A-59898, MARCH 12, 1935, 14 COMP. GEN. 692

A-59898: Mar 12, 1935

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HOLDING THAT SALES OF GASOLINE TO NATIONAL GUARD ORGANIZATIONS OF A STATE ARE EXEMPT FROM THE FEDERAL GASOLINE TAX DOES NOT EXEMPT FROM SUCH TAX SALES TO A REGULAR ARMY EMPLOYEE FOR USE IN AN ARMY TRUCK. NOTWITHSTANDING THAT THE EMPLOYEE AND TRUCK MAY BE ENGAGED UPON OFFICIAL DUTIES THE EXPENSES OF WHICH ARE CHARGEABLE TO THE FEDERAL APPROPRIATION FOR THE NATIONAL GUARD. 13 COMP. GEN. 118) THE PAYMENT OF THE FEDERAL TAX ON GASOLINE AND OIL USED BY THE NATIONAL GUARD WAS UNAUTHORIZED. 2. REPLY WAS MADE BY THIS OFFICE UNDER DATE OF DECEMBER 13. IT IS THEREFORE THE DISBURSING OFFICER'S OPINION THAT THE COMPTROLLER GENERAL'S DECISION OF OCTOBER 28. IS NOT APPLICABLE UNDER THE CIRCUMSTANCES. "THIS GASOLINE WAS USED IN A REGULAR ARMY TRUCK BY A REGULAR ARMY EMPLOYEE IN CONNECTION WITH THE INSPECTION OF ORDNANCE EQUIPMENT HELD BY THE NATIONAL GUARD.

A-59898, MARCH 12, 1935, 14 COMP. GEN. 692

TAXES - STATE - GASOLINE - NATIONAL GUARD THE DECISION OF THE SECRETARY OF THE TREASURY OF SEPTEMBER 14, 1932, HOLDING THAT SALES OF GASOLINE TO NATIONAL GUARD ORGANIZATIONS OF A STATE ARE EXEMPT FROM THE FEDERAL GASOLINE TAX DOES NOT EXEMPT FROM SUCH TAX SALES TO A REGULAR ARMY EMPLOYEE FOR USE IN AN ARMY TRUCK, NOTWITHSTANDING THAT THE EMPLOYEE AND TRUCK MAY BE ENGAGED UPON OFFICIAL DUTIES THE EXPENSES OF WHICH ARE CHARGEABLE TO THE FEDERAL APPROPRIATION FOR THE NATIONAL GUARD. 13 COMP. GEN. 118, DISTINGUISHED.

ACTING COMPTROLLER GENERAL ELLIOTT TO MAJOR D. W. MOREY, UNITED STATES ARMY, MARCH 12, 1935:

THERE HAS BEEN RECEIVED YOUR LETTER OF JANUARY 15, 1935, AS FOLLOWS:

1. THE GENERAL ACCOUNTING OFFICE IN THE AUDIT OF MY DECEMBER 1933 ACCOUNTS HAS DISALLOWED $1.54 ON A PAYMENT OF $16.85 MADE TO THE STANDARD OIL COMPANY OF NEW JERSEY (VOUCHER 311, DECEMBER 1933 ACCOUNTS) COVERING SMALL PURCHASES OF GASOLINE MADE BY AN ORDNANCE MECHANIC IN CONNECTION WITH THE INSPECTION OF FEDERAL EQUIPMENT IN THE HANDS OF THE WEST VIRGINIA NATIONAL GUARD. THE NOTICE OF EXCEPTION HELD THAT UNDER THE COMPTROLLER GENERAL'S DECISION OF OCTOBER 28, 1933 (13 COMP. GEN. 118) THE PAYMENT OF THE FEDERAL TAX ON GASOLINE AND OIL USED BY THE NATIONAL GUARD WAS UNAUTHORIZED.

2. REPLY WAS MADE BY THIS OFFICE UNDER DATE OF DECEMBER 13, 1934, AS FOLLOWS:

"THIS NOTICE OF EXCEPTION RELATES TO A VOUCHER COVERING PURCHASES OF SMALL QUANTITIES OF GASOLINE AT WEST VIRGINIA SERVICE STATIONS RATHER THAN PROCUREMENTS UNDER A CONTRACT FOR THE NATIONAL GUARD, AND IT IS THEREFORE THE DISBURSING OFFICER'S OPINION THAT THE COMPTROLLER GENERAL'S DECISION OF OCTOBER 28, 1933, 13 COMP. GEN. 118, IS NOT APPLICABLE UNDER THE CIRCUMSTANCES.

"THIS GASOLINE WAS USED IN A REGULAR ARMY TRUCK BY A REGULAR ARMY EMPLOYEE IN CONNECTION WITH THE INSPECTION OF ORDNANCE EQUIPMENT HELD BY THE NATIONAL GUARD. THE EMPLOYEE IN CHARGE, MR. J. M. DANNAHER, COMPLIED WITH REGULATIONS, IT IS BELIEVED, IN THAT HE EXECUTED STANDARD FORM 44 IN EACH CASE.

THERE IS NO FORM OF PROCEDURE KNOWN TO THE UNDERSIGNED WHEREBY THE FEDERAL TAX MAY BE DEDUCTED ON SERVICE-STATION PURCHASES. IN THIS CASE, THE STANDARD OIL COMPANY WAS PAID THE FEDERAL TAX; CONSEQUENTLY THE AMOUNT INVOLVED IN THIS SUSPENSION HAS ALREADY BEEN RETURNED TO THE GOVERNMENT.'

THIS EXPLANATION WAS NOT ACCEPTED AND THE ACCOUNT WAS DISALLOWED JANUARY 11, 1935.

3. AS UNDERSTOOD, THE DECISION OF OCTOBER 28, 1933, HAS APPLICATION TO FORMAL CONTRACTS CARRYING SPECIFIC TAX EXEMPTIONS, AND NOT SMALL OPEN MARKET PURCHASES WHERE THE FEDERAL TAX HAS BEEN PAID AND LATER ABSORBED IN THE UNIT PRICES. IN THE INSTANT CASE ELEVEN SEPARATE PURCHASES WERE MADE AT VARIOUS STANDARD OIL COMPANY SERVICE STATIONS IN THE STATE OF WEST VIRGINIA OVER A THIRTY DAY PERIOD (SEPTEMBER 19TH TO OCTOBER 17TH), THE FEDERAL TAX BEING PAID BY THE VENDOR IN THE USUAL WAY: A CONFIRMING PURCHASE ORDER MORE THAN A MONTH LATER (NUMBER 2073 NOVEMBER 27, 1933) AUTHORIZED THE PURCHASE.

4. THE CIRCUMSTANCES OUTLINED ABOVE HAVE AN EQUAL APPLICATION TO VOUCHER 312, DECEMBER 1933, ACCOUNTS (STANDARD OIL COMPANY OF OHIO, $9.43), DISALLOWED IN THE AMOUNT OF ?60 UNDER THE SAME DATE.

5. IT IS REQUESTED THAT THE ACTION OF THE GENERAL ACCOUNTING OFFICE BE REVIEWED AND A DECISION RENDERED AS TO THE CORRECTNESS OF THESE PAYMENTS.

THE DECISION OF THIS OFFICE OF OCTOBER 28, 1933, 13 COMP. GEN. 118, INSOFAR AS IT HELD THAT THE PURCHASE OF GASOLINE FOR THE USE OF NATIONAL GUARD UNITS WAS NOT SUBJECT TO FEDERAL TAX, WAS BASED UPON A DECISION OF THE SECRETARY OF THE TREASURY DATED SEPTEMBER 14, 1932, IN WHICH IT WAS HELD:

DUE TO THE CONSTITUTIONAL INHIBITION AGAINST TAXING INSTRUMENTALITIES OF A STATE, IT IS HELD THAT THE TAXES IMPOSED BY TITLE IV OF THE REVENUE ACT OF 1932 DO NOT ATTACH TO SALES TO STATES OR THEIR POLITICAL SUBDIVISIONS OF ARTICLES TO BE USED IN THE EXERCISE OF AN ESSENTIAL GOVERNMENTAL FUNCTION, PROVIDED SUCH SALES ARE MADE DIRECT BY THE MANUFACTURER, PRODUCER, OR IMPORTER TO A STATE OR POLITICAL SUBDIVISION OF A STATE WITHOUT ANY INTERVENING SALE TO A DEALER OR DISTRIBUTOR.

IN ACCORDANCE WITH THIS RULING, SALES OF LUBRICATING OIL, GASOLINE, AUTOMOBILES AND AUTOMOBILE ACCESSORIES, AND OTHER ARTICLES SUBJECT TO THE TAXES UNDER TITLE IV OF THE REVENUE ACT OF 1932 ARE EXEMPT WHEN THE ARTICLES ARE SOLD BY THE MANUFACTURER, PRODUCER, OR IMPORTER DIRECT TO THE NATIONAL GUARD ORGANIZATION OF A STATE FOR USE IN THE EXERCISE OF AN ESSENTIAL GOVERNMENTAL FUNCTION.

IT APPEARS THAT THE GASOLINE IN THE PRESENT CASE WAS NOT SOLD DIRECTLY TO A NATIONAL GUARD UNIT, NOR WILL IT BE PAID FOR FROM A STATE ALLOTMENT, BUT WAS SOLD TO A REGULAR ARMY EMPLOYEE AND USED IN A REGULAR ARMY TRUCK IN CONNECTION WITH THE INSPECTION OF ORDNANCE EQUIPMENT HELD BY A NATIONAL GUARD. WHILE SUCH DUTY MADE THE COST CHARGEABLE AGAINST THE FEDERAL APPROPRIATION FOR THE NATIONAL GUARD, IN VIEW OF THE FACT THAT THE SALE WAS NOT MADE TO A STATE ORGANIZATION AND WILL NOT BE PAID FROM A STATE ALLOTMENT, IT WAS NOT EXEMPT FROM FEDERAL TAXATION UNDER THE RULING OF THE SECRETARY OF THE TREASURY. UPON REVIEW, $1.54 AND 60 CENTS, RESPECTIVELY, WILL BE CERTIFIED IN YOUR ACCOUNTS, IF OTHERWISE CORRECT.