A-46168, DECEMBER 29, 1932, 12 COMP. GEN. 480

A-46168: Dec 29, 1932

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ON THE SALE OF GASOLINE IS ON THE PRODUCER. THERE IS NO AUTHORITY IN ANY CONTRACTING OFFICER OF THE GOVERNMENT TO PROVIDE BY CONTRACT OR OTHERWISE FOR THE PAYMENT OF THE TAX BY THE UNITED STATES (IN THIS CASE THE PURCHASER). ON THE SALE OF GASOLINE CAN BE PASSED ON TO THE GOVERNMENT IS THAT THE AMOUNT OF SAID TAX BE ADDED TO THE PRICE OTHERWISE FIXED AND BECOME A PART OF THE CONTRACT PRICE. THERE IS INCLOSED AN APPROVED VOUCHER IN FAVOR OF THE SINCLAIR REFINING COMPANY IN THE SUM OF $0.70. CONTRACT W 626 QM 12742 IS DATED JUNE 30. OR OTHER TAXES IMPOSED BY CONGRESS UPON THE COMMODITY COVERED BY THIS CONTRACT AND EFFECTIVE DURING THE PERIOD THEREOF WILL BE CHARGED TO THE GOVERNMENT AND WILL BE ENTERED ON INVOICES AS A SEPARATE ITEM.' 3.

A-46168, DECEMBER 29, 1932, 12 COMP. GEN. 480

CONTRACTS - DISCOUNTS - FEDERAL TAX ON GASOLINE THE TAX IMPOSED BY SECTION 617 OF THE ACT OF JUNE 6, 1932, 47 STAT. 266, ON THE SALE OF GASOLINE IS ON THE PRODUCER, AND THERE IS NO AUTHORITY IN ANY CONTRACTING OFFICER OF THE GOVERNMENT TO PROVIDE BY CONTRACT OR OTHERWISE FOR THE PAYMENT OF THE TAX BY THE UNITED STATES (IN THIS CASE THE PURCHASER). THE ONLY POSSIBLE THEORY ON WHICH THE TAX IMPOSED BY SECTION 617 OF THE ACT OF JUNE 6, 1932, 47 STAT. 266, ON THE SALE OF GASOLINE CAN BE PASSED ON TO THE GOVERNMENT IS THAT THE AMOUNT OF SAID TAX BE ADDED TO THE PRICE OTHERWISE FIXED AND BECOME A PART OF THE CONTRACT PRICE, AND WHERE SUCH A CONTRACT PROVIDES FOR A DISCOUNT FOR PROMPT PAYMENT, THE DISCOUNT SHOULD BE TAKEN ON THE ENTIRE AMOUNT PAID FOR THE GASOLINE, INCLUDING THE AMOUNT ADDED TO COVER THE TAX.

COMPTROLLER GENERAL MCCARL TO MAJ. W. D. DABNEY, UNITED STATES ARMY, DECEMBER 29, 1932:

BY FIRST INDORSEMENT OF DECEMBER 5, 1932, THE CHIEF OF FINANCE, WAR DEPARTMENT, TRANSMITTED YOUR LETTER OF NOVEMBER 29, 1932, AS FOLLOWS:

1. THERE IS INCLOSED AN APPROVED VOUCHER IN FAVOR OF THE SINCLAIR REFINING COMPANY IN THE SUM OF $0.70, WHICH ACCOUNT HAS BEEN PRESENTED TO THE UNDERSIGNED, A DISBURSING OFFICER, FOR PAYMENT. THIS VOUCHER COVERS REFUND OF AMOUNT OF DISCOUNT DEDUCTED ON FEDERAL TAX OF $70.16-- VOUCHER NO. 3436 OF NOVEMBER, 1932, ACCOUNTS OF THE UNDERSIGNED (COPY INCLOSED).

2. CONTRACT W 626 QM 12742 IS DATED JUNE 30, 1932, AND CONTAINS THE FOLLOWING STATEMENT:

"ANY SALES TAX, DUTIES, IMPOSTS, REVENUES, EXCISE, OR OTHER TAXES IMPOSED BY CONGRESS UPON THE COMMODITY COVERED BY THIS CONTRACT AND EFFECTIVE DURING THE PERIOD THEREOF WILL BE CHARGED TO THE GOVERNMENT AND WILL BE ENTERED ON INVOICES AS A SEPARATE ITEM.'

3. INVOICE OF THE SINCLAIR REFINING COMPANY ON WHICH VOUCHER NO. 3436 OF NOVEMBER, 1932, WAS BASED COVERED---

TABLE

7,016 GALLONS GASOLINE AT $0.0732 PER GAL-------------- $513.57

FEDERAL GAS TAX--- $0.01------------------------------- 70.16

583.73

4. IN MAKING PAYMENT OF THIS INVOICE 1 PERCENT DISCOUNT PROVIDED FOR IN THE CONTRACT WAS TAKEN ON THE TOTAL OF THE BILL AND NOT ONLY ON TOTAL FOR GASOLINE EXCLUSIVE OF TAX, AS IT IS THE OPINION OF THE UNDERSIGNED THAT THE AMOUNT ALLOWED AS DISCOUNT UNDER A CONTRACT IS THE SUM VENDOR IS WILLING TO PAY FOR PAYMENT OF THE ACCOUNT WITHIN A STIPULATED PERIOD.

5. IN VIEW OF THE PROTEST OF THE SINCLAIR REFINING COMPANY CONTAINED IN LETTER OF THE 23D INSTANT INCLOSED HEREWITH, AN ADVANCE DECISION IS REQUESTED AS TO WHETHER OR NOT IN MAKING PAYMENTS UNDER CONTRACTS IN WHICH THE TAX IS SHOWN AS A SEPARATE ITEM DISCOUNT SHOULD BE TAKEN ON THE AMOUNT OF THE MERCHANDISE ONLY OR WHETHER DISCOUNT SHOULD BE TAKEN ON THE AMOUNT OF THE MERCHANDISE PLUS THE FEDERAL TAX.

6. IN VIEW OF THE LARGE NUMBER OF ACCOUNTS SIMILAR TO THE INCLOSED PRESENTED TO THIS OFFICE FOR PAYMENT, AN EARLY DECISION IS REQUESTED.

SECTION 617 OF THE ACT OF JUNE 6, 1932, 47 STAT. 266, PROVIDES:

(A) THERE IS HEREBY IMPOSED ON GASOLINE SOLD BY THE IMPORTER THEREOF OR BY A PRODUCER OF GASOLINE, A TAX OF 1 CENT A GALLON, EXCEPT THAT UNDER REGULATIONS PRESCRIBED BY THE COMMISSIONER WITH THE APPROVAL OF THE SECRETARY THE TAX SHALL NOT APPLY IN THE CASE OF SALES TO A PRODUCER OF GASOLINE.

(B) IF A PRODUCER OR IMPORTER USES (OTHERWISE THAN IN THE PRODUCTION OF GASOLINE) GASOLINE SOLD TO HIM FREE OF TAX, OR PRODUCED OR IMPORTED BY HIM, SUCH USE SHALL FOR THE PURPOSES OF THIS TITLE BE CONSIDERED A SALE.

(C) AS USED IN THIS SECTION---

(1) THE TERM "PRODUCER" INCLUDES A REFINER, COMPOUNDER, OR BLENDER, AND A DEALER SELLING GASOLINE EXCLUSIVELY TO PRODUCERS OF GASOLINE, AS WELL AS A PRODUCER.

(2) THE TERM "GASOLINE" MEANS GASOLINE, BENZOL, AND ANY OTHER LIQUID THE CHIEF USE OF WHICH IS AS A FUEL FOR THE PROPULSION OF MOTOR VEHICLES, MOTOR BOATS, OR AEROPLANES.

IT APPEARS THAT A QUANTITY OF GASOLINE WAS FURNISHED AND THAT THE FEDERAL TAX THEREON AMOUNTED TO $70.16 AND THAT IN MAKING PAYMENT THEREFOR THE 1 PERCENT DISCOUNT PROVIDED FOR IN THE CONTRACT WAS DEDUCTED FROM THE AMOUNT OF THE TAX AS WELL AS THE AMOUNT TO BE PAID FOR THE GASOLINE EXCLUSIVE OF THE TAX. THE CONTRACTOR PROTESTED THE PAYMENT ON THE GROUND THAT THE TAX WAS BILLED AS A SEPARATE ITEM IN ACCORDANCE WITH THE TERMS OF THE CONTRACT AND THAT THE DISCOUNT WAS NOT APPLICABLE THERETO.

THE CUSTOM OF ALLOWING DISCOUNT FOR PROMPT PAYMENT WITHIN A SPECIFIED TIME IS PREDICATED ON THE THEORY THAT THE USE OF THE MONEY TIED UP IN THE SHIPMENT, DELIVERY, ETC., WILL BE WORTH TO THE VENDOR THE AMOUNT OF THE DISCOUNT OFFERED AND FROM THE STANDPOINT OF THE VENDEE IN DETERMINING WHETHER THE OPTION TO PAY WITHIN THE DISCOUNT PERIOD SHALL BE EXERCISED, THERE IS FOR CONSIDERATION WHETHER THE USE OF THE MONEY BEYOND THE DISCOUNT PERIOD WILL BE OF MORE BENEFIT THAT THE AMOUNT OF THE DISCOUNT. HENCE, IT IS IMMATERIAL AS TO WHAT PART OF THE AMOUNT INVOLVED REPRESENTS TO THE VENDOR ORIGINAL COST, HANDLING CHARGES, PROFIT, DELIVERY CHARGES, TAXES, ETC., IT BEING ASSUMED THAT THE VENDOR CONSIDERED ALL SUCH THINGS IN ARRIVING AT THE PRICE QUOTED. IT IS NO CONCERN OF THE VENDEE HOW THE FINAL BID PRICES WERE ARRIVED AT. IN OTHER WORDS, IN THIS CASE, THE SAID CONTRACTOR BY AGREEING TO A DISCOUNT OF 1 PERCENT WITHIN 10 CALENDAR DAYS FROM AND INCLUDING DATE OF DELIVERY OF THE GASOLINE AT DESTINATION ACKNOWLEDGED THAT IT WAS WILLING TO ACCEPT IN FULL SETTLEMENT A PAYMENT OF 99 PERCENT OF THE TOTAL AMOUNT WITHIN 10 DAYS STIPULATED IN LIEU OF A PAYMENT OF 100 PERCENT OF THE AMOUNT DUE AT SOME LATER DATE.

THE TAX IMPOSED BY SECTION 617 OF THE ACT OF JUNE 6, 1932, SUPRA, IS ON THE PRODUCER, PRODUCER BEING DEFINED IN THE SAID ACT AS INCLUDING "REFINER, COMPOUNDER, OR BLENDER, AND A DEALER SELLING GASOLINE EXCLUSIVELY TO PRODUCERS OF GASOLINE, AS WELL AS A PRODUCER.' SUCH BEING THE CASE, THERE WOULD CLEARLY BE NO AUTHORITY IN THE WAR DEPARTMENT OR ANY OTHER DEPARTMENT OR ESTABLISHMENT OF THE GOVERNMENT TO PROVIDE BY CONTRACT OR OTHERWISE THAT IT SHALL BE PAID BY THE PURCHASER (IN THIS CASE THE UNITED STATES). THE ONLY POSSIBLE THEORY ON WHICH THE BURDEN OF THE TAX IMPOSED BY THE ACT, SUPRA, CAN BE PASSED ON TO THE GOVERNMENT IS THAT THE AMOUNT OF THE SAID TAX BE ADDED TO THE PRICE OTHERWISE FIXED AND BECOME A PART OF THE CONTRACT PRICE AND IT MUST BE ASSUMED THAT THAT WAS THE PURPOSE AND EFFECT OF THE PROVISION INVOLVED IN THE CONTRACT NOW UNDER CONSIDERATION. IF THIS IS NOT THE TRUE SITUATION THEN THE SAID PROVISION IS OF NO FORCE OR EFFECT WHATEVER BECAUSE, AS NOTED, SUPRA, THERE IS NO AUTHORITY IN THE CONTRACTING OFFICER TO OBLIGATE THE UNITED STATES TO PAY A TAX. WHERE AN AGENT OF THE GOVERNMENT ACTS IN EXCESS OF THE AUTHORITY VESTED IN HIM HIS ACT, FROM A LEGAL STANDPOINT, IS NO LONGER THE ACT OF THE GOVERNMENT. THE UNDERWRITER, 6 FED.REP./2D) 937.

ANSWERING SPECIFICALLY THE QUESTION PRESENTED, YOU ARE ADVISED THAT THE DISCOUNT SHOULD BE TAKEN ON THE ENTIRE AMOUNT PAID FOR THE GASOLINE INCLUDING THE AMOUNT ADDED TO COVER THE TAX. ACCORDINGLY, THE DEDUCTION OF THE DISCOUNT IN THIS CASE WAS PROPER AND PAYMENT ON THE VOUCHER PRESENTED IS NOT AUTHORIZED.