A-43944, AUGUST 24, 1932, 12 COMP. GEN. 278

A-43944: Aug 24, 1932

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TAXES - GASOLINE - FEDERAL THE UNITED STATES AS A CONTRACTOR IS NOT RESPONSIBLE FOR ITS ACTS IN A SOVEREIGN CAPACITY. AS FOLLOWS: WILL YOU ASSIST US IN OBTAINING FAIR TREATMENT FROM GOVERNMENT UNDER CONTRACTS CONCERNING WHICH WE SENT FOLLOWING WIRE ON AUGUST NINTH TO FOURTH ASSISTANT POSTMASTER GENERAL DIVISION OF EQUIPMENT AND SUPPLIES NAMELY BETWEEN DATES OF MAY TWENTY-SEVENTH AND JUNE FOURTH THIS YEAR WE SUBMITTED BIDS TO YOUR DEPARTMENT THROUGH POSTMASTERS FOR FURNISHING GASOLINE AT SIOUX CITY AND DUBUQUE IOWA OMAHA NEBRASKA ST JOSEPH AND ST LOUIS MISSOURI FOR THE THIRD QUARTER OF THE YEAR COMMENCING JULY FIRST STOP THERE WAS NO FEDERAL TAX ON GASOLINE AT THE TIME WE SUBMITTED OUR BIDS AND OUR BIDS DID NOT INCLUDE ANY GASOLINE TAXES OF ANY KIND WHATEVER STOP OUR ACTUAL GROSS PROFIT MARGIN ON THESE BIDS IS APPROXIMATELY ONE QUARTER OF A CENT PER GALLON STOP THESE BIDS WERE ACCEPTED BY YOUR DEPARTMENT BETWEEN THE DATES OF JUNE EIGHTH AND JUNE FOURTEENTH WHICH WAS AFTER CONGRESS HAD ENACTED A FEDERAL GASOLINE TAX LAW OF ONE CENT PER GALLON STOP IN VIEW OF THE FACT THAT THE LAW WAS PASSED AFTER WE SUBMITTED OUR BID IT CANNOT BE PRESUMED THAT OUR BID INCLUDED A TAX CONCERNING WHICH WE HAD NO INFORMATION AND WHICH WAS NOT IN EXISTENCE STOP WE ARE ADVISED BY THE POSTMASTER AT ST.

A-43944, AUGUST 24, 1932, 12 COMP. GEN. 278

TAXES - GASOLINE - FEDERAL THE UNITED STATES AS A CONTRACTOR IS NOT RESPONSIBLE FOR ITS ACTS IN A SOVEREIGN CAPACITY, AND A GOVERNMENT CONTRACT FOR THE DELIVERY OF GASOLINE, WITHOUT ANY STIPULATION AS TO THE PAYMENT OF A TAX THEREON SHOULD ONE BE IMPOSED, MAY NOT BE AMENDED SO AS TO OBLIGATE THE GOVERNMENT TO PAY THE AMOUNT OF SUCH TAX IN ADDITION TO THE CONTRACT PRICE, IN THE CASE OF CONTRACTS ENTERED INTO AFTER MAY 1, 1932, WHERE THE LAW IMPOSING THE TAX PROVIDED THAT, AS TO CONTRACTS MADE BEFORE THAT DATE, FOR DELIVERY OF GASOLINE AFTER THE TAX TAKES EFFECT, THE BURDEN OF PAYING THE TAX SHALL REST ON THE VENDEE RATHER THAN ON THE VENDOR.

COMPTROLLER GENERAL MCCARL TO L. L. CORYELL AND SON, AUGUST 24, 1932:

THERE HAS BEEN RECEIVED AND CONSIDERED YOUR TELEGRAM OF AUGUST 10, 1932, AS FOLLOWS:

WILL YOU ASSIST US IN OBTAINING FAIR TREATMENT FROM GOVERNMENT UNDER CONTRACTS CONCERNING WHICH WE SENT FOLLOWING WIRE ON AUGUST NINTH TO FOURTH ASSISTANT POSTMASTER GENERAL DIVISION OF EQUIPMENT AND SUPPLIES NAMELY BETWEEN DATES OF MAY TWENTY-SEVENTH AND JUNE FOURTH THIS YEAR WE SUBMITTED BIDS TO YOUR DEPARTMENT THROUGH POSTMASTERS FOR FURNISHING GASOLINE AT SIOUX CITY AND DUBUQUE IOWA OMAHA NEBRASKA ST JOSEPH AND ST LOUIS MISSOURI FOR THE THIRD QUARTER OF THE YEAR COMMENCING JULY FIRST STOP THERE WAS NO FEDERAL TAX ON GASOLINE AT THE TIME WE SUBMITTED OUR BIDS AND OUR BIDS DID NOT INCLUDE ANY GASOLINE TAXES OF ANY KIND WHATEVER STOP OUR ACTUAL GROSS PROFIT MARGIN ON THESE BIDS IS APPROXIMATELY ONE QUARTER OF A CENT PER GALLON STOP THESE BIDS WERE ACCEPTED BY YOUR DEPARTMENT BETWEEN THE DATES OF JUNE EIGHTH AND JUNE FOURTEENTH WHICH WAS AFTER CONGRESS HAD ENACTED A FEDERAL GASOLINE TAX LAW OF ONE CENT PER GALLON STOP IN VIEW OF THE FACT THAT THE LAW WAS PASSED AFTER WE SUBMITTED OUR BID IT CANNOT BE PRESUMED THAT OUR BID INCLUDED A TAX CONCERNING WHICH WE HAD NO INFORMATION AND WHICH WAS NOT IN EXISTENCE STOP WE ARE ADVISED BY THE POSTMASTER AT ST. LOUIS THAT YOUR DEPARTMENT HAS RULED THAT IT IS PRESUMED THE FEDERAL TAX WAS INCLUDED IN OUR BID PRICE AND DIRECTING THE POSTMASTER TO MAKE SETTLEMENT AT THE QUOTED PRICE ONLY STOP SUCH A PRESUMPTION DOES COMPLETE VIOLENCE TO THE FACTS WITH RESPECT TO OUR BIDS STOP WE CANNOT PRESUME TO KNOW WHAT CONGRESS IS GOING TO DO IN THE MATTER OF REVENUE BILLS IT SEEMS TO US THE GOVERNMENT IS NOT IMMUNE FROM THE REQUIREMENT OF FAIR DEALING STOP THE ACT OF THE GOVERNMENT IN IMPOSING A TAX AFTER WE FILED OUR BIDS AND THEN ACCEPTING OUR BID MADE WITHOUT KNOWLEDGE OF THE TAX IS UNFAIR AND ILLEGAL UNLESS YOUR DEPARTMENT ASSUMES THE TAX STOP THIS WILL THROW A LOSS UPON US OF THREE QUARTERS OF A CENT PER GALLON AND THIS IN OUR OPINION IS NOT FAIR DEALING STOP WILL YOU KINDLY INVESTIGATE IMMEDIATELY AND DIRECT POSTMASTERS TO ADD FEDERAL TAX ON BIDS MADE AND FILED BEFORE THE LAW WAS PASSED AND ACCEPTED AFTER THE LAW CAME INTO EFFECT OR RELEASE US FROM PERFORMANCE OF REMAINDER OF CONTRACT ON ACCOUNT OF COMPLETE LACK OF UNDERSTANDING BETWEEN PARTIES.

YOU PROPOSED JUNE 3, 1932, TO DELIVER APPROXIMATELY 1,000 GALLONS OF GASOLINE TO THE POST OFFICE AT DUBUQUE, IOWA, FOR $0.0689 PER GALLON, AND THIS PROPOSAL WAS ACCEPTED JUNE 10, 1932. YOU PROPOSED JUNE 4, 1932, TO DELIVER APPROXIMATELY 1,700 GALLONS OF GASOLINE TO THE POST OFFICE AT SIOUX CITY, IOWA, FOR $0.0689 A GALLON, AND THIS PROPOSAL WAS ACCEPTED JUNE 10, 1932. YOU PROPOSED MAY 21, 1932, TO DELIVER APPROXIMATELY 1,800 GALLONS OF GASOLINE TO THE POST OFFICE AT ST. JOSEPH, MO., FOR $0.0689 PER GALLON, AND THIS PROPOSAL WAS ACCEPTED MAY 24, 1932. YOU PROPOSED MAY 31, 1932, TO DELIVER APPROXIMATELY 65,000 GALLONS OF GASOLINE TO THE POST OFFICE AT ST. LOUIS, MO., FOR $0.0649 PER GALLON, AND THIS PROPOSAL WAS ACCEPTED ON OR ABOUT JUNE 7, 1932. YOU PROPOSED JUNE 6, 1932, TO DELIVER APPROXIMATELY 18,000 GALLONS OF GASOLINE TO THE POST OFFICE AT OMAHA, NEBR., FOR $0.0673 PER GALLON, AND THIS PROPOSAL WAS ACCEPTED JUNE 11, 1932. THERE WAS NO STIPULATION IN THESE CONTRACTS THAT THE UNITED STATES SHOULD PAY AMOUNTS EQUAL TO THE TAX IMPOSED BY THE ACT OF JUNE 6, 1932, PUBLIC, NO. 154, 47 STAT. 169, 269, AND IT IS TO BE NOTED THAT SECTION 625 OF THAT ACT PROVIDED THAT---

IF (1) ANY PERSON HAS, PRIOR TO MAY 1, 1932, MADE A BONA FIDE CONTRACT FOR THE SALE, AFTER THE TAX TAKES EFFECT, OF ANY ARTICLE IN RESPECT OF THE SALE OF WHICH A TAX IS IMPOSED UNDER THIS TITLE, OR IN RESPECT OF WHICH A TAX IS IMPOSED UNDER THIS SUBSECTION, AND (2) SUCH CONTRACT DOES NOT PERMIT THE ADDING TO THE AMOUNT TO BE PAID UNDER SUCH CONTRACT, OF THE WHOLE OF SUCH TAX, THEN (UNLESS THE CONTRACT PROHIBITS SUCH ADDITION) THE VENDEE SHALL, IN LIEU OF THE VENDOR, PAY SO MUCH OF THE TAX AS IS NOT SO PERMITTED TO BE ADDED TO THE CONTRACT PRICE. IF A CONTRACT OF THE CHARACTER ABOVE DESCRIBED WAS MADE WITH THE UNITED STATES OR WITH ANY PERSON OTHER THAN A DEALER, NO TAX SHALL BE COLLECTED UNDER THIS TITLE.

THE PROPOSALS IN ALL OF THESE CASES WERE SUBMITTED AFTER MAY 1, 1932, AND, OF COURSE, THERE WAS NO CONTRACT AS THE RESULT THEREOF PRIOR TO MAY 1, 1932, AND WITHIN SECTION 625 OF THE ACT OF JUNE 6, 1932. THE LAW HAVING SPECIFICALLY PROVIDED WITH RESPECT TO CONTRACTS PRIOR TO MAY 1, 1932, THE ONLY POSSIBLE INTERPRETATION IS THAT THE STATUTE WAS INTENDED TO APPLY TO AND TO IMPOSE THE BURDEN OF THE TAX UPON THE SELLER WITH RESPECT TO ALL CONTRACTS AFTER MAY 1, 1932, UPON THE THEORY, POSSIBLY, THAT ALL BIDDERS AFTER MAY 1, 1932, HAD NOTICE OF THE FACT THAT TAX LEGISLATION WAS PENDING IN THE CONGRESS AND HAD SUBMITTED THEIR PROPOSALS ACCORDINGLY.

BUT, HOWEVER THAT MAY BE, THE PRINCIPLE OF LAW IS WELL SETTLED THAT THE UNITED STATES AS A CONTRACTOR IS NOT RESPONSIBLE FOR ITS ACTS IN A SOVEREIGN CAPACITY. THAT IS TO SAY, THE UNITED STATES AS A CONTRACTOR WITH YOU FOR THE DELIVERY OF GASOLINE IS NOT RESPONSIBLE FOR ANY ADDITIONAL BURDENS IMPOSED UPON YOU BY THE GOVERNMENT IN ITS SOVEREIGN CAPACITY IN THE FORM OF A TAX WHICH WAS APPLICABLE TO ALL ALIKE. SEE 8 COMP. GEN. 25, 26, WHEREIN IT WAS STATED, AMONG OTHER THINGS, THAT--

IT IS SETTLED THAT A CONTRACT MAY NOT BE MODIFIED PREJUDICIAL TO THE UNITED STATES WITHOUT ADEQUATE CONSIDERATION THEREFOR. SEE PREIS AND CO. V. UNITED STATES, 58 CT.CLS. 81. THE ACT OF MAY 17, 1928, IS A GENERAL STATUTE APPLICABLE TO ALL PERSONS DOING BUSINESS IN THE DISTRICT OF COLUMBIA INCLUDED WITHIN ITS TERMS AND IT CAN NOT BE CONSIDERED A "CHANGE" WITHIN THE MEANING OF ARTICLE 3 OF THE CONTRACT. IT IS EQUALLY WELL SETTLED THAT THE CHARACTER OF THE UNITED STATES AS SOVEREIGN AND AS CONTRACTOR ARE SEPARATE AND DISTINCT AND THAT THE UNITED STATES, AS A CONTRACTOR, IS NOT RESPONSIBLE IN DAMAGES BECAUSE OF ITS ACTS IN ITS SOVEREIGN CAPACITY. THE MATTER WAS CONSIDERED BY THE SUPREME COURT OF THE UNITED STATES IN HOROWITZ V. UNITED STATES, 267 U.S. 458, AND BY THE CIRCUIT COURT OF APPEALS IN MAXWELL V. UNITED STATES, 3 FED.REP./2D) 906. THE COURT SAID IN THE FIRST-NAMED CASE, IN SUPPORT OF ITS CONCLUSION TO THE EFFECT THE UNITED STATES AS A CONTRACTOR WAS NOT RESPONSIBLE FOR ITS ACTS IN ITS SOVEREIGN CAPACITY, THAT---

"IT HAS LONG BEEN HELD BY THE COURT OF CLAIMS THAT THE UNITED STATES WHEN SUED AS A CONTRACTOR CANNOT BE HELD LIABLE FOR AN OBSTRUCTION TO THE PERFORMANCE OF THE PARTICULAR CONTRACT RESULTING FROM ITS PUBLIC AND GENERAL ACTS AS A SOVEREIGN. DEMING V. UNITED STATES, 1 CT.CLS. 190, 191; JONES V. UNITED STATES, 1 CT.CLS. 383, 384; WILSON V. UNITED STATES, 11 CT.CLS. 513, 520. IN THE JONES CASE, SUPRA, THE COURT SAID: "THE TWO CHARACTERS WHICH THE GOVERNMENT POSSESSES AS A CONTRACTOR AND AS A SOVEREIGN CANNOT BE THUS FUSED; NOR CAN THE UNITED STATES WHILE SUED IN THE ONE CHARACTER BE MADE LIABLE IN DAMAGES FOR THEIR ACTS DONE IN THE OTHER. WHATEVER ACTS THE GOVERNMENT MAY DO, BE THEY LEGISLATIVE OR EXECUTIVE, SO LONG AS THEY BE PUBLIC AND GENERAL, CANNOT BE DEEMED SPECIALLY TO ALTER, MODIFY, OBSTRUCT OR VIOLATE THE PARTICULAR CONTRACTS INTO WHICH IT ENTERS WITH PRIVATE PERSONS. * * * IN THIS COURT, THE UNITED STATES APPEARS SIMPLY AS CONTRACTORS; AND THEY ARE TO BE HELD LIABLE ONLY WITHIN THE SAME LIMITS THAT ANY OTHER DEFENDANT WOULD BE IN ANY OTHER COURT. THOUGH THEIR SOVEREIGN ACTS PERFORMED FOR THE GENERAL GOOD MAY WORK INJURY TO SOME PRIVATE CONTRACTORS, SUCH PARTIES GAIN NOTHING BY HAVING THE UNITED STATES AS THEIR DEFENDANTS.'"

THERE IS NO LEGAL BASIS UNDER WHICH THIS OFFICE COULD PERMIT CHARGES AGAINST APPROPRIATED FUNDS UNDER THE CONTRACTS IN QUESTION FOR AN AMOUNT EQUIVALENT TO THE FEDERAL TAX IMPOSED BY THE ACT OF JUNE 6, 1932, NOR WHICH WOULD AUTHORIZE YOUR RELEASE FROM PERFORMANCE OF THE REMAINDER OF SAID CONTRACTS EXPIRING SEPTEMBER 30, 1932.