Which U.S. Supreme Court case established that states cannot tax the federal government?

McCulloch v. Maryland established that a state could not tax the federal government or interfere with a federal institution. In 1819, the Supreme Court struck down Maryland’s tax on the Second Bank of the United States.

Maryland had imposed a tax on bank notes issued by banks not chartered in the state. Although the law was written generally, the Second Bank was the only such out-of-state bank operating there, making it the practical target. James McCulloch, the bank’s Baltimore cashier, refused to pay the tax.

Chief Justice John Marshall’s unanimous opinion made two major constitutional points. First, Congress possessed implied powers under the Necessary and Proper Clause, so it could establish a national bank even though the Constitution did not expressly mention one. Second, valid federal action was supreme over conflicting state action under the Supremacy Clause.

The decision is often summarized by Marshall’s warning that “the power to tax involves the power to destroy.” That principle protects federal operations from direct state taxation, although it does not mean every tax affecting federal contractors or federal spending is automatically invalid.