dissenting:
I dissent. For ease of reference, I prefer to state my own version of the relevant facts.
BACKGROUND
The Montana Act levies a 1% tax upon the gross receipts of “public contractors,” defined to include all persons who perform contracts for the State of Montana, its subdivisions, and the United States Government [the federal government]. The Act contains provision for refunds and credits: contractors who produce proof of payment of personal property taxes receive a prorata refund of taxes paid; the balance of the tax may be claimed as a credit against Montana personal income and corporate taxes.
In its 1971 action, the federal government sought both a declaratory judgment as to the constitutionality of the Act and an injunction prohibiting the collection of the tax and ordering a refund of the taxes previously collected. In May of 1971, this court, pursuant to a stipulation of the parties granted a continuance until such time as the Montana courts could consider the Act. The Montana Supreme Court considered the Act on two occasions and ruled against the federal government both times.
In the first, Peter Kiewit Sons’ Co. v. State Board of Equalization, 161 Mont. 140, 505 P.2d 102 (1973) [Kiewit # 1 ], the federal government concedes that it was the real party in interest. Relevant to the present inquiry, Kiewit # 1 resolved the following issues:
*362(1) It held that the Act did not have the effect of imposing a tax directly upon the federal government.
(2) It held that the statutory classification between public and private contractors was rational and constitutional such that there could be no discrimination against either the federal government or the public contractors.
(3) It held that there was no discrimination against the federal government because the Act complied with equal force to all public contractors.
In Peter Kiewit Sons’ Co. v. Department of Revenue, 166 Mont. 260, 531 P.2d 1327 (1975) [Kiewit # 2], the Montana Supreme Court reaffirmed its earlier decision and held that Kiewit # 1 was res judicata. It also held that a reasonable classification for tax purposes lay between public and private contractors and that the Act was a legitimate revenue raising device.
After the decision in Kiewit # 1, both parties moved for summary judgment in this court. The state, in arguing that the case should be dismissed under the authority of, inter alia, England v. Medical Examiners, 375 U.S. 411, 84 S.Ct. 461, 11 L.Ed.2d 440 (1964), claimed that the federal government tried its case in the state courts and left no issues for decision by the federal court. This court, however, specifically declined to rule on these res judicata and collateral estoppel issues on the ground that at least “ . . . some of the [federal] Government’s presently asserted issues of violation of the Supremacy Clause remain viable and unfettered by any holding in Kiewit [# 1], . . .” [Filed November 20, 1974].
Before us, the federal government advances the same arguments it made in the state courts, and continues to maintain that the Act discriminates against it. The state takes the opposite position and, in addition, claims that the federal government is precluded from relitigating these issues on either res judicata or collateral estoppel principles.
PRELIMINARY CONSIDERATION
At various places throughout the majority opinion, see, e. g., footnotes 1, 4, and 6, the majority intimates that its decision is based at least in part upon a view of the legislative history of the Act and the treatment given it by the Montana Supreme Court [in Kiewit # 1 ]. The majority indicates that the Act has resulted in the raising of revenue, “all in the face of legislative and judicial disavowal of intent to do so.” This is wrong and totally overlooks what the Montana Supreme Court said in Kiewit # 2. Kiewit made the same argument there: it argued that the Act was constitutional only insofar as it created a fund from which the state could secure the payment of income taxes and personal property taxes; any amount remaining after such payment, the argument goes, had to be refunded to the individual contractor. The Montana Supreme Court expressly rejected this argument:
“Kiewit insists that the only basis for this Court’s conclusion that the Act was not discriminatory as to the public contractors was that if the Act were properly enforced, it would result in a ‘washout’; that is, refunds of personal property taxes and contractors’ income taxes would offset the 1% gross receipts tax. Kiewit reads our opinion much too narrowly. We held there that a reasonable classification for tax purposes lay between private and public contractors." [Emphasis supplied]. 531 P.2d at 1328-9.
Clearly, the Supreme Court of the State of Montana held that the Act was a legitimate revenue raising device. We are faced, therefore, with only two general issues, the res judicata /collateral estoppel one, and the issue involving the propriety of the tax under the Supremacy Clause.
RES JUDICATA AND COLLATERAL ESTOPPEL
Because I disagree with the substantive holdings of the majority, it is unnecessary to even consider its treatment of the above issues. Nevertheless, it is important that I express my firm views on these issues.
*363At the outset, I must say that I am unable to understand the majority’s treatment of this problem. It at no point distinguishes between the doctrines of res judicata and collateral estoppel in its one-paragraph discussion. On the basis of this court’s November 20, 1974, decision [denying the summary judgment motions], the majority summarily concludes that, “the Supremacy Clause issue” remains. This is a gross misinterpretation of that decision which concluded merely that “ . . .at the least, some of the Government’s presently asserted issues of violation of the Supremacy Clause remain viable and unfettered by any holdings in Kiewit [# 1]. . ” [Emphasis supplied]. The majority does not distinguish between the variety of Supremacy Clause issues that were raised. Nor does it mention the issues that were tried and decided in Kiewit # l.1 The majority leaves us in the dark as to the issues it feels remain and why.
For example, it here considers and upholds the propriety of the classification between resident and non-resident contractors even though it felt in 1974 that Kiewit # 1 had disposed of the issue.2 Similarly, the majority completely avoids the fact that the Supremacy Clause issues [relied upon by it to invalidate the Act] were already decided by the Montana Supreme Court in Kiewit # 1. In short, the majority’s failure to indicate whether and to what extent the federal government is bound by the prior litigation has only obscured the nature of the issues to be decided.
England applies where the federal government “freely and without reserva*364tion” submits its federal claims for decision to the state courts. The federal government has not shown us when or how it informed the state courts of any intention to return to the federal court. On the record here presented, I can only conclude that the federal government did so submit its claims.
Moreover, in its conclusion that the Act was unconstitutional on the two substantive grounds, the majority did not specifically consider the application of the collateral estoppel doctrine. From its conclusion that these two issues remained open after Kiewit # 1, it says by implication that the doctrine would apply to bar consideration of the issues if they had been presented in the state court. I agree with this implication, and think that the issues were raised.
I conclude that the federal government had the requisite control over the litigation in the state courts.3 ****8 Having such control, it was bound by the outcome. Drummond v. United States, 324 U.S. 316, 65 S.Ct. 659, 89 L.Ed. 969 (1945). See generally Expert Electric, Inc. v. Levine, 564 F.2d 1227 (C.A.2 1977); American Safety Flight Systems v. Garrett Corp., 528 F.2d 288 (C.A.9 1975); Aerojet General Corp. v. Askew, 611 F.2d 710 (C.A.5 1975), cert. denied 423 U.S. 908, 96 S.Ct. 210,46 L.Ed.2d 137; Troy Company v. Products Research Co., 339 F.2d 364, 367 (C.A.9 1964); petition for cert. dismissed, 381 U.S. 930, 85 S.Ct. 1762, 14 L.Ed.2d 689 (1965). See also IB Moore’s Federal Practice § 0.411[6]; Restatement of Judgments § 84, Comment (e) (1942). At a minimum, therefore, the federal government is collaterally estopped from relitigating the issues that were tried in state courts. Thus, even if the England rule does not apply, I would conclude that the doctrine of collateral estoppel applies and that it precludes our consideration of the merits of the two substantive issues reached by the majority.
MERITS
Assuming, arguendo, that the merits are properly before us, I would oppose the majority views.
It concludes that the Act discriminates against the federal government and in favor of the state. Its conclusion, I believe, is fundamentally unsound.
The majority reasons that:
. . the State would receive as general revenue that portion of the G. R. Tax remaining after allowing credits and refunds. . . . Contra, the [federal] Government . . . gets no return of the overplus of approximately 50 percent.”
Thus, the majority correctly finds that this state tax results in state revenue [that portion of the tax retained after refunds and credits]. It goes on, however, to erroneously find that the existence of this state revenue works a discrimination against the federal government because there is no corresponding revenue to the federal government. This reasoning, if followed to its logical conclusion, would effectively invali*365date the state taxes routinely upheld in Alabama v. King & Boozer, 314 U.S. 1, 62 S.Ct. 43, 86 L.Ed. 3 (1941), and James v. Dravo Contracting, 302 U.S. 134, 58 S.Ct. 208, 82 L.Ed. 155 (1937).
Dravo, for example, involved a two percent gross receipts tax imposed by the state of West Virginia upon contractors performing work in the state. Dravo Contracting was constructing dams and locks in the area pursuant to a contract with the United States. The Court dismissed the constitutional challenges and upheld the tax despite the economic burden upon the federal government. Likewise, the Court in King & Boozer refused to invalidate a two percent Alabama sales tax which was passed on to the federal government contractors under a “cost-plus” contract with the federal government:
“So far as such a non-discriminatory state tax upon the contractor enters into the cost of the materials to the Government, that is but a normal incident of the organization within the same territory of two independent taxing sovereignties. The asserted right of the one to be free of taxation by the other does not spell immunity from paying the added costs, attributable to the taxation of those who furnish supplies to the Government and who have been granted no tax immunity.” 314 U.S. at 8-9, 62 S.Ct. at 45.
The reasoning of the majority sub silentio overrules this and other authority. In each of the above cases, the tax would apply equally to those doing work for the state government. Applying the reasoning of the majority, there is discrimination against the federal government because the otherwise legitimately collected tax [general state revenue] reduces the state’s net cost, thereby allowing it to spend less than the federal government. Thus, under the guise of discrimination against the federal government, any state tax could be traced backwards to defeat its own existence.
Nor can the federal government support its discrimination claim with statistics showing an economic impact upon it. King & Boozer and Dravo upheld taxes with a more severe economic impact than is present here. More recently in United States v. Boyd, 378 U.S. 39, 50-1, 84 S.Ct. 1518, 1525, 12 L.Ed.2d 713 (1964), the Supreme Court expressed its approval of Boozer and its predecessors in clear and precise language as follows:
“The principles laid down in King & Boozer, ... we think, strike a proper judicial accommodation between the interests of the States’ power to tax and the concerns of the Nation, they are workable, and we adhere to them. If they unduly intrude upon the business of the Nation, it is for Congress, in the valid exercise of its powers, not this Court, to make the desirable adjustment.” [Emphasis supplied].4
*366The proper test for discrimination is found in Phillips Co. v. Dumas School Dist., 361 U.S. 376, 80 S.Ct. 474, 4 L.Ed.2d 384 (1960), a case cited to us by both parties in support of their positions. Phillips dealt with a tax by the state of Texas on lessees of property from the federal government, which tax did not apply to lessees of property from the state of Texas as lessor. In striking down the state tax as discriminatory against the federal government, the Court laid down a relatively simple test:
“. . .it does not seem too much to require that the State treat those who deal with the [federal] Government as well as it treats those with whom it deals itself.” Id. at 385, 80 S.Ct. at 480.
The majority erroneously reads this case, and presumably this test, as supportive of its decision. The fact is, however, that all public contractors under the Montana Act, whether working for the state or the federal government, are treated in identical fashion; each of them is subject to the same one percent gross receipts tax. The state of Montana, therefore, does “treat those who deal with the [federal] government as well as it treats those with whom it deals itself.” Id. The Montana courts came to this same conclusion and I think that they were correct. See also International Paper Co. v. County of Siskiyou, 515 F.2d 285 (C.A.9 1974).
OTHER CLAIMS
With little more than a scant reference to the Act’s “discriminatory effect upon it [the federal government] as an owner-builder .,” the majority concludes that it is not precluded under the collateral estoppel doctrine from considering the propriety of the classification between public contractors and private contractors. Its collateral estoppel argument is, of course, without merit.5 Moreover, its reference to a discriminatory effect upon the government is misplaced. This case would have been thrown out of court six years ago if the tax were being placed upon the federal government as a contractor. The fact is that it is not. The federal government complains only about the higher prices it must pay as a result of the tax upon its contractors.6
Its conclusion that the Act discriminates against the federal government and in favor of private parties, is meritless.
Because of its earlier holding of unconstitutionality, the majority . . find[s] it unnecessary to pass upon the Equal Protection Clause issues or upon the questions of collateral estoppel arising as to them.” It, nevertheless, then finds that:
. . [hjowever, nothing in the issues raised presented, nor did the contractor Kiewit have standing to raise on behalf of the Government in Kiewit, the Government’s current issue of the discriminatory effect upon it as an owner-builder by the imposition of the G. R. Tax upon its Contractors in violation of the Supremacy Clause.” [Citation omitted].
Because the interests of the federal government are implicated, the majority correctly treats this “equal protection clause” issue as implicating the Supremacy Clause. Kiewit # 1 did the same thing and cited the same Supremacy Clause cases, but it found the Act constitutional on this ground:
“The second half of the discrimination question raised by appellant is that this tax discriminates against the federal government. It urges that the state of Montana is required to treat the United States and other public bodies as well as it treats private nongovernmental parties. Appellant contends granting a preferred tax status to a substantial number of taxpayers, contractors performing work for private owners, and failing to grant a comparable status to construction contractors of the United States, consti*367tutes unconstitutional discrimination against the United States and those with whom it deals.” * * * * * *
“Here, we do not believe that the state of Montana has discriminated against the federal government.” 505 P.2d at 109.
It is clear, therefore, that the next couple of pages of the majority disposition contain only dicta [because unnecessary to its finding of unconstitutionality], and bad dicta at that [because the issue was foreclosed on collateral estoppel grounds and because it is wrong on the merits]. Kiewit # 1 held that a valid tax classification lay between public and private contractors and I do not think that the federal government has shown otherwise. I find no evidence in the record to show that the federal government met its burden of proof. Testimony offered by the state of Montana, on the other hand, attests to the real and substantial differences between the two classes of contractors. For equal protection purposes, there is a very liberal standard of review and cases will be upheld if there is any conceivable basis which will support the classification. See, e. g., Allied Stores of Ohio v. Bowers, 358 U.S. 522, 79 S.Ct. 437, 3 L.Ed.2d 480 (1959); Brown-Forman Co. v. Kentucky, 217 U.S. 563, 30 S.Ct. 578, 54 L.Ed. 883 (1910). Cf. San Antonio School Dist. v. Rodriguez, 411 U.S. 1, 40-1, 93 S.Ct. 1278, 36 L.Ed.2d 16 (1973). Essentially the same test is applied in cases related to intergovernmental tax immunity under the Supremacy Clause. Chief Justice Warren in the Phillips case, however, indicated that the equal protection cases are not controlling, and that the [federal] government’s interest must be weighed in the balance to ascertain whether the state treats similarly-situated constituents in a similar fashion. 361 U.S. at 385, 80 S.Ct. 474. As noted above, this condition is satisfied here in that all contractors are subject to the same exact tax. In short, I think that the federal government has failed in its burden of showing the classification improper. In view of the standard of review, I would uphold the classification.
The balance of the federal government’s arguments in support of its discrimination claim have been rejected in state court. If they were properly before us, I would find them meritless too.
In particular, the argument that the Act places the legal incidence of the tax upon the federal government is without merit. See 505 P.2d at 110. A much stronger argument on this ground was available in King & Boozer, the situation involving a cost-plus contract where it is clear that the 2% tax was passed on to the federal government, but the Court upheld the state tax. Cases such as United States v. Mississippi Tax Comm’n., 421 U.S. 599, 95 S.Ct. 1872, 44 L.Ed.2d 404 (1975); Agricultural Bank v. Tax Comm’n., 392 U.S. 339, 88 S.Ct. 2173,20 L.Ed.2d 1138 (1968); and Kern-Limerick, Inc. v. Scurlock, 347 U.S. 110, 74 S.Ct. 403, 98 L.Ed. 546 (1954) are clearly distinguishable.
CONCLUSION
Independent of the res judicata and collateral estoppel issues, I reject the majority’s conclusion that the Act discriminates against the federal government and in favor of both the state of Montana and private parties within the state. The state has exercised its power to raise revenue in an even-handed fashion by taxing all those similarly situated [public contractors] in the same manner. United States v. County of Fresno, 429 U.S. 452, at 462, 97 S.Ct. 699, at 704, 50 L.Ed.2d 683. (1/25/77). Cf. Kiewit # 2, 531 P.2d at 1329; State ex rel. Schultz Lindsay v. Board of Equalization, 145 Mont. 380, 403 P.2d 635 (1965). The contrary holding of the majority directly undermines all recent authority in this area. Any increased costs to the federal government, so heavily relied upon by the majority, are “but a normal incident of the organization within the same territory of two independent taxing sovereignties. . . . ”7 Additionally, private parties within the state are not illegally favored because the federal *368government is not in the same class with them.
I would reject all the government’s contentions and dismiss its complaint with prejudice.
. As relevant to the present inquiry, this court, in its 1974 decision, listed the following issues as among those considered in Kiewit # 1:
“(1) The 1% gross receipt tax did not entirely ‘wash out’ [the gross receipt tax collected aggregated more than the contractor’s corporate income and personal property taxes which became payable to Montana and its subdivisions] upon the part of some non-resident contractors and tended to impose a higher overall tax liability to Montana upon those contractors than upon resident contractors. The Supreme Court concluded that this increased liability was due to those contractors’ own action or fault and not to any discriminatory effect through the workings of the Act, and in any event, the effect of the non-washout of the receipts tax collections was of minor consequence and not of unconstitutional status.
“(2) As stated by the Supreme Court, ‘[Kiewit’s] primary argument’ was that the 1% gross receipt tax is placed upon public construction contractors and not private construction contractors and is discriminatory and lacks equal treatment under the law. The Supreme Court reasoned and held, under Montana decisions based upon federal law, that the several classifications between ‘public’ and ‘private’ among contractors were rational, reasonable, and constitutional.
“In addition, the Supreme Court did deal with two issues of alleged discrimination against the Government, namely and as stated by that court:
“(a) The second half of the discrimination question raised by [Kiewit] is that this tax discriminates against the federal government. It urges that the state of Montana is required to treat the United States and other public bodies as well as it treats private nongovernmental parties. That argument was rejected through the rationale that the Government suffered no discrimination since the Act applied with equal force to Montana and its subdivisions in their public contracts. Nevertheless we point out that such a conclusion does not absolve the manifest adverse effect of the operation of the Act and regulations upon the non-resident prospective or firm public contractors and the favoritism allowed resident prospective or firm public contractors who hold a higher potential base of tax liability to Montana, thereby narrowing the field of public contractors open to the Government.
“ ‘(b) Finally, it [was] argued that this Act violates the immunity of the federal government from taxation or the economic impact of taxation.’ This argument was rejected under federal law.”
. I find no indication in Kiewit # 1 that this issue was in fact decided by the Montana Supreme Court such that we could not consider it. In its 1974 decision, however, see footnote 1, this court felt otherwise. Were I to reach the merits of this issue, in any event, I would be in complete agreement with the substantive holding of the majority that any discrimination is de minimus.
The happenstance difference in treatment referred to in the majority opinion [.44% v. .46%] does not approach constitutional dimension even though there is favoritism to the extent that resident contractors are presumed to have a higher potential base of tax liability in the state of Montana. Each contractor, in any event, receives identical tax treatment under the Act. The Act itself makes no distinction.
. To support its position that the federal government was bound by the decisions in the prior litigation, the State refers us to the admitted facts regarding the extent of the federal government’s participation in Kiewit # 1:
(1) The federal government required that the lawsuit be filed by Peter Kiewit.
(2) The federal government reviewed and approved the complaint.
(3) The federal government paid the attorneys fees and costs involved in the action.
(4) The federal government directed the appeal from the state district court to the Montana Supreme Court.
(5) Before the Montana Supreme Court, the federal government appeared as amicus curiae, submitted a brief and participated in oral argument.
(6) The federal government was the real party in interest in the state court litigation.
(7) The federal government directed the filing of a notice of appeal to the United States Supreme Court.
(8) The federal government, through the Solicitor General, effectuated Kiewit’s abandonment of its appeal to the United States Supreme Court.
The federal government maintains, inter alia, that the above facts demonstrate an insufficient amount of participation to say that it had a “laboring oar” in the state court controversy. Drummond v. United States, 324 U.S. 316, 65 S.Ct. 659, 89 L.Ed. 969 (1945). I disagree.
. This same thought has been echoed by the Supreme Court on a number of other occasions. As long ago as 1943, Penn Dairies v. Milk Control Comm’n., 318 U.S. 261, 270-1, 63 S.Ct. 617, 621, 87 L.Ed. 748, the Court stated:
“The trend of our decisions is not to extend governmental immunity from state taxation and regulation beyond the national government itself and governmental functions performed by its officers and agents. We have recognized that the Constitution presupposes the continued existence of the states functioning in coordination with the national government, with authority in the states to lay taxes and to regulate their internal affairs and policy, and that state regulation like state taxation inevitably imposes some burdens on the national government of the same kind as those imposed on citizens of the United States within the state’s borders, [citation]. And we have held that those burdens, save as Congress may act to remove them, are to be regarded as the normal incidents of the operation within the same territory of a dual system of government, and that no immunity of the national government from such burdens is to be implied from the Constitution which established the system, [citation].” [Emphasis supplied].
See also United States v. City of Detroit, 355 U.S. 466, 474, 78 S.Ct. 474, 479, 2 L.Ed.2d 424 (1958):
“Today the United States does business with a vast number of private parties. In this Court the trend has been to reject immunizing these private parties from nondiscriminatory state taxes as a matter of constitutional law. [Citation], Of course this is not to say that Congress, acting within the proper scope of its power, cannot confer immunity by statute where it does not exist constitutionally. Wise and flexible adjustment of intergovernmental tax immunity calls for political and economic *366considerations of the greatest difficulty and delicacy. Such complex problems are ones which Congress is best qualified to resolve.” [Emphasis supplied].
. Kiewit # I decided this precise issue adverse to the contention of the federal government. See footnote 1, supra.
. This claim must be rejected. See text accompanying footnote 4.
. See King & Boozer, supra, 314 U.S. at 9, 62 S.Ct. at 45.