Did a state military organization's post exchange on a federal reservation have to collect Florida sales tax?

Plain-English summary

Florida concluded that the described post exchange did not have to collect and remit Florida sales tax while operating on the federal military reservation. The requesting state military organization planned to take over an exchange then operated by a federal instrumentality.

The Department gave two routes to the same result. When the organization had been activated by the federal government, it functioned as a federal instrumentality and was immune from Florida law. When it had not been activated, it remained a state organization, but the Department concluded that Florida law was inoperative on the federal enclave because federal law preempted it.

For the nonactivated situation, the Department relied on the Supremacy Clause and its reading of the Buck Act. The Act allowed state sales taxes in federal areas as applied to a "person," but the Department found no clear basis for treating the state itself as a person under that provision on these facts.

Common questions

Was this a Florida sales-tax exemption? No. The TAA described the result as federal immunity or preemption, not a state-law exemption.

What happened when the military organization was federally activated? It was treated as a federal instrumentality immune from Florida law.

What happened when it was not activated? The Department still found Florida law preempted within the federal reservation.

Did the ruling apply to sales outside the federal reservation? It addressed operation of the post exchange within the described federal enclave.

Citations and references

• U.S. Const. art. I, § 8, cls. 15-16
• U.S. Const. art. VI, cl. 2
• 4 U.S.C. §§ 105(a) and 110(a)
• 26 U.S.C. § 7701(a)(1)
• Fla. Stat. §§ 250.05 and 213.22

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 98A-092

Original ruling text

SUMMARY

Taxpayer operates a military training site on federal land
licensed to the State of Florida for the exclusive purpose
of operating a military training reservation. Currently,
an instrumentality of the Federal Government operates a
Post Exchange on the land. The current operator does not
collect Florida sales tax as it is an instrumentality of
the Federal Government. Taxpayer plans to take over the
operation of the Post Exchange believes that sales made by
the Post Exchange under its operation should be accorded
the same treatment as sales made by the Post Exchange under
its current operator.

It is the Department's position that when Taxpayer operates
the Post Exchange within the federal reservation after
having been activated by the federal government that the
Taxpayer is an instrumentality of the federal government
and thereby immune from the operation of Florida's laws.
It is also the Department's position that when the Taxpayer
is operating the Post Exchange within the federal enclave
but has not been activated by the federal government that
it is not a federal instrumentality but that the laws of
the State of Florida are inoperative on the federal
reservation as having been pre-empted by federal law.

Dec 11, 1998

Re: Technical Assistance Advisement 98A-092
Sales and Use Tax
Operation of a Post Exchange
XXX ("Taxpayer")
Sections 213.22, 250.05, F.S.
Rule 12-11, F.A.C.
Article I, Section 8, cl.15, United States Constitution
Article I, Section 8, cl.16, United States Constitution
Article VI, cl.2, United States Constitution
4 U.S.C. Section 101 et seq.

26 U.S.C. Section 3797 (1939), now 26 U.S.C.Section 7701
32 U.S.C. Sections 305, 307
32 U.S.C. Section 325
32 C.F.R. Chapter XI, Part 1101.52(b)

Dear :

This is a response to your request dated November 3, 1998, for
the issuance of a Technical Assistance Advisement ("TAA")
concerning the above referenced matter. Your petition has been
carefully examined and the Department finds it to be in
compliance with the requisite criteria set forth in Chapter
12-11, F.A.C. This response to your request constitutes a TAA
and is issued to you under the authority of s. 213.22, F.S.

STATED FACTS

The XXX is a component of the XXX and are jointly referred to
herein as "the taxpayer." The taxpayer operates a military
training site on federal land licensed to the State of Florida
for the exclusive purpose of operating a military training
reservation. Currently, the XXX operates a Post Exchange on the
land. XXX does not collect Florida sales tax as it is an
instrumentality of the Federal Government. The taxpayer plans
to take over the operation of the Post Exchange and is of the
opinion that the sales made by the Post Exchange under its
operation should be accorded the same treatment as sales made by
the Post Exchange under the operation of the XXX.

LAW AND ANALYSIS

The XXX is the militia reserved to the States under the United
States Constitution, Article I, Section 8, cl. 16. The XXX,
pursuant to Section 250.05, F.S., is a component part of the
XXX, which is an agency of the State of Florida:

(1) The agency of the state government heretofore known as
the Military Department shall henceforth be known as the
XXX of the State, which shall be composed of the military
forces as provided in the laws of this state.

Theoretically, the XXX is an independent military force. It is
part of the executive branch of the state government and the
governor is the commander-in-chief. See Chapter 250, F.S.
However, there is almost no area of operation in which the XXX
operation and actions are not limited in some respect by federal
control. For example, no XXX unit receiving federal funds or
support can place an officer in its organizational hierarchy
unless that officer has been federally recognized. See 32
U.S.C. Sections 305, 307. Further, pursuant to the authority
granted in Article I, Section 8, cl. 15, United States
Constitution, Congress has required all enlistees in a XXX such
as the XXX to also, simultaneously, enlist in the XXX of the
United States. Under the dual enlistment system, a member of
the XXX is relieved of his or her status when ordered to active
duty in the federal service. 32 USC Section 325(a). The United
States Supreme Court, in Perpich v. Department of Defense, 496
US 334, 110 L Ed 2d 312, 110 S. Ct. 2418 (1990), characterized
the dual nature of the XXX as follows:

Notwithstanding brief periods of federal service, the
members of the XXX unit continue to satisfy this
description of a militia. In a sense, all of them now must
keep three hats in their closets--a civilian hat, a state
militia hat, and an army hat--only one of which is worn at
any particular time.

Thus, when called into active service by the federal government,
members of a XXX are deemed to be employees of the United States
and the XXX itself is viewed as an agency or instrumentality of
the federal government. When not so called, absent specific
federal legislation to the contrary, the XXX is not viewed as an
agency or instrumentality of the federal government and members
thereof are not viewed as federal employees. Maryland Use of
Levin v. United States, 381 US 41, 14 L Ed 2d 205, 85 S Ct.
1293, vacated on other grounds 382 US 159, 15 L Ed 2d 227, 86 S
Ct. 305 (1965). See also, 32 C.F.R. Chapter XI, Part
1101.52(b). Thus, given the dual nature of the XXX and given
the high level of federal control over every aspect of the XXX,
it is sometimes difficult to determine when a XXX is acting for
the federal government and when it is not.

There are no exemptions available under state law which "exempt"
XXX or the XXX from collecting and remitting sales tax on sales
made in the Post Exchange. However, as discussed below, federal
law appears to provide "immunity" from the duty to collect and
remit Florida's sales taxes when such sales are made by the XXX
and/or XXX on federal land used as a military training
reservation. This is not an "exemption" but rather "immunity"
provided by the federal government under the concept of federal
pre-emption of state law.

Pursuant to the Supremacy Clause of the United States
Constitution, the State of Florida is without the power to
impose its sales taxes on sales taking place on federal land
absent specific Congressional Consent to such taxation. The
Supremacy Clause of the United States Constitution, Article VI,
Clause 2, reads as follows:

This Constitution, and the laws of the United States which
shall be made in Pursuance thereof; and all Treaties made,
or which shall be made, under the Authority of the United
States, shall be the supreme Law of the Land; and the
Judges in every State shall be bound thereby, and any Thing
in the Constitution or Laws of any State to the contrary
notwithstanding.

Congress has granted the State of Florida a limited right to
impose its sales taxes on sales taking place on federal
reservations in the Buck Act, 4 U.S.C. Section 101 et seq.
Section 105(a), of Title 4 U.S.C. reads as follows:

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; and such State or taxing authority shall have
full jurisdiction and power to levy and collect any such
tax in any Federal area within such State to the same
extent and with the same effect as though such area was not
a Federal area.

The grant of authority in 4 U.S.C. Section 105(a) allowing
States to exercise state sales tax laws on a federal reservation
is limited by the word "person" in that statute. The State can
only impose its sales tax laws on a "person." "Person" is
defined in Section 110 of the Buck Act, 4 U.S.C. Section 110(a),
by referencing the definition of "person" in the Internal
Revenue Code, 26 U.S.C. Section 3797. Section 3797 has now been
replaced by Internal Revenue Code Section 7701, 26 U.S.C.

This section provides in pertinent part as follows:

(a) When used in this title, where not otherwise distinctly
expressed or manifestly incompatible with the intent
thereof--

(1) Person.--The term "person" shall be construed to mean
and include an individual, a trust, estate, partnership,
association, company or corporation.

Section 7701, 26 U.S.C. also provides a definition for the word
"state." It is not clear from the definition in Section
7701(a)(1), 26 U.S.C. whether the word "person" includes a
state; however, the fact that there is a separate definition for
the word "state" may indicate that states were not viewed as
within the definition of "person." Ultimately, though, whether
a state is a "person" or not will depend on the context of its
use, whether or not defining a state as a "person" for purposes
of the Buck Act would be "manifestly incompatible" with the
intent of the Buck Act or, put another way, "[W]hether the word
`person'... includes a State or the United States depends upon
its legislative environment." Georgia v. Evans, et. al., 316
U.S. 159, 62 S. Ct. 972, 86 L. Ed. 1346 (1942) quoting from Ohio
v. Helvering, 292 U.S. 360, 370, 54 S. Ct. 725, 727, 78 L.Ed.
1307. Given that the Buck Act was passed to give states more
power to impose state laws within the boundaries of federal
enclaves and, that, clearly, the present situation was not
contemplated, it would be difficult to argue that the framers of
the Buck Act intended a state to be viewed as a "person" for
purposes of that Act. Indeed, research failed to reveal any
case defining the word "person," for purposes of the Buck Act,

as including a state. Research into cases addressing other
federal acts in which the word "person" is used failed to
provide any assistance in resolving the issue at hand. Some
cases held that a state could be viewed as a "person" and some
cases held that a state was not to be viewed as a "person."

CONCLUSION

It is the Department's position that when the XXX is operating
the Post Exchange within the federal reservation after having
been activated by the federal government that the XXX is an
instrumentality of the federal government and thereby immune
from the operation of Florida's laws. It is also the
Department's position that when the XXX is operating the Post
Exchange within the federal enclave but has not been activated
by the federal government that it is not a federal
instrumentality but that the laws of the State of Florida are
inoperative on the federal reservation as having been pre-empted
by federal law. The basis for this pre-emption when XXX has not
been activated by the federal government is the clear
prohibition against state action on federal land absent
Congressional approval, the Buck Act's failure to clearly
include states within the word "person," the purposes for which
the Buck Act was enacted, i.e. to provide aid and assistance to
states, and the lack of a clear judicial consensus on whether a
state is a "person" within the meaning of federal law. See
also, AGO 073-364, October 1, 1973, in which the Florida
Attorney General opined that a Post Exchange on the same
military training facility here at issue need not collect or
remit taxes on malt beverages sold, served or distributed by it.

This response constitutes a Technical Assistance Advisement
under s. 213.22, F.S., which is binding on the department only
under the facts and circumstances described in the request for
this advice as specified in Section 213.22, F.S. Our response
is predicated on those facts and the specific situation
summarized above. You are advised that subsequent statutory or
administrative rule changes or judicial interpretations of the
statutes or rules upon which this advice is based may subject
similar future transactions to a different treatment than
expressed in this response.

You are further advised that this response and your request are
public records under Chapter 119, F.S., which are subject to
disclosure to the public under the conditions of Section 213.22,
F.S. Your name, address, and any other details which might lead
to identification of the taxpayer must be deleted by the
Department before disclosure. In an effort to protect the
confidentiality of such information, we request you notify the
undersigned in writing within 15 days of any deletions you wish
made to the request or the response.

Sincerely,

Tracy L. Allen
Assistant General Counsel
P.O. Box 6668
Tallahassee, FL 32314