., at 221- 222. Cf. Lambert v. California , 355 U. S. 225 (1957). The Court's consistent interpretation of the word "willfully" to require an element of mens rea implements the pervasive int~nt of Congress to construct penalties that separate the purposeful tax violator from the well-meaning, but easily confused, mass of taxpayers.

Until Congress speaks otherwise, we therefore shall continue to require, in both tax felonies and tax misdemeanors that must be done "willfully," the bad purpose or evil motive described in Murdock, supra. We hold, consequently, that the word "willfully" has the same meaning in § 7207 that it has in § 7206 ( 1). Since the only issue in dispute in this case centered on willfulness, it follo,vs that a conviction of the misdemeanor would clearly support a conviction for the felony.9 Under these circumstances a lesser-included-offense instruction was not required or proper, for in the federal system it is not the function of the jury to set the penalty. Berra v. United States , 351 U. S., at 134-135.

The Government has argued that the misdemeanor of § 7207 could never be a lesser included offense in § 7206 (l) because the misdemeanor requires that the actor have knowledge of the falsity. This is said to create an additional element in the misdemeanor, not present in the felony, so the misdemeanor is not "netessarily included" in the felonY, within the meaning of Fed. Rule Crim. Proc. 31 (c). Our conclusfon that the word '·willfully" has tlH· same meaning in both statutes makes it unnecessary to reach thiR contention.

p. 362

Statement of DOUGLAS, J. 412 U.S.

The judgment of the Court of Appeals is reversed, and the case is remanded for further proceedings.

It is so ordered.

MR. JusTICE DouGLAS would affirm the judgment of the Court of Appeals for the Ninth Circuit on the opinion written for that court by Judge Powell. 455 F. 2d 612.

p. 363

Syllabus

UNITED STATES v. STATE TAX COMMISSION

OF MISSISSIPPI ET AL.

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF MISSISSIPPI

No. 72-350. Argued :\farrh 19, 1973-Decidcd June 4, 1973

The Unitrd States brought this action contesting the validity of appellee Tax Commission's regulation requiring out-of-state liquor distillers and suppliers to collect and remit to the Co=ission a wholesale markup on liquor sold to military officers' clubs and other nonappropriated fund activities located on bases within Mississippi, over two of which thr United States exercises exclusive jurisdiction, and the remaining two of which concurrent jurisdiction. Relying on the Twenty-first Amendment, the District Court upheld the regulation. II eld:

1. The Twenty-first Amendment does not empower a State to tax or otherwise regulate the importation of distilled spirits into a territory over which the United States exercises exclusive jurisdiction, Collins v. Yosemite Park & Curry Co., 304 U. S. 518, regardless of whether some of the liquor may have been consumed off base. Pp. 369-378.

2. Whether the markup can be viewed as a sales tax to whose imposition in the context of the two exclusive-jurisdiction bases the United States has consented under the Buck Act, and whether, in any event, the markup unconstitutionally taxes federal instrumentalities, and violates the Supremacy Clause as conflicting with federal procurement regulations and policy, are issues that the District Court did not reach and should consider initially on remand. Pp. 378-381.

340 F. Supp. 903, vacated and remanded.

MARSHALL, J., delivered the opinion of the Court, in which BURGER, C. J., and BRENNAN, STEWART, WHITE, BLACKMON, and PowELL, JJ., joined. DouGLAS, J ., filed a dissenting opinion, in which REHNQUIS'l', J., joined, post , p. 381.

Jewell S. Lafontant argued the cause for the United States. On the brief were Solicitor General Griswold, p. 364364 OCTOBER TERJVI, 1972

Assistant Attorney General Wood, Mark L. Evans, Robert E. Kopp, and Anthony J. Steinmeyer.

Robert L. Wright argued the cause for appellees. With him on the brief ,vas Guy N. Rogers, Assistant Attorney General of Mississippi.

Mr. JusTICE MARSHALL delivered the oprn10n of the Court.

In this case we are called upon to review the judgment of the District Court for the Southern District of Mississippi that the State of Mississippi may require out-of-state liquor distillers and suppliers to collect and remit to the State a wholesale markup on liquor sold to officers' clubs, ship's stores, and post exchanges located on various military bases over which the United States exercises either exclusive jurisdiction or jurisdiction concurrent with the State.

Prior to 1966, the State of Mississippi prohibited the sale or possession of alcoholic beverages within its borders. In that year, Mississippi passed a local option alcoholic beverage control law subject to the requirement that the State Tax Commission be the sole importer and wholesaler of alcoholic beverages distributed within the State.1 The Tax Commission was given exclusive authority to act as wholesale distributor in the sale of alcoholic beverages to licensed retailers within the State "including, at the discretion of the Commission, any retail distributors operating within any military post ... within the boundaries of the State, ... exercising such control over the distribution of alcoholic beverages as [seems] right and proper in keeping with the provisions and purposes of this act."" In conjunction with these transactions with retailers, the Commission was directed to

Miss. Code Ann. § 10265- 01 et seq. (Supp. 1972).

Id., § 10265-18 (c).

p. 365

UNITED STATES v. MISSISSIPPI TAX COMM'K 365

"add to the cost of all alcoholic beverages such ... markups as in its discretion will be adequate to cover the cost of operation of the State wholesale liquor business, yield a reasonable profit, and be competitive with liquor prices in neighboring states." a Under the authority granted to it by the Act, the Tax Commission promulgated Regulation 25 which gives military post exchanges, ship's stores, and officers' clubs the option of purchasing liquor either from the Commission or directly from the distiller. However, insofar as purchases are made directly from the distillers by such military facilities, the regulation requires the distiller to collect and remit to the Tax Commission the latter's "usual wholesale markup." During the period involved in this case, the Tax Commission's wholesale markup was 17% on distilled spirits and 20% on wine.

Four United States military bases are located in the State of Mississippi-Keesler Air Force Base, the Naval Construction Battalion Center, Columbus Air Force Base, and Meridian Naval Air Station. Prior to 1966, the officers' clubs, the post exchanges, and the ship's stores-

• Id., § 10265-106. • The Regulation, which was originally numbered 22, reads as follows:

"Post exchanges, ship stores, and officers' clubs located on military reservations and operated by military personnel (including those operated by the National Guard) shall have the option of ordering alcoholic beverages direct from the distiller or from the Alcoholic Beverage Control Division of the State Tax Commission. In the event an order is placed by such organization directly with a distiller, a copy of such order shall be immediately mailed to the Alcoholic Beverage Control Division of the State Tax Commission.

"All orders of such organizations shall bear the usual wholesale markup in price but shall be exempt from all state taxes. The price of such beverages shall be paid by such organizations directly to the distiller, which shall in turn remit the wholesale markup to the Alcoholic Beverage Control Division of the State Tax Commission monthly covering shipments made for the previous month."

p. 366

which are run with funds derived from operations rather than from funds appropriated by the United States-on these four bases had purchased liquor from distillers and suppliers located outside the State of Mississippi. Following the passage of the Mississippi local option law, these nonappropriated fund activities elected to continue the practice of purchasing liquor supplies outside the State rather than to purchase liquor from the Commission. Efforts were made by military authorities to convince the Commission not to collect the markup on out-of-state liquor purchases by nonappropriated fund activities, but these efforts failed, and the Commission compelled out-of-state distillers and suppliers to collect and remit the markup on military sales under threat of criminal prosecution and of delisting, that is, withdrawal of the privilege of selling to the Commission for retailing within Mississippi.5 The military authorities sought to pay the markup into an escrow fund pending judicial determination of the legality of the markup as applied to military purchases. But the Commission refused to accept such an arrangement, and in order to obtain liquor supplies the nonappropriated fund activities have had to pay the markup to the distillers and suppliers, albeit under protest.6

In November 1969, the United States brought this action seeking declaratory and injunctive relief against the continued enforcement of Regulation 25, plus a judgment in the total amount paid to the Commission, through the suppliers, since the imposition of the markup on military purchases. The complaint alleged that the United States has exclusive jurisdiction over Keesler Air Force Base and the Naval Construction Battalion Center, and that Mississippi and the United States exercise p. 367concurrent jurisdiction over Columbus Air Force Base and Meridian Naval Air Station. The complaint contended that the Regulation was invalid because it constituted an attempt by the State to legislate with respect to military facilities and territory over which the Congress has exclusive legislative authority;7 to impose a tax on federal instrumentalities and thereby infringe upon the Federal Government's immunity from state taxation;8 and to interfere with federal procurement regulations and policy established by the Secretary of Defense pursuant to authority granted to him by Congress.9 The complaint also asked that a three-judge court be convened.

See Stipulation of Facts (hereinafter Stipulation) App. 36-38.

Out-of-state suppliers had been paid $648,421.92 under protest for such markups by July 31, 1971.

On cross-motions for summary judgment, the District Court ruled in favor of the Commission, upholding the validity of the challenged Regulation. 340 F. Supp. 903 (SD Miss. 1972). The District Court agreed that the United States had exclusive jurisdiction over two of the four bases and concurrent jurisdiction over the remaining two. But it concluded that Congress' constitutional powers over the military forces and over territory belonging to the United States "are diminished by the express prohibition of the XXI Amendment as to all packaged liquor transactions which (I) are made on exclusively federal enclaves but without restriction upon use and consumption of such liquors outside the base, or (2) take place on military installations over which the state and federal government exercise concurrent jurisdiction." Id., at 904. In light of this conclusion the District Court found it unnecessary to consider the import of the procurement regulations issued by the Secretary of Defense. Nor did it discuss the contention that the markup p. 368constituted an impermissible tax upon federal instrumentalities. On appeal by the United States, we noted probable jurisdiction, 409 U. S. 1005 (1972).10° For the reasons which follow, we now hold that the District Court erred in concluding that the Twenty-first Amendment provides the State v,:ith sufficient authority over liquor transactions to support the application of the Regulation to the two bases over which the United States exercises exclusive jurii-:diction,11 and we vacate and remand the case to the District Court for consideration of further arguments, relevant to the nonappropriated fund activities on all four bases, that it did not reach.

See U. S. Const., Art. I , § 8, els. 14 and 17, Art. IV, § 3.

See, e. g., M'Culloch v. Maryland , 4 Wheat. 316 (1819).

See 32 CFR §261.4 (c).

See Paul v. United States , 371 U. S. 245, 249-250 (1963).

In a special concurring opinion, .Judge Cox added that recoupment of the sums paid under the markup was also barred because, in his view, the payments had been voluntarily made by the nonappropriated fund activitie~. 340 F. Supp., at. 909. It is true that where voluntary payment is knowingly made pursuant to an illegal demand, rerovery of that payment may be denied. S<'e, e. g., United States v. New York & Cuba l'rfail 8. S. Co., 200 U. S. 488, 493-494 (1906); Little v. Bowers , 134 U. S. 547, 554 (1890): Railroad Co. v. Commissioners , 98 U. S. 541, 543-544 (1879). But no such voluntary payments itre involved here. The Tax Commission refused to accept an escrow arrangement and it made clear to the out-of-state suppliers that severe sanctions would be applied to anyone who failed to charge the markup and to remit the rernlting funds to it. Thus, the Tax Commission gave the nonappropriated fund activities no choice except to pay the markup-either to itself or to the out-of-state suppliers-in order to obtain liquor supplies or else to cease dispensing alcoholic beverages altogether-that is, to discontinue an entire line of business. Obviously. this was no choice at all. The payments of the markup were obtained only by coercion : they were paid under protest; and thus they hardly ran be said to have been volnntary. See, e. g., Ward v. Board of County Comm'rs of Love County , 253 U.S. 17, 23 (1920); Atchison , T. & S. F. R. Co. v. O'Connor , 223 U. S. 280, 286-287 (1912); Oceanic Steam Navigation Co. v. Stranahan , 214 U. S. 320, 329 (1909); Swift Co. v. United States , 111 U.S. 22, 28-29 (1884).

p. 369

"{TNITED STATES v.:VIISSISSIPPI TAX CO.:.\1:M'N 369

3Ga Opinion of 1.he Court

A. \Vith respect to the two bases over which it claims exclusive jurisdiction, Keesler Air Force Base and

the

Naval Construction Battalion Center, the Government places principal reliance upon Art. I,

§ 8, cl. 17, of the

Co11stitution. That clause empowers Congress to "exercise exclusive Legislation . . . over all Places purchased by the Consent of the Legislature of the State in which the Sa.me shall be, for the Erection of Forts, Magazines, Arsenals, dock-Yards, and other needful Buildings."

In Pacific Coast Dairy, Inc. v. Dept. of Agriculture, 318 F. S. 285 ( 1943), the Court considered that clause sufficient to render ineffective an attempt by the State of California to fix the prices at which California milk producers could sell milk to military authoritiesat Moffett Field, over which the l'nited States exercised exclusive jurisdiction.

"\Yheu the federal goYernment acquired the tract l upon which l\Ioffett Field was locatedJ. local law not inconsistent with federal policy remained in force until altered by national legislation. The state statute involved was adopted long after the transfer of sovereignty and was without force in the enclave. It follows that contracts to sell and sales consummated within the enclave cannot be regulated by the California law. To hold otherwise would be to affirm that California may ignore the Constitutional provision that 'This Constitution, and the laws of the United States which shall be made in Pursuance thereof; . . . shall be the supreme Law of the Land; . . .' It would be a denial of the federal power 'to exercise exclusive Legislation.'

As respects such federal territory Congress has the p. 370combined powers of a. general and a state government." Id., at 294 (footnotes omitted).

The view of Art. I, § 8, cl. 17, expressed in Pacific Coast Dairy was reaffirmed in Paul v. United States , 371 U. S. 245, 263-270 (1963). There the Court was confronted with another attempt by California to enforce minimum wholesale price regulations on sales of milk to the United States at three other military installations located within the State. A portion of the milk was purchased-as are the liquor supplies here at issue-with nonappropriated funds for use at officers' clubs and for resale at post exchanges. As to these nonappropriated fund purchases, the Court found it necessary to remand the case to determine whether the state regulatory scheme predated the transfer of sovereignty over any of the particular bases to the United States,112 and, even if not, whether the United States in fact exercised exclusive jurisdiction over the areas in which purchases and sales of milk were made. But in so doing the Court emphasized that "[t]he cases make clear that the grant of 'exclusive' legislative power to Congress over enclaves that meet the requirements of Art. I, § 8, cl. 17, by its own \.Veight, bars state regulation without specific congressional action." / d., at 263.

Were it not for the fact that we deal here with a State's

"The Constitution does not command that every vestige of the laws of the former sovereignty must vanish. On the contrary its language has long been interpreted so as to permit the continuance until abrogated of those rules existing at the time of the surrender of sovereignty which govern the rights of the occupants of the territory transferred. This assures that no area however small will be without a developed legal system for private rights." James Stewart & Co. v. Sadrakula , 309 U. S. 94, 99-100 (1940). See also Pacific Coast Dairy, Inc. v. Dept. of Agriculture , 318 U. S. 285, 294 (1943); Murray v. Joe Gerrick & Co., 291 U. S. 315, 318 (1934); Chicago, R. I. & P. R. Co. v. McGlinn , 114 U. S. 542, 546-547 (1885).

p. 371

-UNITED STATES v. MISSISSIPPI TAX COM:\l'N 371

attempt to regulate and derive income from wholesale transactions in liquor-a fact which raises further questions as to the extent of the power conferred upon the States under the Twenty-first Amendment and the possibility of consent by the United States to state taxation-Pacific Coast Dairy and Paul would seem to be sufficient to dispose of this case insofar as Keesler Air Force Base and the Naval Construction Battalion Center are concerned. See also James v. Dravo Contracting Co., 302 U.S. 134, 140 (1937); Standard Oil Co. v. California , 291 U.S. 242 (1934). The transactions here at issue are strictly between the United States and out-of-state distillers and suppliers. The goods are ordered by the officers' clubs and other nonappropriated fund activities and then delivered within the military bases over which the United States claims exclusive jurisdiction. Thus, with respect to the initial sale and delivery of the liquor by the suppliers to military facilities located in exclusively federal enclaves, nothing occurs within the State that gives it jurisdiction to regulate the initial wholesale transaction.13 Cf. Polar Ice Cream & Creamery Co. v. Andrews , 375 U. S. 361, 382-383 (1964); Penn Dairies, Inc. v. Milk Control Corr..m'n , 318 U. S. 261 (1943).

There can be no question that the tracts of land upon which Keesler Air Force Base and the Naval Construction Battalion Center are located were "purchased by the Consent of the Legislature" of Mississippi within the meaning of Art. I, § 8, cl. 17. Despite its ultimate resolution of the case, the District Court acknowledged that the United States had acquired exclusive jurisdiction over these two bases. 340 F. Supp., at 904, 906. The Federal Government acquired the relevant lands by condemnation p. 372372 OCTOBER TER)I, 1972

The State's power to regulate transportation of alcoholic beverages through its territory to the bases or from the bases back into its jurisdiction is, however, a different quest.ion, see infra, at 377-378.

between 1941 and 1950.14 And, throughout the period of acquisition, the State had expressly given its "consent ... , in accordance with the 17th clause, 8th section, and of the 1st article of the Constitution of the United States, to the acquisition by the United States, by purchase, condemnation or otherwise, of any land in this state ... for custom houses, post offices, or other public buildings,"10 subject only to the right of the State to serve civil and criminal process upon such public lands.'" True, the assent of the United States to the exercise of exclusive jurisdiction over the lands occupied by the two bases was a necessary final step in light of 40 U. S. C. § 255,17 but such assent was given through a p. 373series of letters from Government officials to the Governors of Mississippi between 1942 and 1950.18

See Stipulation, App. 28-29, and Ex. 1-7. It is well established that land which the Government acquires by condemnation has been "purchased" within the meaning of Clause 17. Sec Paul v. United States , 371 U. S., at 264; Humble Pipe Line Co. v. TVaggonner , 376 U. S. 369, 371-372 (1964).

Section 255 provides in relevant part : "Notwithstanding any other provision of law, the obtaining of exclusive jurisdiction in the United States over lands or intcrPsts therein which have been or shall hereafter be acquired by it shall not be required; but the head or other authorized officer of any department or independent establishment or agency of the Government maY, in such cases and at such times as he may deem desirable, accept or secure from the State in which any lands or interests therein under his immediate jurisdiction, custody, or control arc situated, consent to or cession of such jurisdiction, exclusive or partial, not theretofore obtained, over any such lands or interests as he may deem desirable and indicate acceptance of such jurisdiction on behalf of the United States by filing a notice of such acceptance with the Governor of such State or in such other manner as may be prescribed by the laws of the State where such lands are situated. Unless and until the United States has accepted jurisdiction over lands hereafter to be acquired as aforesaid, it shall be conclusively presumed that no such jurisdiction ha,; been accepted."

" Miss. Code Ann. § 4153. General consent statutes are not uncommon, see Paul, v. United States, supra, at 265 and n. 31; James v. Dravo Contracting Co., 302 U. S. 134, 143 and n. 4 ( 1937), and they arc as effective for purposes of Art. I , § 8, cl. 17, as consent to each particular acquisition, see Paul, v. United States, supra, at 268-269.

See Miss. Code Ann. § 4154. The effectiveness of such qualifications to consent has long been accepted, sec, e. g., Paul v. United States, supra, at 264-265; James v. Dravo Contracting Co., supra, at 146-149.

Accordingly, unless the fact that in this case the State has attempted to derive revenue from private wholesale liquor transactions provides a decisive distinction, our prior cases make it clear that the Tax Commission could not attach its markup to the sale and delivery of liquor by out-of-state suppliers to nonappropriated fund activities within Keesler Air Force Base and the Naval Construction Battalion Center.

B. But the Tax Commission contends-as the District Court held-that the application of the markup regulation to the t\vo bases over which the United States exercises exclusive jurisdiction is sustainable on the basis of the broad regulatory authority conferred upon the States by the Twenty-first Amendment. The second section of the Twenty-first Amendment provides:

"The transportation or importation into any State, Territory, or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited."

In Collins v. Yosemite Park & Curry Co., 304 U. S. 518 (1938), a concessionaire which operated hotels, camps, p. 374and stores in Yosemite National Park, under a contract with the Secretary of the Interior, sought to enjoin the efforts of California . authorities to enforce the State's Alcoholic Beverage Control Act within the limits of the Park. The state liquor lav,, would have required the concessionaire to apply for permits for the importation and sale of liquor and to pay related taxes and fees. The Court found that the State had ceded to the United States, and that the United States had accepted, exclusive jurisdiction over Yosemite National Park, except insofar as the State had expressly reserved the right to tax persons and corporations within the Park. Id., at 527-530. In light of this determination, the Court held that "[a]s there is no reservation of the right to control the sale or use of alcoholic beverages, such regulatory provisions as are found in the Act"-namely, the provisions concerning importation and sales permits-"are unenforceable in the Park.'' Id., at 530. In support of its attempt to apply the permit provisions within the Park, the State placed specific reliance upon the regulatory authority conferred upon it by § 2 of the Twenty-first Amendment. But the Court rejected this argument, agreeing instead with the District Court's conclusion "that though the Amendment may have increased 'the state's power to deal with the problem ... [of liquor importation], it did not increase its jurisdiction.'" Id., at 538. The Court then went on to state:

See Stipulation, App. 28-29, and Ex. 1-7. Since the challenged regulation first became effective in 1966, long after the United States had acquired jurisdiction over the bases, there is no question here as to the application within a federal enclave of a state law that predates the transfer of sovereign authority, see n. 12, supra.

"As territorial jurisdiction over the Park was in the United States, the State could not legislate for the area merely on account of the XXI Amendment. There was no transportation into California 'for delivery or use therein.' The delivery and use is in the Park, and under a distinct sovereignty. Where exclusive jurisdiction is in the United States, without power in the State to regulate alcoholic beverages, p. 375the XXI Amendment is not applicable." Ibid. (Footnotes omitted.) It is true, as the Tax Commission argues, that the Court did sustain the application of the tax provisions of the state liquor law within the Park. But this aspect of the decision was bottomed specifically on the State's reservation of taxing authority in its cession of lands to the United States, id., at 532, 536.

Collins would seem to compel the conclusion that absent an appropriate express reservation-which is lacking here-the Twenty-first Amendment confers no power on a State to regulate-whether by licensing, taxation, or otherwise-the importation of distilled spirits into territory over which the United States exercises exclusive jurisdiction. See also Johnson v. Yellow Cab Transit Co., 321 U. S. 383 (1944). Certainly, the Amendment was intended to free the State of "traditional Commerce Clause limitations when it restricts the importation of intoxicants destined for use, distribution, or consumption within its borders." Hostetter v. ldlewild Bon Voyage Liquor Corp., 377 U.S. 324, 330 (1964). See also .Joseph E. Seagram & Sons, Inc. v. Hostetter , 384 U. S. 35, 42 (1966). But the Government contends that here, as in Collins, there was no "transportation or importation [of liquor J into [the] State ... for delivery or use therein" within the meaning of the second section and therefore the Twenty-first Amendment does not assist the Tax Commission's case. We agree.

The District Court acknowledged that Keesler Air Force Base and the Naval Construction Battalion Center "are to Mississippi as the territory of one of her sister states or a foreign land. They constitute federal islands which no longer constitute any part of Mississippi nor function under its control." 340 F. Supp., at 906. And it recognized that in light of Collins, "[t]he importation p. 376of property onto these bases for use thereon would clearly be outside the ambit of the XXI Amendment." Id., at 906-907. But the court considered Collins to be limited strictly to the situation in which delivery and use of the liquor was restricted to the exclusive enclave, whereas in this case "[t]he undisputed facts show that it was acquired for the purpose of being sold to individuals for their use and consumption either on the base or in the surrounding state." Id., at 907. Such off-base consumption was sufficient, in the District Court's view, to subject the transactions between the out-of-state suppliers and the nonappropriated fund activities to the regulatory authority granted to Mississippi under the Twenty-first Amendment. We think, however, that the District Court unjustifiably narrowed the decision in Collins.

There is, in fact, no indication in Collins that the liquor purchased from the concessionaire's facilities in the Park was always consumed within the limits of the Park. To the contrary, the complaint in that case specifically stated that the liquor imported for sale in the park facilities was sold "for consumption on or off the premises where sold."19 Hence, it is just as reasonable to assume that some of the liquor sold in the Park was consumed outside its limits in the State of California as it is to assume that some of the liquor sold on these two bases was ultimately consumed in the State of Mississippi.20 The

Transcript of Record, No. 870, 0. T. 1937, p. 3. 2 0 In fact, the record in this case contains no express indication as to the extent to which packaged liquor purchased from the nonappropriated fund activities is consumed outside the jurisdiction of the two bases. The District Court inferred off-base consumption from the facts that "numerous classes of non military persons are authorized to make purchases; and every selling facilit y exacts a promise from each purchaser that he will obey the laws of the state as to such of t he liquor bought as may be taken off of t he installation." 340 F. Supp., at 905. By a parity of reasoning the likelihood that some of the liquor purchased from stores located in Yosemite National Park was transported to and consumed in California is even greater since those stores were open to the public at large.

p. 377

UNITED STATES v. MISSISSIPPI TAX COJ\Il\l'N 377

Collins Court, in rejecting California's reliance upon the Twenty-first Amendment, pointed, to be sure, to the fact that "delivery and use" of the liquor was "in the Park," 304 U. S., at 538. But, considered in the context of the case, the Court's reference clearly was to the transaction between the out-of-state suppliers and the park concessionaire. It was that transaction which California sought to regulate, and insofar as that transaction was concerned, the delivery and use-that is, the delivery, storage, and sale-of the liquor occurred exclusively within the Park. The particular transactions at issue in this case between out-of-state suppliers and the military facilities stand on no different footing, and thus, given that the State has retained only the right to serve process on the two bases, Collins is dispositive of the Commission's effort to invoke the State's authority under the second section of the Twenty-first Amendment to impose its markup on these transactions.

This is not to suggest that the State is without authority either to regulate liquor shipments destined for the bases while such shipments are passing through Mississippi or to regulate the transportation of liquor off the bases and into Mississippi for consumption there. Thus, while it may be true that the mere "shipment [ of liquor] through a state is not transportation or importation into the state within the meaning of the [Twenty-first] Amendment," Carter v. Virginia , 321 U. S. 131, 137 ( 1944), a State may, in the absence of conflicting federal regulation, properly exercise its police powers to regulate and control such shipments during their passage through its territory insofar as necessary to prevent the "unlawful diversion" of liquor "into the internal commerce of the State," see Hostetter v. Idlewild Bon Voyage Liquor

p. 378

Opinion of the Court 412 U. s.

Corp., 377 U. S., at 333, 331 n. 10; Carter v. Virginia, supra; Duckworth v. Arkansas , 314 U. S. 390 (1941). And the State, of course, remains free to regulate or restrict, under § 2 of the Twenty-first Amendment, the transportation off the two bases of liquor that has been purchased and is in fact "destined for use, distribution, or consumption" within its borders, see Joseph E. Seagram & Sons, Inc. v. Hostetter , 384 U. S., at 42; see also California v. LaRue , 409 U. S. 109, 114 (1972).

But there is no indication here that the markup is an effort to deal with problems of diversion of liquor from out-of-state shipments destined for one of the two bases. Nor need we now decide the precise parameters of the State's authority to regulate efforts to import liquor from the exclusively federal enclaves, since that question iinot before us. For our purposes here, it suffices to note that any legitimate state interest in regulating the importation into Mississippi of liquor purchased on the bases by individuals cannot effect an extension of the State's territorial jurisdiction so as to permit it to regulate the distinct transactions between the suppliers and the nonappropriated fund activities that involve only the importation of liquor into the federal enclaves which "are to Mississippi as the territory of one of her sister states or a foreign land," 340 F. Supp., at 906. To conclude otherwise would be to give an unintended scope to a provision designed only to augment the powers of the States to regulate the importation of liquor destined for use, distribution, or consumption in its own territory, not to "'increase its jurisdiction,'" Collins v. Yosemite Park & Curry Co., 304 U. S., at 538.

C. Before this Court the Tax Commission also asserts that the markup might properly be viewed as a sales tax and that the United States has consented to the imposition of such a "tax" in the context of the two exclusive jurisdiction bases under the Buck Act of 1940, p. 379:54 Stat. 1059, now 4 "C". S. C. §§ 105-110. Section 10.5 (a) of that Act provides in part:

"No person shall be relieved from liability for payment of, collection of. or accounting for any sales or use tax levied by any State, or by any duly constituted taxing authority therein, having jurisdiction to levy such a tax, on the ground that the sale or use, with respect to which such tax is levied, occurred in whole or in part within a Federal Area . . " 4 U.S. C. § 105 (a).

However, § 107 (a) of the Act spells out certain exceptions to the consent provision contained in § 105 (a). Specifically, § 107 (a) states that § 105 (a) "shall not be deemed to authorize the levy or collection of any tax on or from the United States or any instrumentality thereof .... " Whether the markup should be treated as a tax on sales occurring within a federal area within the meaning of § 105 (a), see also 4 U. S. C. § 110 (b), and, if so, whether the exception contained in § 107 (a) nevertheless serves to remove the markup from the consent provision for purposes of the two exclusively federal enclaves are issues which the record reveals were never considered, much less decided, by the District Court. Having found that the District Court erred in the basis on which it did dispose of this cruse, we think that these additional issues are appropriately left for determination by that court in the first instance on remand. II

The two bases over which the United States claims to exercise jurisdiction concurrent with the State-Columbus Air Force Base and Meridian Naval Air Stationpresent somewhat different problems. Since the United States has not acquired exclusive jurisdiction over the land upon which these bases are located, the Government p. 380is unable to rest its claims for immunity from the markup with respect to purchases of liquor for the nonappropriated fund activities of these bases on Art. I, § 8, cl. 17. Rather, it bases its argument on the theories that the markup either is an unconstitutional tax upon instrumentalities of the United States21or is invalid under the Supremacy Clause because it conflicts with federal procurement regulations and policy.22 The District Court specifically found it unnecessary to reach the Government's argument under the Supremacy Clause, and implicitly declined to reach the Government's argument concerning taxation of United States instrumentalities. Instead, having concluded that, despite Art. I, § 8, cl. 17, the Twenty-first Amendment permitted the Tax Commission to apply the markup to out-of-state purchases destined for nonappropriated fund activities on the two bases over which the United States exercises exclusive jurisdiction, the District Court simply reasoned that "[a] fortiori, the liquor sales made on the two bases over which the federal and state governments exercise concurrent jurisdiction-Meridian and Columbus-are similarly subject to Mississippi law." 340 F. Supp., at 907.

The District Court's rationale for adopting this view is not entirely clear. Certainly it was correct when it further observed that "as to the concurrent jurisdiction bases, the liquor sales transactions occurred within the jurisdiction of the State of Mississippi, eve11 where the consumption or other use of the liquor was consummated within the territorial confines of the base." Ibid. But this serves only to dispose of any question under Art. I, § 8, cl. 17. As already noted, however, the Government does not purport to rest its case with respect to transac- p. 381363 DoUGLA8, J., dissE'nting

See, e.g., M 'Culloch v. Maryland , 4 Wheat. 316 (1819).

See 32 CFR § 261.4 (c). See also Paul v. United States , 371 U. S., at 253.

tions involving the two bases over ,vhich it exercises only concurrent jurisdiction upon that clause. In any event, we have now concluded that the District Court erred in ruling that the Twenty-first Amendment empowered the State Tax Commission to apply the markup to transactions between out-of-state distillers and nonappropriated fund activities located on the two exclusively federal enclaves. Our conclusion eliminates the essential premise of the District Court's decision concerning the two concurrent jurisdiction bases. While the arguments upon which the Government does rely with respect to the purchase of liquor destined for those two bases present, to be sure, only questions of la,v which we might now decide, we believe it would be useful to have the views of the District Court on these additional arguments, and we therefore remand the case to the District Court to allow it to consider initially the Government's instrumentality and Supremacy Clause arguments. Cf. Lewi-S v. Martin , 397 U. S. 552, 560 (1970); FCC v. WJR , 337 U. S. 265, 285 (1949).

The judgment of the District Court is vacated and the case is remanded for further proceedings consistent with this opinion.

It i-S so ordered.

MR. JusTICE DouGLAS, with whom MR. JusTICE REHNQUIST concurs, dissenting.

This is an amazing decision doing irreparable harm to the cause of States' rights under the Twenty-first Amendment. That Amendment gives the States pervasive control over the "transportation ... into [the] State ... for delivery or use therein of intoxicating liquors, in violation" of its laws. The liquors cannot reach these federal enclaves unless they are transported into or across the State and they are obviously delivered and used within Mississippi.

p. 382

382 OCTOBER TEK\J, 1972

Douous, J., dissenting 412 U.S.

Two of the posts are inland enclaves within the State. Two are on Mississippi's coastline. But to reach the latter by water a vessel must enter Mississippi's territorial waters. As we held in Skiri.otes v. Florida , 313 U. S. 69, the territorial waters are part of the domain over which the coastal State has sovereignty. These shipments therefore constitute "transportation or importation into" Mississippi for "delivery . . . therein of intoxicating liquors" within the meaning of the Twenty-first Amendment. The power of the State to bar the transportation of liquor into the State certainly includes the power to manage its distribution within the State. Mississippi has done no more than that. So it seems clear to me that this is a classic example of the exercise of basic States' rights under the Twenty-first Amendment.

Mississippi in her regulation of alcoholic beverages is a so-called monopoly State,1 like 17 other States. Some of these monopoly States make themselves the exclusive wholesaler2 of liquor and wine and exclusive retailer as well. Mississippi only makes itself the exclusive wholesaler. The sales involved in this litigation are wholesale sales to clubs of members of the Armed Services on four federal bases in Mississippi, over two of which :Mississippi and the United States have concurrent jurisdiction, the United States having exclusive jurisdiction over the other two.

Under Mississippi law these post exchanges and other facilities (hereafter post exchanges) may order liquor direct from the distiller or from the state commission. The Mississippi regulation provides, "All orders of such organizations shall bear the usual wholesale p. 383markup3 in price but shall be exempt from all state taxes." The wholesale markup on distilled spirits is 17% and on wine, 20%. If the purchase is made from the distiller, it remits the wholesale markup to the State. A distiller who fails or refuses to observe these conditions is deprived of the benefits of this state law and may be prosecuted.

Wholesaler is defined as "any person, other than a manufacturer, engaged in distributing or selling any alcoholic beverage at wholesale for delivery within or without this State when such sale is for the purpose of resale by the purchaser." Id., § 10265-05 (g).

Miss. Code Ann. § 10265-01 et seq. (Supp. 1972).

This suit brought before a three-judge district court was to collect the amount of the markups paid by the post exchanges and to enjoin the enforcement of the Mississippi regulation against distillers or suppliers doing business with the post exchanges on the terms of Mississippi law. The three-judge District Court, relying on the T\venty-first Amendment,' gave appcllees a summary judgment, :340 F. Supp. 903. Its judgment should be affirmed.

The four federal enclaves involved in this dispute are in the State of Mississippi. The spirits are made out of State and delivered to the post exchanges within the State. The question is whether the terms of the Twenty-first Amendment are met, that is to say, whether there is "transportation . . . in to . . . [the] State . . . for delivery or use therein of intoxicating liquors."

The spirits are not all consumed on or at the post exchanges. Rather, they are resold to members of the Armed Services, to retired members and the families of members; and some of the spirits are consumed in Mississippi and outside the federal enclaves by guests of

The Act provide,; in § 10265- 106, "The Commission shall add to the cost of all alcoholic beverages such various markups as in its discretion will be adequate to rover the cost of operation of the State wholesale liquor business, yield a reasonable profit, and be competitive with liquor prices in neighboring states."

It provides in § 2, "The transportation or importation into any State, Territory, or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the law thereof, is hereby prohibited."

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DOUGLAS, J., dissenting 412 U.S.

members and retirees and their families. As the District Court said, the spirits are not brought into the federal enclaves for sole use there. The spirits are resold to individuals for their use or consumption either on the federal enclave or in the surrounding state area.

Private retailers in Mississippi pay the State a tax of $2.50 a gallon on distilled spirits. The Post Exchanges pay no state tax on their resales; and it is stipulated that these post exchanges each make a profit.

Section 6 of the Universal Military Training and Service Act, as amended in 1951, authorizes the Secretary of Defense to make regulations "governing the sale, consumption, possession of or traffic in ... intoxicating liquors to or by members" of the Armed Forces "at or near any camp, station, post, or other place primarily occupied by [them]." 50 U. S. C. App. § 473. And it makes criminal, knowing violations of such regulations. Department of Defense Directive 1330.15 issued May 4, 1964, and amended June 9, 1966, provides that "the purchase of all alcoholic beverages for resale at any camp, post. station, base or other place primarily occupied by members of the Armed Forces within the United States shall be in such a manner and under such conditions as shall obtain for the Government the most advantageous contract, price and other factors considered." The Act and the Department of Defense regulation do not on their face purport to override or displace state price control of liquor. It is said, however, that that is immaterial.

The Solicitor General relies on Art. I , § 8, cl. 17, of the Constitution, which empowers Congress to "exercise exclusive Legislation ... over all Places purchased by the Consent of the Legislature of the State in which the Same shall be, for the Erection of Forts, Magazines, Arsenals, dock-Yards, and other needful Buildings." This provision, it is said, bars state price regulations as respects sales to post exchanges on the t,vo federal enclaves p. 385363 DOUGLAS, J., dissenting

over which the United States has exclusive jurisdiction even in absence of a conflicting federal statute or regulation. Reliance is placed on Paul v. United States , 371 U. S. 245, 263-268. The Paul case did not involve the Twenty-first Amendment. There post exchanges resold milk and California provided minimum wholesale price regulations; aml we held that Art. I, § 8, cl. 17, "by its own weight, bars state regulation without specific congressional action." Id., at 263.

The Twenty-first Amendment and Art. I, § 8, cl. 17, are parts of the same Constitution. In Hostetter v. I die-wild Bon Voya(Je Liquor Corp., 377 U.S. 324, we held that while the Twenty-first Amendment gave the States control ,vhere otherwise the Commerce Clause would be a bar to its action (id., at 330), the Twenty-first Amendment did not give a State the po,ver to prohibit the passage of liquor through its territory for delivery to consumers in foreign countries. Congress had enacted a law governing traffic in liquor to foreign nations; and that aspect of the Commerce Clause gave Congress exclusive authority over foreign trade. Hence it is argued here that the power of Congress to exercise exclusive jurisdiction over a federal enclave pre-empts state power. But all that we have here is "transportation" into a State, not beyond it.

Collins v. Yosemite Park & Curry Co., 304 U. S. 518, held as respects a state re(Julatory re(Jime of alcoholic beverages within Yosemite National Park in California that the Tv.renty-first Amendment gave the State no power to supervise liquor transactions within the federal enclave. The Court said:

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DoUGLAs, J., dissenting 412 u. s.

in the Park, and under a distinct sovereignty. Where exclusive jurisdiction is in the United States, without power in the State to regulate alcoholic beverages, the XXI Amendment is not applicable." Id., at 538.

That observation was apt, for California undertook to assert a regulatory authority within the park. The Solicitor General presses for an application of Collins to the present post exchanges. Yet Mississippi asserts no regulatory power over these military bases or over the dispensing of liquor by the post exchanges. Mississippi only collects a tax from out-of-state distillers and suppliers who ship liquor to the post exchanges. Those shipments, as noted, must enter Mississippi to reach the military bases.

Moreover, Mississippi asserts no authority to collect the tax from the Federal Government or its instrumentalities, the post exchanges. The legal incidence of the so-called sales tax is on the distributor only. The economic incidence is, of course, on the post exchanges. But it has long been held that there is no constitutional barrier to that result.

That raises the other phase of the case which should be decided here, as it is covered by our decisions and requires no additional factfindings for its resolution.

At least since Alabama v. King & Boozer , 314 U. S. 1, state taxes have been upheld on those doing business with the Federal Government even as respects cost-plus contracts where the terms of the contract forced their payment out of the federal treasury.5 The principle of p. 387King & Boozer permits no exception for distillers who make wholesale transactions with post exchanges, as the legal incidence of the tax is on the distillers, not on the

In New York v. United States. 326 U.S. 572, in discussing the Federal Government's right to lrvy taxes on New York State's sale of mineral waters, the Court. stated, "In the older cases, the emphasis was on immunity from taxation. The whole tendency of recent cases reveals a shift in emphasis to that of limitation upon immunity. They also indicate an awareness of the limited role of Government on the tax day. The Court found no constitutional impediment to permitting a possessory-interest tax on Governmentowned personal property. Unlike the real property situation, the Michigan statute did not specifically authorize such tax, but it was imposed pursuant to the 11sual personal property tax statute, levying the tax on the property. In commenting on the disparity between the statutes, the Court stated, "It is true that the particular Michigan taxing statutes involved here do not expressly state that the person in possession is taxed 'for the privilege of using or possessing' personal property, but to strike down a tax on the possessor because of such a verbal omission would only prove a victory for empty formalisms. And empty formalisms are too shadowv a basis for invalidating state tax laws. . . . In the circumstanc;s of this rase the State rould obviate such grounds for invalidity by merely adding a few words to its statutes." Id., at 493.

courts in assessing the relative weight of the factors upon which immunity is based." Id., at 581.

That trend continued in Esso Standard Oil Co., v. Evans , 345 U. S. 495, where the Court upheld the validity of a state privilege tax on Essa, occasioned by its storage of gasoline owned by the United States, even though it was shown that the United States had contractually obligated itself to reimburse the contractor for any state tax liability incurred. The Court distinguished those cases which had held that there could be no state tax on federally owned property by indicating that in Esso the tax was on the privilege of storing Government property.

United States v. City of Detroit. 355 1.:. S. 466, and United States v. J1uskegon , 355 U. S. 484, con('erned the application of a 1953 Michi• gan statute providing that when tax-exempt real property is used by a private person in a business conducted for profit the private person is subject to taxation to the same extent as if he were the owner of the property. Both cases involved Government contractors occupying defense plants, one under a lease and the other under a pP.rmit which could be terminated at will. The Court upheld the imposition of the tax, saying the constitutional immunity of the Federal Government from state taxation was not violated and that the state statute was not discriminatory nor was the statute discriminatorily administered. This result was reached notwithstanding the fact that the Federal Government had for yea.rs reimbursed its contractors for the costs of possessory interest taxes.

In City of Detroit v. Jfurray Corp., 355 U.S. 489, the Court, upheld a tax imposed on 2'vlurray, an Air Force subcontractor, on the basis of work in process and inventory, title to which was in the Federal

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DOUGLAS, J., dissenting 412 U.S.

post exchanges. Moreover, the Buck Act, 54 Stat. 1059, now 4 U. S. C. § 105 et seq., authorizes the application of state sales and use taxes to all post exchange purchases \vhere "the sale or use, with respect to which such tax is levied, occurred in whole or in part within a Federal area." The Buck Act exempts from such taxes, sales, purchases, storage, or use of personal property sold by the United States or any instrumentality thereof to "any authorized purchaser" ( § 107), who is defined as one permitted to purchase at commissaries, ship's stores, post exchanges, and the like, by regulations of the departmental Secretary.

It also does not authorize "the levy or collection of any tax on or from the United States or any instrumentality thereof." 4 U. S. C. § 107 (a).

The markup which the State requires wholesalers of liquor to make is in its worst light a sales tax. There is no "levy or collection" by the State from a post exchange in any technical, legal sense. As noted, the economic but not the legal incidence of the tax is in the post exchanges. The post exchange is merely paying indirectly the cost of doing business in the manner in which King & Boozer held that there was no constitutional immunity from state taxation.

That alone is sufficient to distinguish the present case from Paul v. United States , 371 U. S. 245, where state minimum price regulations were held to be inoperative as applied to purchases of milk by federal instrumentalities, such as post exchanges. Paul in other words involved no tax at all. The levy of Mississippi on wholesalers is, as noted, a sum designed to cover the cost to the State of operating the wholesale liquor business, yield a reasonable profit, and be competitive \Vith liquor prices in p. 389363 DoUGLAS, .T., dissenting

neighboring States. It is plainly, therefore, a tax on sales and in my view authorized by Congress under the Buck Act. The Solicitor General concedes in his brief that the Mississippi regulation is meant only "to raise revenue." By reason of the Buck Act it matters not, therefore, that the post exchanges, as held in Paul, are federal instrumentalities. Here, as in King & Boozer, we deal only with the "economic" burden of the local tax, its legal incidence being solely on the distributor.

First Agricultural National Bank v. State Tax Comm'n , 392 U. S. 339, is inapposite. In that case Congress had specifically provided four ways in which the States could tax national banks, apart from taxes on their real estate. Id., at 341-342. Efforts to allow broader taxation were defeated in Congress. Because of that history, we read the Massachusetts sales tax closely and noting that the tax was " 'recoverable at law' " from the national bank, id., at 347, held that it transcended the congressional waiver of immunity.

That case does not control here for two reasons. First, the legal incidence of the present tax is not in the post exchanges, only the economic incidence.

Second, the Massachusetts sales tax had no relation to the Twenty-first Amendment. The present case involves "transportation or importation" of liquor into the State of Mississippi over which the State has plenary control. The State, having the power to bar liquor completely from Mississippi, can admit it on such terms and conditions as she chooses. If she sought to levy a tax on the post exchanges a different issue \.Vould arise. But there is no federal immunity against including state costs in federal contracts.

While the Buck Act by § 107 (a) bars a state tax on federal instrumentalities- which as Paul h-:>lds includes post exchanges--King & Boozer allows a state tax on those who, like the wholesalers in this case, do business with the United States. King & Boozer, decided in 1941,

p. 390

DouGLAS, J., dissenting 412 U.S.

aftcr the Buck Act, stated the modern version of the scope of intergovernmental immunity.6 The present case is therefore on all fours with the excise tax imposed by Florida on milk distributors who in turn sold to federal enclaves. In referring to the Buck Act we said:

"We think this provision provides ample basis for Florida to levy a tax measured by the amount of milk Polar distributes monthly, including milk sold to the United States for use on federal enclaves in Florida." Polar Ice Cream & Creamery Co. v. AnC:rews, 375 u. s. 361, 383.

The judgment below should be affirmed.

During the first third of this century the doctrine of intergovernmental immunity, as it applies to state taxation of allegedly federal governmental activities, went through a highly expansive phase. Among the taxes held invalid were the following: sales tax on articles sold to the Government, Panhandle Oil Co. v. Mississippi , 277 U. S. 218; income tax on earnings from patents and copyrights, Long v. Rockwood , 277 U. S. 142; inrome tax on income derived by lessees of public lands, Gillespie v. Oklahoma , 257 U. S. 501. At the same time. howevn, a number of inroads or qualifications on the doctrine were established. Among the taxes held valid were the following: rnrporate franrhise tax measured by income including that from Government bonds, Flint v. Stone Tr(JCy Co., 220 U. S. 107; inheritance or estate tax measured in part by Government bonds, Plummer v. Coler , 178 U. S. 115: income tax on capital gain on resale of Government bonds, Willcuts v. Bunn , 282 U. S. 216; income tax on net income of contra.ctors with the Government, Metcalf & Eddy v. Mitchell , 269 U. S. 514. This trend culminated in the decision of the Court in Alabama v. King & Boozer , 314 U.S. 1. That trend led a commentator to note, "Today, the United States conducts much of its business through a vast number of private parties. The trend in the U. S. Supreme Court has been to reject immunizing these private parties from non-discriminatory state taxes, as a matter of constitutional law, even though the United States bears the economic brunt of the tax, indirectly in some instances, by inclusion in price, and more directly in many instances, by reimbursement to the contractor as an item of cost." Hollman, Recent Developments in Sovereign Immunity of the Federal Government from State and Local Taxes, 38 N. D. L. Rev. 26, 30.