A-20190, APRIL 2, 1928, 7 COMP. GEN. 621

A-20190, APRIL 2, 1928, 7 COMP. GEN. 621

CONTRACTS - STATE TAX ON GASOLINE WHERE THE GOVERNMENT ENTERED INTO A CONTRACT FOR THE PURCHASE OF GASOLINE AND IT WAS UNDERSTOOD BETWEEN THE PARTIES TO THE CONTRACT THAT THE PRICE PER GALLON STIPULATED THEREIN DID NOT INCLUDE GASOLINE TAX AND THAT IN ADDITION TO THE STIPULATED PRICE THE CONTRACTOR WOULD BE PAID OR REIMBURSED THE AMOUNT OF ALL TAXES IT MIGHT BE REQUIRED TO PAY ON GASOLINE, PAYMENT OF SUCH TAX IN ACCORDANCE WITH THE UNDERSTANDING IS AUTHORIZED. (7 COMP. GEN. 349, MODIFIED.)

DECISION BY COMPTROLLER GENERAL MCCARL, APRIL 2, 1928:

THE ATLANTIC REFINING CO. HAS REQUESTED RECONSIDERATION OF DECISION OF THIS OFFICE DATED NOVEMBER 23, 1927, A-20190, 7 COMP. GEN. 349, WHEREIN WAS DISALLOWED ITS CLAIM IN THE AGGREGATE SUM OF $9,597.59 REPRESENTING THE AMOUNT ALLEGED TO HAVE BEEN PAID BY IT TO THE STATE OF VIRGINIA AS A TAX OF 4 1/2 CENTS PER GALLON ON GASOLINE FURNISHED THE NAVY DEPARTMENT UNDER CONTRACT NO. 67255, DATED MAY 15, 1926.

THE PROVISIONS OF THE GASOLINE TAX LAW AS ENACTED BY THE STATE OF VIRGINIA, APPLICABLE TO THE SALES HERE IN QUESTION, WERE SET FORTH IN THE FORMER DECISION TO WHICH REFERENCE IS MADE.

THE FACTS THEN OF RECORD AND ON WHICH THE DECISION OF NOVEMBER 23, 1927, SUPRA, WAS BASED, DISCLOSED THAT IN RESPONSE TO INVITATIONS FOR BIDS CLAIMANT COMPANY SUBMITTED A PROPOSAL TO FURNISH AN APPROXIMATE QUANTITY OF MOTOR AND AVIATION GASOLINE TO THE NAVY DEPARTMENT AT VARIOUS POINTS DESIGNATED IN THE ADVERTISEMENT DURING THE PERIOD JULY 1, 1926, TO DECEMBER 31, 1926. THE PROPOSAL WAS ACCEPTED AND A FORMAL CONTRACT ENTERED INTO UNDER DATE OF MAY 15, 1926, WHICH FIXED THE PRICE TO BE PAID AT 0.1275 PER GALLON FOR THE MOTOR GASOLINE AND 0.195 FOR AVIATION GASOLINE. IT WAS HELD THAT THE QUESTION AS TO THE PRICE THE GOVERNMENT MAY BE REQUIRED TO PAY THE DEALER OR DISTRIBUTOR WAS FOR DETERMINATION IN ACCORDANCE WITH THE TERMS OF THE CONTRACT UNDER WHICH THE GASOLINE WAS PURCHASED BY THE GOVERNMENT AND THAT INASMUCH AS THE CLAIMANT IN SUBMITTING ITS BID MADE NO MENTION OF THE STATE GASOLINE TAX AND THAT AS THE CONTRACT CALLED FOR THE DELIVERY OF AN ESTIMATED QUANTITY OF GASOLINE AT A DEFINITE PRICE PER GALLON AND NO SPECIFIC PROVISION WAS MADE THEREIN FOR THE PAYMENT BY THE GOVERNMENT OF ANY AMOUNT IN ADDITION TO THE UNIT PRICE SO STATED--- 0.1275 PER GALLON FOR THE MOTOR GASOLINE AND 0.195 PER GALLON FOR AVIATION GASOLINE--- TO COVER ANY TAX WHICH THE CONTRACTOR MIGHT BE REQUIRED TO PAY TO THE STATE OF VIRGINIA, THERE WAS NO LEGAL LIABILITY ON THE PART OF THE GOVERNMENT FOR PAYMENT THEREOF.

THE ADVERTISEMENT WHICH WAS SENT PROSPECTIVE BIDDERS AND WHICH WAS BY REFERENCE MADE A PART OF THE FORMAL CONTRACT PROVIDED THAT:

UNIT PRICES IN THIS PROPOSAL WILL BE SHOWN SEPARATELY FOR THE GASOLINE AND STATE OR MUNICIPAL TAXES. SHOULD ANY STATE OR MUNICIPAL TAX BE PROPERLY CHARGEABLE TO THE FEDERAL GOVERNMENT ON DELIVERIES OF GASOLINE UNDER CONTRACT ENTERED INTO AS A RESULT OF THIS BID, THE AMOUNT OF SUCH TAXES WILL BE ADDED TO THE CONTRACT AS A SEPARATE ITEM.

IN REQUESTING RECONSIDERATION OF THE MATTER THE CLAIMANT COMPANY CONTENDS IN SUBSTANCE THAT THE PARTIES TO THE CONTRACT AGREED ON A UNIT PRICE TO BE PAID FOR THE GASOLINE WHICH DID NOT INCLUDE THE STATE TAX AND THAT BOTH PARTIES KNEW AND UNDERSTOOD THAT THE PRICE WOULD NOT INCLUDE THE TAX AND THAT IN SUBMITTING ITS ORIGINAL PROPOSAL WHICH FORMED THE BASIS OF THE CONTRACT IN QUESTION THERE WAS INSERTED THEREIN A STATEMENT WITH REFERENCE TO THE GASOLINE TAX AS FOLLOWS:

STATE OR MUNICIPAL TAXES DO NOT APPLY TO GOVERNMENTAL DELIVERIES.

AS TO THIS STATEMENT THE PAYMASTER GENERAL OF THE NAVY, UNDER DATE OF DECEMBER 7, 1927, MADE THE FOLLOWING CERTIFICATE:

I CERTIFY THAT THE FOLLOWING WORDS APPEAR ON PAGE 3 OF THE ORIGINAL PROPOSAL OF THE ATLANTIC REFINING CO., ON FILE IN THE BUREAU OF SUPPLIES AND ACCOUNTS, NAVY DEPARTMENT, WHICH FORMED THE BASIS FOR CONTRACT NO. 67255, DATED MAY 15, 1926, JUST PRECEDING THE WORDS:

"BIDS MUST BE SUBMITTED AT DEFINITE PRICES, IN CENTS PER GALLON. BIDS QUOTING DIFFERENTIALS BASED ON MARKET PRICES WILL NOT BE CONSIDERED. BIDDER MUST STATE AT EACH POINT, IN SPACE PROVIDED THEREFOR, POINT FROM WHICH TANK CAR AND DRUM SHIPMENTS WILL BE MADE.'

"STATE OR MUNICIPAL TAXES DO NOT APPLY TO GOVERNMENTAL DELIVERIES.'

THIS STATEMENT IN THE PROPOSAL, WITHOUT OTHER SUPPORTING FACTS, WOULD NOT OBLIGATE THE UNITED STATES FOR THE PAYMENT OF THE SAID TAX. AS FURTHER EVIDENCE THAT IT WAS UNDERSTOOD BETWEEN THE PARTIES THAT THE PRICE STATED IN THE CONTRACT DID NOT INCLUDE STATE GASOLINE TAX AND THAT THERE WOULD BE ADDED TO SAID STATED PRICE THE AMOUNT OF ANY TAX THE CONTRACTOR MIGHT BE REQUIRED TO PAY ON THE GASOLINE, THE CONTRACTOR SUBMITS A LETTER DATED JUNE 11, 1926, FROM THE OFFICER IN CHARGE, NAVAL SUPPLY STATION, HAMPTON ROADS, VA., WHEREIN THE SAID CONTRACTOR WAS ADVISED AS FOLLOWS:

IT IS NOTED THAT THE ABOVE-MENTIONED CONTRACT HAS BEEN ENTERED INTO WITH YOUR COMPANY FOR MOTOR GASOLINE, TO BE DELIVERED AT THIS BASE IN TANK CARS DURING THE SIX MONTHS' PERIOD BEGINNING JULY 1, 1926. FOR YOUR INFORMATION IT IS STATED THAT AN AGREEMENT IS IN EFFECT WITH THE MOTOR VEHICLE COMMISSIONER OF THE STATE OF VIRGINIA WHEREBY PAYMENT OF THE VIRGINIA STATE ROAD TAX OF 4 1/2 CENTS PER GALLON IS MADE MONTHLY, BASED UPON STATEMENTS PREPARED BY THIS OFFICE. THIS ARRANGEMENT IS NECESSARY SINCE THIS STATION EXPORTS CONSIDERABLE QUANTITIES OF GASOLINE, AND EXPORT GASOLINE IS EXEMPTED FROM THE ROAD TAX. ALL GASOLINE IS ORDERED BY THIS STATION TO REPLENISH STOCK IN OUR STORAGE TANKS AND IT CAN NOT BE FORESEEN AT TIME OF DELIVERY WHAT QUANTITY WILL BE ISSUED FOR LOCAL CONSUMPTION AND WHAT QUANTITY WILL BE EXPORTED.

IT IS REQUESTED THAT THE ARRANGEMENT OUTLINED BELOW, WHICH HAS HERETOFORE BEEN FOLLOWED WITH SATISFACTION TO ALL CONCERNED, BE CONTINUED DURING THE LIFE OF YOUR CONTRACT.

SHORTLY AFTER THE CLOSE OF EACH MONTH THIS OFFICE WILL FURNISH YOU WITH A STATEMENT SHOWING THE DISPOSITION OF GASOLINE ISSUED DURING THE MONTH AND REPORTING THE QUALITY ON WHICH THE ROAD TAX IS PAYABLE. IT WILL THEN BE IN ORDER FOR YOU TO SETTLE ACCORDINGLY WITH THE STATE OF VIRGINIA AND TO RENDER A BILL TO THIS OFFICE FOR A LIKE AMOUNT. PROMPTLY UPON RECEIPT OF YOUR INVOICE, PUBLIC BILL IN YOUR FAVOR WILL BE PREPARED. THIS OFFICE WILL, OF COURSE, MAKE CLAIM DIRECTLY UPON THE STATE OF VIRGINIA FOR REFUND OF TAX ON SUCH PART OF THE GASOLINE AS WAS NOT ACTUALLY CONSUMED ON THE PUBLIC HIGHWAYS OF THE STATE. IT IS REQUESTED THAT NO ROAD TAX CHARGE BE INCLUDED IN YOUR INVOICES COVERING SPECIFIC DELIVERIES OF GASOLINE.

IT THUS APPEARS THAT IT WAS UNDERSTOOD BETWEEN THE PARTIES TO THE CONTRACT THAT THE PRICE STIPULATED THEREIN DID NOT INCLUDE STATE GASOLINE TAX AND THAT, IN ADDITION TO SUCH PRICE, THE CONTRACTOR WOULD BE PAID OR REIMBURSED THE AMOUNT OF ALL STATE TAXES IT MIGHT BE REQUIRED TO PAY ON THE GASOLINE.

IT APPEARS THAT THE PROCEDURE FOLLOWED BY THE NAVY DEPARTMENT WAS SIMPLY AN ARRANGEMENT TO ALLOW THE CONTRACTOR AS A PART OF THE PURCHASE PRICE TO BE PAID FOR THE GASOLINE SUCH SUM OR SUMS AS IT SHOULD BE CALLED UPON TO PAY AS TAXES IN ADDITION TO THE BASE SUM FIXED IN THE CONTRACT. SEE EMERY V. UNITED STATES, 13 FED.REP. (2D) 658. IN OTHER WORDS, IF THE TERMS AND CONDITIONS OF THE UNDERSTANDING THAT APPARENTLY EXISTED BETWEEN THE CONTRACTOR AND THE CONTRACTING OFFICER IN THIS CASE HAD BEEN INCORPORATED INTO THE CONTRACT, THE EFFECT WOULD HAVE BEEN AN AGREEMENT THAT TO THE PRICES STIPULATED IN THE CONTRACT WOULD BE ADDED THE AMOUNT OF ANY TAX WHICH THE CONTRACTOR MIGHT HAVE BEEN REQUIRED TO PAY THE STATE OF VIRGINIA ON THE GASOLINE, IT APPEARING THAT A PART OF THE GASOLINE WOULD BE EXEMPT FROM SUCH TAX BECAUSE INTENDED FOR EXPORT.

IT IS NOT APPARENT WHY THERE WERE NOT INCORPORATED IN PLAIN TERMS IN THE CONTRACT THE PROVISIONS ABOVE INDICATED, WHICH APPEAR TO HAVE BEEN SO CLEARLY UNDERSTOOD BY THE CONTRACTOR AND THE CONTRACTING OFFICER AND WHICH WERE LEGAL AND PROPER. 3 COMP. GEN. 348, 781; 5 ID. 1022. THE NAVY DEPARTMENT'S INSTRUCTIONS TO BIDDERS IN REGARD TO THE SHOWING OF UNIT PRICES SEPARATELY FROM GASOLINE TAX, AND THE STATEMENT THAT STATE OR MUNICIPAL TAXES DO NOT APPLY TO GOVERNMENTAL DELIVERIES, ARE AMBIGUOUS AND MISLEADING, AS IS, ALSO, THE CLAUSE THAT--- "SHOULD ANY STATE OR MUNICIPAL TAX BE PROPERLY CHARGEABLE TO THE FEDERAL GOVERNMENT ON DELIVERIES OF GASOLINE UNDER CONTRACT ENTERED INTO AS A RESULT OF THIS BID, THE AMOUNT OF SUCH TAXES WILL BE ADDED TO THE CONTRACT AS A SEPARATE ITEM.' THE ADVERTISEMENT, INSTRUCTIONS TO BIDDERS, PROPOSAL, OR FORMAL CONTRACT SHOULD SET FORTH IN PLAIN TERMS THE UNDERSTANDING OF THE PARTIES WITH REFERENCE TO THE SUBJECT MATTER OF THE CONTRACT.

UPON THE RECORD AS PRESENTED AT THE TIME THE DECISION OF NOVEMBER 23, 1927, SUPRA, WAS MADE, THE DISALLOWANCE OF THE CLAIM WAS PROPER. HOWEVER, THE PROVISIONS OF THE CONTRACT, READ IN THE LIGHT OF THE NAVY DEPARTMENT'S ASSURANCE TO THE CONTRACTOR THAT THE SALE UNDER THE CONTRACT WOULD NOT BE SUBJECT TO THE STATE TAX AND ITS SUBSEQUENT INSTRUCTIONS TO THE CONTRACTOR TO PAY THE SAID TAX ON SO MUCH OF THE PURCHASE AS SHOWN NOT TO BE FOR EXPORT, WHICH MATTERS WERE NOT DISCLOSED TO THIS OFFICE WHEN SAID DECISION WAS RENDERED, MAY BE ACCEPTED AS PROVIDING FOR MAKING THE AMOUNT OF THE SAID TAX ON THE GASOLINE NOT FOR EXPORT A PART OF THE CONTRACT PRICE IN ADDITION TO THE PRICE STIPULATED IN THE CONTRACT.

ACCORDINGLY, UPON RECONSIDERATION OF THE MATTER IN LIGHT OF THE FACTS AS HEREIN STATED, THERE MAY NOW BE ALLOWED TO THE CONTRACTOR SUCH AMOUNT AS MAY BE SHOWN TO HAVE BEEN PAID BY THE CONTRACTOR TO THE STATE OF VIRGINIA AS TAX ON SO MUCH OF THE GASOLINE DELIVERED UNDER THIS CONTRACT AS WAS NOT EXEMPT FROM SUCH TAX UNDER THE STATE LAW--- SUCH AS THE GASOLINE PURCHASED FOR EXPORT.