In 1911 the State of New York began to acquire title to all of the lands in the Saratoga Springs area with a view to halting excessive pumping of the mineral waters for which the springs are famous. As a result of state ownership the area became a state reservation which, in 1930, was placed under control of, the Saratoga Springs Commission. A hotel-sanitarium, recreational facilities, bath houses, drink halls, a research laboratory as well as state operation of the springs were part of a state program under legislative authority. During the period from 1932 to 1934, sales of the mineral waters were promoted by advertising and customarily yielded a profit used by the commission to defray other expenses in the operation of the reservation. Section 615 (a) (5) of the 1932 Revenue Act imposed an excise on mineral waters sold by the producer or bottler. The United States brought suit in the federal District Court for the Northern District of New York to recover taxes assessed for the period from June, 1932 to May, 1934, and received a judgment in its favor. The district court rested its decision on the ground that the bottling and sale of the waters was a business enterprise conducted for profit rather than a governmental function immune from federal taxation. The circuit court of appeals affirmed. It took the position that the state was engaged in a business for profit in competition with others and was not immune from federal taxation on the theory that the state was performing a non-taxable governmental function, even though the program might be of great public value; also that the fundamental consideration in determining whether a state activity is immune from taxation must be that immunity arises from the necessity of preserving the continued existence of the state. On certiorari, held, affirmed. Justice Frankfurter delivered the judgment of the Court and wrote an opinion in which Justice Rutledge concurred. Chief Justice Stone delivered a concurring opinion in which Justices Reed, Murphy, and Burton joined. Justices Douglas and Black concurred in a dissenting opinion. New York v. United States, (U.S. 1946) 66 S. Ct. 310.
Joseph N. Morency, Jr.,
CONSTITUTIONAL LAW-INTERGOVERNMENTAL IMMUNITIES-FEDERAL TAX ON STATE FUNCTION,
Mich. L. Rev.
Available at: https://repository.law.umich.edu/mlr/vol44/iss5/13