A-59022, JANUARY 4, 1935, 14 COMP. GEN. 515

A-59022: Jan 4, 1935

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CONTRACTS - PROCESSING TAXES BIDDERS WERE PUT ON NOTICE OF THE PROCESSING TAX ON COTTON FROM AND AFTER JULY 14. THERE IS NO AUTHORITY FOR PAYMENT TO A CONTRACTOR OF ANY AMOUNT IN ADDITION TO THE BID PRICE TO REIMBURSE HIM FOR THE PROCESSING TAX. WHERE THE BIDS WERE OPENED AFTER JULY 14. EVEN THOUGH THE BIDS WERE SUBMITTED PRIOR TO SAID DATE AND THE TAX WAS MADE EFFECTIVE THEREAFTER. RECONSIDERATION IS REQUESTED OF THE ACTION OF THE AUDIT DIVISION OF THE GENERAL ACCOUNTING OFFICE IN DISALLOWING A PAYMENT OF $158.06 AS PROCESSING TAX UNDER VOUCHER NO. 40409 IN MY APRIL 1934 ACCOUNTS. 2. WHICH IS APPLICABLE TO THE MATERIAL ON THIS BID. OR OTHER TAXES WHICH MAY HEREAFTER (THE DATE SET FOR THE OPENING OF THIS BID) BE IMPOSED BY THE CONGRESS AND MADE APPLICABLE TO THE MATERIAL ON THIS BID WILL BE CHARGED TO THE GOVERNMENT AND ENTERED ON INVOICES AS A SEPARATE ITEM.' 3.THE REGULATIONS RELATING TO PROCESSING TAX ON COTTON AND COTTON PRODUCTS WERE APPROVED BY THE PRESIDENT OF THE UNITED STATES 14 JULY 1933 BUT WERE NOT PUBLISHED BY THE TREASURY DEPARTMENT UNTIL 29 JULY 1933 AND DID NOT BECOME EFFECTIVE.

A-59022, JANUARY 4, 1935, 14 COMP. GEN. 515

CONTRACTS - PROCESSING TAXES BIDDERS WERE PUT ON NOTICE OF THE PROCESSING TAX ON COTTON FROM AND AFTER JULY 14, 1933, DATE OF PRESIDENTIAL APPROVAL OF THE PROCLAMATION OF THE SECRETARY OF AGRICULTURE PURSUANT TO THE AGRICULTURAL ADJUSTMENT ACT OF MAY 12, 1933, 48 STAT. 31, AND UNDER A CONTRACT PROVIDING THAT ONLY THOSE TAXES IMPOSED AFTER THE DATE SET FOR OPENING OF BIDS WOULD BE CHARGED TO THE GOVERNMENT, THERE IS NO AUTHORITY FOR PAYMENT TO A CONTRACTOR OF ANY AMOUNT IN ADDITION TO THE BID PRICE TO REIMBURSE HIM FOR THE PROCESSING TAX, WHERE THE BIDS WERE OPENED AFTER JULY 14, 1933, EVEN THOUGH THE BIDS WERE SUBMITTED PRIOR TO SAID DATE AND THE TAX WAS MADE EFFECTIVE THEREAFTER.

COMPTROLLER GENERAL MCCARL TO CAPTAIN J. H. KNAPP, UNITED STATES NAVY, JANUARY 4, 1935:

BY SECOND INDORSEMENT OF NOVEMBER 27, 1934, THE JUDGE ADVOCATE GENERAL OF THE NAVY TRANSMITTED TO THIS OFFICE YOUR LETTER OF NOVEMBER 8, 1934, AS FOLLOWS:

1. RECONSIDERATION IS REQUESTED OF THE ACTION OF THE AUDIT DIVISION OF THE GENERAL ACCOUNTING OFFICE IN DISALLOWING A PAYMENT OF $158.06 AS PROCESSING TAX UNDER VOUCHER NO. 40409 IN MY APRIL 1934 ACCOUNTS.

2. CONTRACT NO. 32596 WITH THE MINNESOTA MINING AND MANUFACTURING COMPANY CONTAINS THE FOLLOWING CLAUSE:

"PRICES BID HEREIN INCLUDE ANY FEDERAL TAX HERETOFORE IMPOSED BY THE CONGRESS, WHICH IS APPLICABLE TO THE MATERIAL ON THIS BID. ANY SALES TAX, DUTIES, IMPOSTS, REVENUES, EXCISE, OR OTHER TAXES WHICH MAY HEREAFTER (THE DATE SET FOR THE OPENING OF THIS BID) BE IMPOSED BY THE CONGRESS AND MADE APPLICABLE TO THE MATERIAL ON THIS BID WILL BE CHARGED TO THE GOVERNMENT AND ENTERED ON INVOICES AS A SEPARATE ITEM.'

3.THE REGULATIONS RELATING TO PROCESSING TAX ON COTTON AND COTTON PRODUCTS WERE APPROVED BY THE PRESIDENT OF THE UNITED STATES 14 JULY 1933 BUT WERE NOT PUBLISHED BY THE TREASURY DEPARTMENT UNTIL 29 JULY 1933 AND DID NOT BECOME EFFECTIVE, AS PROVIDED FOR IN THE REGULATIONS UNTIL 1 AUGUST 1933.

4. THE BID UPON WHICH THE CONTRACT IN QUESTION WAS AWARDED WAS OPENED 25 JULY 1933 AND THE CONTRACT AWARDED THEREUNDER WAS DATED 9 AUGUST 1933. THE DATE OF OPENING OF BIDS ANTEDATED THE DATE OF THE PUBLICATION OF THE REGULATIONS RELATING TO THE COTTON PROCESSING TAX AND THE EFFECTIVE DATE THEREOF IT MUST BE ASSUMED THAT NO TAX WAS IMPOSED OR IN EFFECT THAT WOULD BE APPLICABLE TO THE MATERIAL CALLED FOR IN THE BIDS OPENED 25 JULY 1933.

5. THE PAYMENT WAS DISALLOWED FOR THE FOLLOWING REASON: CONTRACT PROVIDES THAT PRICE QUOTED INCLUDES ALL TAXES IMPOSED BY CONGRESS UP TO AND INCLUDING THE DATE OF OPENING OF BID, JULY 25, 1933. THE PROCESSING TAX ON COTTON AND COTTON PRODUCTS HAVING BEEN IMPOSED JULY 14, 1933, PAYMENT OF SAME IS UNAUTHORIZED.

6. IT IS THEREFORE REQUESTED THAT THE DISALLOWANCE BE REMOVED.

THE STATEMENT CONTAINED IN THE BID OF THE CONTRACTOR, AS QUOTED IN YOUR LETTER, WAS THAT THE PRICES PAID INCLUDED ANY FEDERAL TAX IMPOSED, ETC., PRIOR THERETO, AND THAT ANY TAXES IMPOSED AND MADE APPLICABLE TO THE MATERIALS AFTER THE DATE SET FOR THE OPENING OF THE BID WOULD BE CHARGED TO THE GOVERNMENT. THE DATE WHEN SUCH STIPULATION WAS EFFECTIVE WAS SET BY THAT PROVISION AS JULY 25, 1933, THE DATE OF THE OPENING OF THE BIDS, RATHER THAN ANY DATE PRIOR THERETO UPON WHICH THE BID MIGHT HAVE BEEN SUBMITTED.

YOU CONTEND THAT WHILE THE PROCLAMATION OF THE SECRETARY OF AGRICULTURE RELATING TO PROCESSING TAX ON COTTON AND COTTON PRODUCTS WAS APPROVED BY THE PRESIDENT ON JULY 14, 1933, 11 DAYS BEFORE THE OPENING OF THE BIDS, IT WAS NOT PUBLISHED UNTIL JULY 29, 1933, AND DID NOT BECOME EFFECTIVE UNTIL AUGUST 1, 1933; AND THAT, AS THE DATE OF OPENING OF THE BIDS, JULY 25, 1933, ANTEDATED THE PUBLICATION OF THE PROCLAMATION AND THE EFFECTIVE DATE THEREOF, IT MUST BE ASSUMED THAT NO TAX WAS IMPOSED OR IN EFFECT THAT WOULD BE APPLICABLE TO THE MATERIAL CALLED FOR IN THE BIDS OPENED JULY 25, 1933. YOUR CONTENTION IN THIS BEHALF DOES NOT APPEAR TENABLE IN VIEW OF THE LAW AND THE FACTS.

THE AGRICULTURAL ADJUSTMENT ACT OF MAY 12, 1933, 48 STAT. 35, PROVIDED THAT WHEN THE SECRETARY OF AGRICULTURE DETERMINED THAT RENTAL OR BENEFIT PAYMENTS WERE TO BE MADE WITH RESPECT TO ANY BASIC AGRICULTURAL COMMODITY, HE SHALL PROCLAIM SUCH DETERMINATION, AND A PROCESSING TAX SHOULD BE IN EFFECT WITH RESPECT TO SUCH COMMODITY FROM THE BEGINNING OF THE MARKETING YEAR THEREFOR NEXT FOLLOWING THE DATE OF SUCH PROCLAMATION, AND THAT THE BEGINNING OF SUCH MARKETING YEAR SHOULD BE DETERMINED BY THE SECRETARY OF AGRICULTURE. SECTION 11 OF SAID ACT SPECIFIED COTTON AND COTTON PRODUCTS AS AMONG THE AGRICULTURAL PRODUCTS CONTEMPLATED. THE ACT DEFINITELY PROVIDED FOR THE LEVYING OF THE TAXES AND ACTION BY THE SECRETARY OF AGRICULTURE TO EFFECTUATE THE LAW. THE BIDDER WAS ON NOTICE THAT THE PROCESSING TAX ON COTTON AND COTTON PRODUCTS HAD BEEN PROVIDED BY CONGRESS AND WOULD BE EFFECTIVE UPON ACTION BY THE SECRETARY OF AGRICULTURE. THE ACT LIKEWISE PROVIDED THE BASIS UPON WHICH THE RATE OF TAX SHOULD BE DETERMINED. IT MAY BE SAID THAT WHILE THE ACT GAVE SOME LATITUDE OR DISCRETION TO THE SECRETARY OF AGRICULTURE, HIS ACTION IN PROCLAIMING AND APPLYING THE TAX TO PRODUCTS DESIGNATED BY THE ACT WAS IN LARGE MEASURE MINISTERIAL. THE PROCLAMATION BY THE SECRETARY OF AGRICULTURE APPROVED BY THE PRESIDENT ON JULY 14, 1933, LEVIED THE TAX IMPOSED BY THE ACT OF MAY 12, 1933, MADE IT APPLICABLE TO THE PRODUCT, AND FIXED THE BEGINNING OF THE MARKETING YEAR, ALL AS PROVIDED IN THE AGRICULTURAL ADJUSTMENT ACT. THE PROCLAMATION WAS COMPLETE, WAS THE FULFILLMENT OF THE LAW, AND CONSTITUTED CONSTRUCTIVE NOTICE TO THE BIDDER. THE FACT THAT THE TAX WAS NOT EFFECTIVE UNTIL AUGUST 1, 1933, THE DATE FIXED BY THE PROCLAMATION AS THE BEGINNING OF THE MARKETING YEAR NEXT SUCCEEDING THE DATE OF THE PROCLAMATION, AND THAT SUCH DATE WAS AFTER THE OPENING OF THE BIDS HERE INVOLVED IS NOT FOR CONSIDERATION. THE TAX WAS IMPOSED AND MADE APPLICABLE TO THE PRODUCT PRIOR TO THE DATE OF THE OPENING. A-57446, SEPTEMBER 21, 1934. IN VIEW OF THE MANIFEST PURPOSE AND INTENT OF THE AGRICULTURAL ADJUSTMENT ACT AND THE PROCLAMATION OF THE SECRETARY OF AGRICULTURE OF JULY 14, 1933, THE CONTRACTOR WAS CHARGED WITH KNOWLEDGE THAT THE PROCESSING TAX HAD BEEN IMPOSED PRIOR TO THE OPENING OF ITS BID, AND WOULD BE IN EFFECT ON AND AFTER AUGUST 1, 1933. 14 COMP. GEN. 44. IS TO BE OBSERVED FURTHER THAT THE FORMAL CONTRACT WAS NOT EXECUTED UNTIL AUGUST 9, 1933, 9 DAYS AFTER THE TAX BECAME EFFECTIVE, YET IT MAKES NO STIPULATION FOR ANY PAYMENT BY THE GOVERNMENT OF THE PROCESSING TAX.

THE RECORDS OF THIS OFFICE DISCLOSE THAT WHILE PAYMENT FOR THE MATERIALS COVERED BY THE CONTRACT WAS MADE IN OCTOBER 1933, THE ITEM OF PROCESSING TAX SHOWN ON THE CONTRACTOR'S INVOICE WAS AT THAT TIME DEDUCTED AND THE PAYMENT ON ACCOUNT OF THE PROCESSING TAX WAS NOT MADE UNTIL APRIL 1934. THERE APPEARS NO REASON WHY THE QUESTION WAS NOT REFERRED HERE FOR DETERMINATION IN ADVANCE AS TO THE LEGALITY OF THE PROPOSED PAYMENT OF THE AMOUNT COVERING PROCESSING TAXES, AS SHOULD BE DONE IN ALL MATTERS WHERE THERE IS ROOM FOR DOUBT AS TO THE LEGALITY OF AN ITEM PRESENTED TO A DISBURSING OFFICER FOR PAYMENT.

UPON THE LAW AND FACTS PRESENTED, IT IS CLEAR THAT THE CONTRACTOR WAS NOT ENTITLED TO BE PAID ANY AMOUNT IN ADDITION TO PRICES FIXED BY THE CONTRACT BY REASON OF PROCESSING TAXES ALLEGED TO HAVE BEEN PAID BY THE CONTRACTOR, AND THAT YOUR PAYMENT OF SUCH ADDITIONAL AMOUNT WAS UNAUTHORIZED. UPON REVIEW THE DISALLOWANCE IN YOUR ACCOUNTS MUST BE AND IS SUSTAINED.