UNITED STATES SUPREME COURT DECISIONS ON-LINE

Washington state statutes impose a sales tax on federal contractors with respect to the sale of materials to such contractors for work on federal projects, but with regard to nonfederal construction projects, the tax is imposed on the landowner, who pays tax on the full price of the project, including the contractor's labor costs and markup, as well as the cost of tangible personal property sold to the contractor. The United States filed suit in Federal District Court, seeking declaratory and injunctive relief and an order requiring a refund of sales taxes for which the Federal Government had reimbursed its contractors. The District Court granted partial summary judgment for the United States, holding that the statutes discriminate against federal contractors in violation of the Supremacy Clause of the Federal Constitution, and the Court of Appeals affirmed.

Held: The Washington statutes are not invalid under the Supremacy Clause. Pp. 460 U. S. 540-546.

(a) The Federal Government's constitutional immunity from state taxation may not be conferred on a third party simply because the tax has an effect on the United States, or even because the Federal Government shoulders the entire economic burden of the levy. Nor can immunity be conferred simply because the state tax falls on the earnings of a contractor providing services to the Government. United States v. New Mexico, 455 U. S. 720, 455 U. S. 734. "So long as the tax is not directly laid on the Federal Government, it is valid if nondiscriminatory . . . or until Congress declares otherwise." United States v. County of Fresno, 429 U. S. 452, 429 U. S. 460. P. 460 U. S. 540.

(b) Washington's tax is not invalid on the asserted ground that the State has circumvented the Federal Government's tax immunity by identifying a federal activity for different tax treatment. Washington imposes a sales tax of the same rate on all purchases from nonfederal contractors. The only deviation from equality between the Federal Government and federal contractors on one hand, and every other taxpayer on the other hand, is that the former are taxed on a smaller proportion of the value of the project than the latter. Thus the Federal Government and its contractors are better off than other taxpayers, which is not the mistreatment of the Federal Government against which the Supremacy Clause clubjuris

Page 460 U. S. 537

protects. A tax is not invalid simply because it treats those who deal with the Federal Government differently than it treats others. Phillips Chemical Co. v. Dumas Independent School District, 361 U. S. 376, distinguished. Cf. United States v. County of Fresno, supra; United States v. City of Detroit, 355 U. S. 466. Pp. 460 U. S. 541-544.

(c) The important consideration is not whether the State differentiates in determining what entity shall bear the legal incidence of the tax, but whether the tax is discriminatory with regard to the economic burdens that result. The State does not discriminate against the Federal Government and those with whom it deals unless it treats someone else better than it treats them. Here, Washington has not singled out contractors who work for the United States for discriminatory treatment. It has merely accommodated for the fact that it may not impose a tax directly on the United States as the project owner. Pp. 460 U. S. 544-546.

654 F.2d 570, reversed.

REHNQUIST, J., delivered the opinion of the Court, in which BURGER, C.J.,and BRENNAN, POWELL, and O'CONNOR, JJ., joined. BLACKMUN, J., filed a dissenting opinion, in which WHITE, MARSHALL, and STEVENS, JJ., joined, post, p. 460 U. S. 547.