A-56133, JULY 16, 1934, 14 COMP. GEN. 44

A-56133: Jul 16, 1934

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CONTRACTS - PROCESSING TAX THE UNITED STATES IS NOT REQUIRED TO PAY PROCESSING TAX ON THE PRODUCTS PURCHASED BY IT AND. WHERE NO MENTION IS MADE OF ANY TAX IN THE SPECIFICATIONS OR THE BID SUBMITTED BY A CONTRACTOR FOR FURNISHING SUPPLIES TO THE UNITED STATES. THERE IS NO LEGAL LIABILITY ON THE UNITED STATES FOR PAYMENT TO THE CONTRACTOR OF AN AMOUNT EQUAL TO PROCESSING TAXES IMPOSED PRIOR TO THE OPENING OF THE BIDS. WHEREIN WAS DISALLOWED ITS CLAIM FOR $6.61 AS PROCESSING TAX ON HAMS AND BACON FURNISHED THE VETERANS' ADMINISTRATION FACILITY. AMONG WHICH WERE ITEMS A-8 AND A-9. THE CLAIM WAS DISALLOWED IN THE SETTLEMENT. FOR THE REASON THAT CLAIMANT'S BID WAS OPENED ON OCTOBER 23. WHILE THE REGULATIONS APPLYING PROCESSING TAX ON HOG PRODUCTS WERE APPROVED BY THE SECRETARY OF AGRICULTURE AND THE PRESIDENT OF THE UNITED STATES ON OCTOBER 18.

A-56133, JULY 16, 1934, 14 COMP. GEN. 44

CONTRACTS - PROCESSING TAX THE UNITED STATES IS NOT REQUIRED TO PAY PROCESSING TAX ON THE PRODUCTS PURCHASED BY IT AND, WHERE NO MENTION IS MADE OF ANY TAX IN THE SPECIFICATIONS OR THE BID SUBMITTED BY A CONTRACTOR FOR FURNISHING SUPPLIES TO THE UNITED STATES, THERE IS NO LEGAL LIABILITY ON THE UNITED STATES FOR PAYMENT TO THE CONTRACTOR OF AN AMOUNT EQUAL TO PROCESSING TAXES IMPOSED PRIOR TO THE OPENING OF THE BIDS, THE GOVERNMENT BEING LIABLE ONLY FOR THE CONTRACT PRICE.

DECISION BY COMPTROLLER GENERAL MCCARL JULY 16, 1934:

THE RATH PACKING CO. HAS REQUESTED REVIEW OF SETTLEMENT NO. 0285876/5), DATED MAY 24, 1934, WHEREIN WAS DISALLOWED ITS CLAIM FOR $6.61 AS PROCESSING TAX ON HAMS AND BACON FURNISHED THE VETERANS' ADMINISTRATION FACILITY, EXCELSIOR SPRINGS, MO., UNDER CONTRACT VA99H 242, DATED OCTOBER 24, 1933.

IT APPEARS THAT UNDER DATE OF OCTOBER 14, 1933, THE BUSINESS MANAGER, VETERANS' ADMINISTRATION FACILITY, EXCELSIOR SPRINGS, MO., ADVERTISED FOR BIDS TO BE OPENED OCTOBER 23, 1933, FOR THE FURNISHING OF A QUANTITY OF PACKING-HOUSE AND DAIRY PRODUCTS, AMONG WHICH WERE ITEMS A-8 AND A-9, CALLING FOR A QUANTITY OF HAMS AND BACON. THE CLAIMANT DELIVERED THE HAMS AND BACON CALLED FOR IN ACCORDANCE WITH ITS CONTRACT AND PAID THE UNITED STATES THE SUM OF $6.61, REPRESENTING PROCESSING TAX ON PORK PRODUCTS, PURSUANT TO THE PRESIDENT'S PROCLAMATION OF OCTOBER 18, 1933, AND BY REASON THEREOF CLAIMANT REQUESTS REIMBURSEMENT.

THE CLAIM WAS DISALLOWED IN THE SETTLEMENT, SUPRA, FOR THE REASON THAT CLAIMANT'S BID WAS OPENED ON OCTOBER 23, 1933, WHILE THE REGULATIONS APPLYING PROCESSING TAX ON HOG PRODUCTS WERE APPROVED BY THE SECRETARY OF AGRICULTURE AND THE PRESIDENT OF THE UNITED STATES ON OCTOBER 18, 1933, TO BECOME EFFECTIVE NOVEMBER 6, 1933. CLAIMANT, IN REQUESTING REVIEW OF THE SETTLEMENT AND ALLOWANCE OF ITS CLAIM, URGES THAT THE TAX WAS NOT INCLUDED IN ITS BID; THAT ITS BILL WAS MAILED FROM WATERLOO, IOWA, ON OCTOBER 20 AND---

WE CERTAINLY DID NOT HAVE THE CONVERSION FACTORS ON VARIOUS PORK CUTS WHEN THIS BID WAS MAILED OUT. IN FACT, WE DID NOT HAVE THE CONVERSION FACTORS UNTIL SEVERAL DAYS LATER, EVEN THOUGH THE SECRETARY ISSUED HIS ORDER OCTOBER 18. EVEN IF WE HAD HAD THE CONVERSION FACTORS, WE COULD NOT HAVE LEGALLY ADDED THEM INTO OUR PRICES, IN VIEW OF THE FACT THAT THE TAX DID NOT TAKE EFFECT ON SHIPMENTS UNTIL NOVEMBER 6.

THE ESTABLISHED RULE IS THAT THE RIGHTS AND LIABILITIES UNDER A CONTRACT ARE LIMITED BY ITS TERMS, WHICH ARE TO BE INTERPRETED ACCORDING TO THE ESTABLISHED RULES OF CONSTRUCTION. WHERE A CONTRACT CONTAINS AN EXPRESS STIPULATION AS TO THE AMOUNT TO BE PAID, SUCH STIPULATION IS CONCLUSIVE ON THE PARTIES AND MEASURES THE AMOUNT OF RECOVERY FOR PERFORMANCE. SIMPSON V. UNITED STATES, 172 U.S. 379; INTERNATIONAL CONTRACTING COMPANY V. LAMONT, 155 U.S. 310. THE CONTRACT PRICE MAY NOT BE INCREASED BY REASON OF A PROCESSING TAX UNLESS PROVIDED FOR IN THE CONTRACT.

THE UNITED STATES IS NOT REQUIRED TO PAY PROCESSING TAXES ON THE PRODUCTS PURCHASED BY IT. WHERE NO MENTION IS MADE OF ANY TAXES IN THE SPECIFICATIONS OR THE BID SUBMITTED BY A CONTRACTOR FOR FURNISHING SUPPLIES TO THE UNITED STATES, THERE IS NO LEGAL LIABILITY ON THE UNITED STATES FOR PAYMENT TO THE CONTRACTOR OF AN AMOUNT EQUAL TO PROCESSING TAXES, THE GOVERNMENT BEING LIABLE ONLY FOR THE CONTRACT PRICE. THE ADVERTISED SPECIFICATIONS IN THIS CASE SPECIFICALLY PROVIDED:

PRICES BID HEREIN INCLUDE ANY FEDERAL TAX HERETOFORE IMPOSED BY THE CONGRESS WHICH IS APPLICABLE TO THE MATERIAL ON THIS BID. IF ANY SALES TAX, PROCESSING TAX, ADJUSTMENT CHARGE, OR OTHER TAXES OR CHARGES ARE IMPOSED OR CHANGED BY THE CONGRESS AFTER THE DATE SET FOR THE OPENING OF THIS BID AND MADE APPLICABLE DIRECTLY UPON THE PRODUCTION, MANUFACTURE, OR SALE OF THE SUPPLIES COVERED BY THIS BID, AND ARE PAID BY THE CONTRACTOR ON THE ARTICLES OR SUPPLIES HEREIN CONTRACTED FOR, THEN THE PRICES NAMED IN THIS BID WILL BE INCREASED OR DECREASED ACCORDINGLY, AND ANY AMOUNT DUE THE CONTRACTOR AS A RESULT OF SUCH CHANGE WILL BE CHARGED TO THE GOVERNMENT AND ENTERED ON VOUCHERS (OR INVOICES) AS SEPARATE ITEMS.

IT WAS FOR THE CLAIMANT TO COMPUTE ITS BID PRICES FOR THE DELIVERY OF THE HAMS AND BACON REQUIRED UNDER THE ADVERTISED SPECIFICATIONS AND TO TAKE INTO CONSIDERATION ALL ELEMENTS OF COST WHICH IT BELIEVED THE SITUATION REQUIRED. A PROCESSING TAX ON HOG PRODUCTS, IMPOSED IN THE REGULATIONS APPROVED BY THE SECRETARY OF AGRICULTURE AND THE PRESIDENT OF THE UNITED STATES ON OCTOBER 18, 1933, HAD BEEN MADE APPLICABLE ON OCTOBER 23, 1933, WHEN THE BIDS IN QUESTION WERE OPENED, AND CLAIMANT MUST BE CHARGED WITH THE KNOWLEDGE THAT WHEN ITS BID WAS SUBMITTED A PROCESSING TAX WOULD BE COLLECTED ON PORK PRODUCTS ON AND AFTER NOVEMBER 6, 1933, THE EFFECTIVE DATE OF THE TAX.

THERE IS NO LEGAL BASIS FOR THE ALLOWANCE OF THE CLAIM, AND THE DISALLOWANCE THEREOF MUST BE AND IS AFFIRMED.