B-190293, NOV. 3, 1977, 57 COMP.GEN. 59

B-190293, NOV. 3, 1977, 57 COMP.GEN. 59

TAXES - STATE - GASOLINE - VERMONT - GOVERNMENT IMMUNITY VERMONT STATUTE IMPOSING A SALES TAX ON GASOLINE OF NINE CENTS A GALLON, REQUIRING THE DISTRIBUTOR TO COLLECT THE TAX FROM THE DEALER, AND THE DEALER TO COLLECT IT FROM THE CONSUMER, PLACES THE LEGAL INCIDENCE OF THE TAX ON THE VENDEE. THE UNITED STATES IS IMMUNE FROM PAYMENT OF THIS TAX. 33 COMP.GEN. 453 IS OVERRULED.

IN THE MATTER OF THE VERMONT GASOLINE TAX, NOVEMBER 3, 1977:

WE HAVE RECEIVED A REQUEST FOR A DECISION FROM THE DIRECTOR, FINANCIAL MANAGEMENT DIVISION, CHICAGO REGION, U.S. CUSTOMS SERVICE, DEPARTMENT OF THE TREASURY, ASKING WHETHER THE FEDERAL GOVERNMENT IS IMMUNE FROM A VERMONT STATE TAX ON GASOLINE PURCHASED AT THE RETAIL LEVEL.

DURING THE SUMMER OF 1977, CUSTOMS SERVICE AGENTS ON TEMPORARY DUTY IN VERMONT USED CREDIT CARDS ISSUED TO CUSTOMS BY THE MOBIL OIL CORPORATION. THE TOTAL PURCHASES AMOUNTED TO 289.4 GALLONS, WITH THE STATE TAX TOTALLING $26.05. THE VERMONT ATTORNEY GENERAL DISAGREES WITH THE CUSTOMS SERVICE CONTENTION THAT THE FEDERAL GOVERNMENT IS IMMUNE FROM THIS TAX. THE CUSTOMS SERVICE HAS PAID THE TAX IN QUESTION UNDER PROTEST, PENDING OUR DECISION IN THIS MATTER.

THE IMMUNITY OF THE FEDERAL GOVERNMENT FROM PAYMENT OF STATE TAXES IS BASED UPON THE CONSTITUTIONAL PRINCIPLE OF SOVEREIGN IMMUNITY. HOWEVER, A TAX DOES NOT NECESSARILY VIOLATE THE IMMUNITY OF THE FEDERAL GOVERNMENT MERELY BECAUSE THE FINANCIAL BURDEN OF THE TAX CAN BE PASSED ON TO THE UNITED STATES. ALABAMA V. KING AND BOOZER, 314 U.S. 1 (1941) (WHICH HELD THAT A TAX ON A GOVERNMENT CONTRACTOR WAS NOT PROHIBITED SIMPLY BECAUSE ITS TAX BURDEN IS PASSED ON TO THE UNITED STATES ECONOMICALLY BY THE TERMS OF A CONTRACT). WHETHER GOVERNMENTAL IMMUNITY APPLIES DEPENDS ON WHERE THE LEGAL INCIDENCE OF THE TAX FALLS UNDER THE STATE STATUTE.

GENERALLY, IF THE LEGAL INCIDENCE OF THE TAX IS ON THE VENDOR, THE UNITED STATES IS NOT CONSTITUTIONALLY IMMUNE FROM PAYMENT OF THE TAX, EVEN WHEN IT ULTIMATELY BEARS THE ECONOMIC BURDEN. HOWEVER, IF THE INCIDENCE OF THE TAX FALLS ON THE VENDEE BY OPERATION OF STATE LAW, THE UNITED STATES, AS THE VENDEE, WOULD BE CONSTITUTIONALLY IMMUNE FROM ITS PAYMENT. SEE 55 COMP.GEN. 1358, 1359 (1976), AND CASES CITED THEREIN.

THUS, RESOLUTION OF THE FEDERAL GOVERNMENT'S IMMUNITY RESTS UPON AN ANALYSIS OF THE PARTICULAR STATE STATUTE INVOLVED. THE VERMONT STATUTE IN QUESTION READS, IN PERTINENT PART:

* * * EACH DISTRIBUTOR SHALL PAY TO THE COMMISSIONER A TAX OF NINE CENTS A GALLON UPON EACH GALLON OF SUCH MOTOR FUEL SOLD BY THE DISTRIBUTOR. THE DISTRIBUTOR SHALL COLLECT SUCH TAX FROM THE DEALER AND THE DEALER FROM THE CONSUMER. VT. STAT. ANN. TIT. 32, SEC. 8806 (SUPP. 1977).

IT IS NOTED THAT THE TAX IS FIRST UPON THE DISTRIBUTOR, WHO MUST PASS THE TAX ONTO THE RETAIL VENDOR, WHO THEN IS REQUIRED TO PASS IT IN TURN TO THE VENDEE. THE SUPREME COURT HAS SPOKEN TO THIS SITUATION, STATING:

IT WOULD APPEAR TO BE INDISPUTABLE THAT A SALES TAX WHICH BY ITS TERMS MUST BE PASSED ON TO THE PURCHASER IMPOSES THE LEGAL INCIDENCE OF THE TAX UPON THE PURCHASER. SEE FEDERAL LAND BANK V. BISMARCK LUMBER CO., 314 U.S. 95, 99, 86 L.ED. 65, 69, 62 S.CT. 1. * * *. FIRST AGRICULTURAL NATIONAL BANK V. STATE TAX COMMISSION, 392 U.S. 339, 347 (1968).

A SIMILAR RESULT WAS REACHED IN DIAMOND NATIONAL CORP. V. STATE BOARD OF EQUALIZATION, 425 U.S. 268 (1976), DEALING WITH WHETHER THE INCIDENCE OF A CALIFORNIA SALES TAX FELL UPON THE RETAILER-VENDOR, OR UPON THE VENDEE, A PURCHASING NATIONAL BANK. THE STATUTE INVOLVED PROVIDED THAT:

THE TAX HEREBY IMPOSED SHALL BE COLLECTED BY THE RETAILER FROM THE CONSUMER IN SO FAR AS IT CAN BE DONE. CAL. REV. & TAX CODE SEC. 6052.

THE UNITED STATES SUPREME COURT, REVERSING THE CALIFORNIA COURT OF APPEAL'S DECISION THAT THIS STATUTE MERELY PERMITTED THE RETAILER TO PASS THE TAX ON AND THAT THE INCIDENCE OF THE TAX WAS THEREFORE ON THE VENDOR, HELD THAT THE STATE AND LOCAL SALES TAXES FELL UPON THE NATIONAL BANK AS PURCHASER AND NOT UPON THE VENDOR. THEREFORE, THE NATIONAL BANK WAS EXEMPT FROM TAXES.

CERTAINLY, IF THE CALIFORNIA STATUTE IS NOW HELD TO PLACE THE INCIDENCE OF THE TAX ON THE VENDEE, SO, TOO, DOES THE VERMONT STATUTE UNDER CONSIDERATION HERE, AS ITS LANGUAGE REQUIRING THE COLLECTION BY THE VENDOR FROM THE VENDEE IS CLEARLY STATED. SEE 55 COMP.GEN. 1358, 1359-60 (1976).

IN 33 COMP.GEN. 453 (1954), WE DISCUSSED THE SAME ISSUE INVOLVING THIS VERY STATUTE. WE HELD THAT THE INCIDENCE OF THE TAX FELL UPON THE GASOLINE DISTRIBUTOR, RATHER THAN THE CONSUMER. THIS WAS BASED ON THE FACT THAT THE GASOLINE DISTRIBUTOR WAS STILL LIABLE FOR THE TAX REGARDLESS OF WHETHER IT WAS COLLECTED BY HIM FROM THE RETAILER. IN ADDITION, WE NOTED THAT THE DISTRIBUTOR COULD BE HELD LIABLE FOR THE TAX ON AN ALTERNATE BASIS OF THE AMOUNT PURCHASED, IMPORTED, ETC., FROM THE MANUFACTURER, EVEN IF HE NEVER SOLD THE GASOLINE IN QUESTION TO THE RETAILER. WE HAVE NOW RECONSIDERED OUR POSITION IN THE 1954 DECISION IN LIGHT OF MORE RECENT OPINIONS OF THE SUPREME COURT AND THE DECISIONS OF THE COMPTROLLER GENERAL BASED THEREON. WE NOW HOLD THAT THE FACT THAT THERE IS NO SANCTION AGAINST A VENDOR WHO FAILS TO PASS ALONG THE TAX DOES NOT AUTOMATICALLY MEAN THAT THE TAX IS ON THE VENDOR. FIRST AGRICULTURAL NATIONAL BANK V. STATE TAX COMMISSION, 392 U.S. 339, 348 (1968). WHERE A TAX STATUTE STATES THAT THE TAX MUST BE PASSED ON TO THE PURCHASER, THE LEGAL INCIDENCE OF THE TAX FALLS UPON THE PURCHASER. 33 COMP.GEN. 453 (1954) IS THEREFORE OVERRULED. SEE DIAMOND NATIONAL CORP. V. STATE BOARD OF EQUALIZATION, 425 U.S. 268 (1976); FIRST AGRICULTURAL NATIONAL BANK V. STATE TAX COMMISSION, SUPRA; 55 COMP.GEN. 1358 (1976).

OUR ATTENTION HAS BEEN BROUGHT BY A VERMONT ASSISTANT ATTORNEY GENERAL AND THE CUSTOMS SERVICE TO THE CASE OF KERN-LIMERICK V. SCURLOCK, 347 U.S. 110 (1953), WHICH INVOLVED AN ARKANSAS SALES TAX SIMILAR TO THE VERMONT STATUTE UNDER CONSIDERATION HERE. THE ARKANSAS TAXING STATUTE PROVIDED THAT THE TAX WOULD BE LEVIED ON THE SELLER'S GROSS RECEIPTS AND THAT THE SELLER "SHALL COLLECT THE TAX LEVIED HEREBY FROM THE PURCHASER." 347 U.S.AT 111-12. ADDITIONALLY, THE STATUTE CONTAINED AN EXPRESS EXEMPTION FOR SALES TO THE UNITED STATES GOVERNMENT.

IN KERN-LIMERICK, THE COST-PLUS-FIXED-FEE CONTRACT BETWEEN THE CONTRACTOR AND THE UNITED STATES PROVIDED THAT THE CONTRACTOR WOULD ACT AS ITS PURCHASING AND DISBURSING AGENT AND THAT TITLE TO GOODS PURCHASED WOULD PASS DIRECTLY FROM THE VENDOR TO THE GOVERNMENT WITHOUT VESTING IN THE CONTRACTOR.

THE UNITED STATES SUPREME COURT HELD THAT IN VIEW OF THIS CONTRACT, THE UNITED STATES, RATHER THAN THE CONTRACTOR, WAS THE PURCHASER OF THE GOODS, AND, THEREFORE, WAS NOT LIABLE FOR PAYMENT OF THE TAX.

THIS CASE WAS DECIDED ON THE BASIS OF THE CONTRACTURAL AGENCY RELATIONSHIP BETWEEN THE CONTRACTOR AND THE UNITED STATES. ALTHOUGH A FINDING THAT THE INCIDENCE OF THE TAX FALLS UPON VENDEE IS NECESSARY TO ESTABLISH CONSTITUTIONAL IMMUNITY, ONCE HAVING DECIDED THAT THE UNITED STATES WAS THE TRUE PURCHASER THE COURT DID NOT DISCUSS WHETHER THE LANGUAGE OF THE STATUTE IMPOSED A VENDOR OR VENDEE TAX SINCE, IN ANY EVENT, THE STATE'S EXEMPTION FOR SALES TO THE GOVERNMENT WOULD BE APPLICABLE.

THEREFORE, THE KERN-LIMERICK CASE IS OF LITTLE PRECEDENTIAL VALUE HERE.

WE ALSO NOTE THAT THE VERMONT STATUTE PROVIDES A LIMITED EXEMPTION FOR SALES BY THE DISTRIBUTOR OF GASOLINE TO THE UNITED STATES. TO QUALIFY, THESE SALES MUST BE IN BULK LOTS OF NOT LESS THAN 500 GALLONS IN EACH DELIVERY. VT. STAT. ANN. TIT. 32, SEC. 8808. SINCE THE PURCHASES INVOLVED WERE MADE AT THE RETAIL LEVEL IN QUANTITIES LESS THAN THE 500 GALLON MINIMUM, THIS EXEMPTION WOULD NOT APPLY IN THE INSTANT CASE.

ACCORDINGLY, WE FIND THAT THE UNITED STATES IS IMMUNE FROM PAYMENT OF TAXES FOR GASOLINE PURCHASED AT THE RETAIL LEVEL IN VERMONT. A REFUND OF THE $26.05 PAID UNDER PROTEST SHOULD BE OBTAINED FROM THE STATE.