A-65514, DECEMBER 16, 1935, 15 COMP. GEN. 516

A-65514: Dec 16, 1935

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CONTRACTS - PROCESSING TAXES - PAYMENT BY MANUFACTURER AND NOT BY GOVERNMENT CONTRACTOR PAYMENT TO A CONTRACTOR IS NOT AUTHORIZED OF AN AMOUNT REPRESENTING PROCESSING TAXES ALLEGED TO HAVE BEEN PAID BY THE MANUFACTURER OF A PRODUCT SOLD TO THE CONTRACTOR AND BY SAID CONTRACTOR FURNISHED THE GOVERNMENT NOTWITHSTANDING THE AMOUNT OF SAID TAX WAS BILLED THE CONTRACTOR SEPARATELY AND WAS NOT INCLUDED ON THE SAME INVOICE WITH THE CHARGE FOR THE MANUFACTURED PRODUCT. REPRESENTING PROCESSING TAXES ALLEGED TO HAVE BEEN PAID ON QUANTITY OF FIELD WIRE DELIVERED UNDER CONTRACT W-227 -SC-749. WHICH CONTAINED THE FOLLOWING PROVISION WITH REFERENCE TO TAXES: IT IS UNDERSTOOD THAT THE PRICES SET FORTH IN THIS BID INCLUDE.

A-65514, DECEMBER 16, 1935, 15 COMP. GEN. 516

CONTRACTS - PROCESSING TAXES - PAYMENT BY MANUFACTURER AND NOT BY GOVERNMENT CONTRACTOR PAYMENT TO A CONTRACTOR IS NOT AUTHORIZED OF AN AMOUNT REPRESENTING PROCESSING TAXES ALLEGED TO HAVE BEEN PAID BY THE MANUFACTURER OF A PRODUCT SOLD TO THE CONTRACTOR AND BY SAID CONTRACTOR FURNISHED THE GOVERNMENT NOTWITHSTANDING THE AMOUNT OF SAID TAX WAS BILLED THE CONTRACTOR SEPARATELY AND WAS NOT INCLUDED ON THE SAME INVOICE WITH THE CHARGE FOR THE MANUFACTURED PRODUCT.

COMPTROLLER GENERAL MCCARL TO THE GRAYBAR ELECTRIC CO., INC., DECEMBER 16, 1935:

THERE HAS BEEN CONSIDERED YOUR REQUEST OF JULY 1, 1935, FOR REVIEW OF THAT PART OF SETTLEMENT NO. 0134798 (3), DATED FEBRUARY 26, 1935, WHICH DISALLOWED YOUR CLAIM FOR $2,542.67, REPRESENTING PROCESSING TAXES ALLEGED TO HAVE BEEN PAID ON QUANTITY OF FIELD WIRE DELIVERED UNDER CONTRACT W-227 -SC-749, DATED MAY 2, 1933, WHICH CONTAINED THE FOLLOWING PROVISION WITH REFERENCE TO TAXES:

IT IS UNDERSTOOD THAT THE PRICES SET FORTH IN THIS BID INCLUDE, AS A PART OF THE PURCHASE PRICE TO BE PAID FOR THE SUPPLIES, ALL SALES TAX DUTIES, IMPOSTS, REVENUES, EXCISE OR OTHER TAXES APPLICABLE TO THE SUPPLIES COVERED BY THIS BID UNDER ANY FEDERAL LAW IN FORCE UPON THE DATE THIS BID IS OPENED. IF ANY CHANGE IN THE AMOUNT OF SUCH TAXES IS MADE BY CONGRESS, OR IF ANY NEW TAXES ARE MADE APPLICABLE TO SUCH SUPPLIES BY CONGRESS AFTER THE DATE OF OPENING OF THIS BID, THE PRICES NAMED IN THIS BID WILL BE INCREASED OR DECREASED ACCORDINGLY.

THE PROCESSING TAX APPEARS TO HAVE BEEN PAID BY THE WHITNEY BLAKE CO. IN THIS CASE UPON THE COTTON USED BY SAID COMPANY IN THE MANUFACTURE OF THE FIELD WIRE; THAT IT CHARGED YOU WITH THE AMOUNT OF THE TAX ON SEPARATE INVOICES; AND THAT UPON INSTRUCTIONS FROM THE ARMY BASE, BROOKLYN, N.Y., YOU INVOICED THE AMOUNT OF THE PROCESSING TAX SEPARATELY TO THE GOVERNMENT. YOU STATE THAT APPARENTLY WHITNEY BLAKE CO. SHOULD HAVE INCREASED THE UNIT PRICE OF THE WIRE TO INCLUDE THE AMOUNT OF THE TAX AND THAT YOU SHOULD HAVE DONE LIKEWISE IN RENDERING YOUR INVOICES TO THE GOVERNMENT, BUT THAT BECAUSE OF ALLEGED ERRONEOUS INSTRUCTIONS RECEIVED FROM THE BROOKLYN ARMY BASE IT WAS NOT DONE.

REGARDLESS OF WHETHER THE AMOUNT OF THE PROCESSING TAX WAS CHARGED TO YOU ON A SEPARATE INVOICE OR ON THE SAME INVOICE WITH THE WIRE, IT, NEVERTHELESS, WAS A PART OF THE COST TO YOU OF THE ITEM WHICH WAS PASSED ON TO YOU IN THE SAME MANNER AND TO THE SAME EXTENT AS OTHER ITEMS OF COST WERE PASSED ON TO YOU. IN A SIMILAR CASE DECIDED ON OCTOBER 27, 1934, A- 57997, 14 COMP. GEN. 338, IT WAS STATED AS FOLLOWS:

THE DETERMINING FACTOR IN THIS CASE IS WHETHER CLAIMANT DID IN FACT PAY THE PROCESSING TAX TO THE UNITED STATES, AND THE RECORD CLEARLY SHOWS THAT THE CLAIMANT DID NOT DO SO. CLAIMANT MAY HAVE BEEN REQUIRED TO PAY MORE FOR THE FABRIC THAN IT WOULD HAVE BEEN REQUIRED TO PAY HAD THERE BEEN NO PROCESSING TAX ON RAW COTTON, BUT SUCH ADDITIONAL PAYMENTS MADE BY CLAIMANT DO NOT CONSTITUTE OR REPRESENT TAXES. A TAX ONCE PAID CEASES TO BE SUCH WHEN PASSED ON TO A SUCCESSIVE PURCHASER OF THE PARTICULAR ARTICLE, SUPPLIES, ETC., AND BECOMES A PART OF THE COST THEREOF. SEE LASH'S PRODUCTS COMPANY V. UNITED STATES, 278 U.S. 175; 13 COMP. GEN. 87; DECISION OF JUNE 18, 1934, A-55979.

THERE BEING NO PROVISION IN THE CONTRACT OR IN THE ACT OF MAY 12, 1933, SUPRA, WHICH AUTHORIZES REIMBURSEMENT OF AN AMOUNT EQUIVALENT TO THE PROCESSING TAX ON THE MATERIAL DELIVERED UNDER THE CONTRACT WHEN YOU DID NOT PAY THE PROCESSING TAX TO THE UNITED STATES, THERE IS NO LEGAL BASIS FOR THE ALLOWANCE OF THE CLAIM.