Montana v. United States

440 U.S. 147 (1979)

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Nature of the Case

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Facts

The State of Montana imposes a one percent gross receipts tax upon contractors of public, but not private, construction projects. Peter Kiewit Sons' Co., brought suit in state court contending that the Montana gross receipts tax unconstitutionally discriminated against the United States and the companies with which it dealt. One month later, the United States sued on the same issue in District Court for the District of Montana. On stipulation by the parties, the instant case was continued pending resolution of the state-court litigation. A unanimous decision by the Montana Supreme Court sustained the tax. The contractor then instituted a second action in state court seeking a refund for certain tax payments different from those involved in Kiewit I. On determining that the contractor's second legal claim was, in all material respects, identical to its first, the Montana Supreme Court invoked the doctrines of collateral estoppel and res judicata to affirm the dismissal of the complaint. After the decision in Kiewit II, a three-judge District Court heard the instant case on the merits. In a divided opinion, the court concluded that the United States was not bound by the Kiewit I decision and struck down the tax as violative of the Supremacy Clause. Their reasoning was that the Supremacy Clause immunizes the Federal Government not only from direct taxation by the States but also from indirect taxation that operates to discriminate against the Government or those with whom it transacts business. No private contractors were subject to the Montana gross receipts tax, and this impermissibly singled out the Federal Government and those with whom it dealt for disparate treatment. The Supreme Court granted certiorari.