A-67334, NOVEMBER 29, 1935, 15 COMP. GEN. 452

A-67334: Nov 29, 1935

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

IF SAID ARTICLES ARE PURCHASED FOR THE EXCLUSIVE USE OF THE UNITED STATES. IS SUCH CHANGE IN THE APPLICABLE TAXES WITHIN THE MEANING OF THE CLAUSE CONTAINED IN CONTRACTS FOR THE PURCHASE OF SUCH ARTICLES PROVIDING FOR PRICE ADJUSTMENTS SHOULD OTHER TAXES OR CHARGES BE IMPOSED OR CHANGED BY THE CONGRESS AFTER THE DATE OF OPENING OF BIDS. 1935: THERE WAS RECEIVED YOUR LETTER OF NOVEMBER 4. AS FOLLOWS: REFERENCE IS MADE TO SECTION 620 OF THE "REVENUE ACT OF 1932" AS AMENDED (EFFECTIVE OCTOBER 1. WILL THE ITEMIZATION OF THE TAX IN THE CERTIFIED VOUCHER OF A CONTRACTOR BE ACCEPTABLE EVIDENCE THAT THE AMOUNT OF THE TAX THUS INDICATED IS THE CORRECT AMOUNT. WHAT DATA WILL BE REQUIRED BY YOUR OFFICE TO ESTABLISH THE AMOUNT DEDUCTIBLE WHEN THE CONTRACTOR PAYS THE TAX DIRECTLY TO THE GOVERNMENT.

A-67334, NOVEMBER 29, 1935, 15 COMP. GEN. 452

CONTRACTS - PRICE ADJUSTMENT - TAXES IMPOSED BY REVENUE ACT OF 1932 THE EXEMPTION EFFECTIVE OCTOBER 1, 1935, FROM TAXES IMPOSED BY THE REVENUE ACT OF 1932, PROVIDED FOR CERTAIN ARTICLES BY THE REVENUE ACT OF AUGUST 30, 1935, 49 STAT. 1025, IF SAID ARTICLES ARE PURCHASED FOR THE EXCLUSIVE USE OF THE UNITED STATES, ETC., IS SUCH CHANGE IN THE APPLICABLE TAXES WITHIN THE MEANING OF THE CLAUSE CONTAINED IN CONTRACTS FOR THE PURCHASE OF SUCH ARTICLES PROVIDING FOR PRICE ADJUSTMENTS SHOULD OTHER TAXES OR CHARGES BE IMPOSED OR CHANGED BY THE CONGRESS AFTER THE DATE OF OPENING OF BIDS, AND CONTRACT PRICES ON SUCH ARTICLES DELIVERED SUBSEQUENT TO OCTOBER 1, 1935, UNDER CONTRACTS INVOLVING SUCH CLAUSES SHOULD BE ADJUSTED ACCORDINGLY.

COMPTROLLER GENERAL MCCARL TO THE ADMINISTRATOR OF VETERANS' AFFAIRS, NOVEMBER 29, 1935:

THERE WAS RECEIVED YOUR LETTER OF NOVEMBER 4, 1935, AS FOLLOWS:

REFERENCE IS MADE TO SECTION 620 OF THE "REVENUE ACT OF 1932" AS AMENDED (EFFECTIVE OCTOBER 1, 1935), BY SECTION 401 OF THE "REVENUE ACT OF 1935," APPROVED AUGUST 30, 1935, WHICH SECTION PROVIDES THAT NO TAX SHALL BE IMPOSED WITH RESPECT TO THE SALE OF ANY ARTICLE SPECIFIED IN TITLE IV OF THE "REVENUE ACT OF 1932" AS AMENDED---

"FOR THE EXCLUSIVE USE OF THE UNITED STATES, ANY STATE, TERRITORY OF THE UNITED STATES, OR ANY POLITICAL SUBDIVISION OF THE FOREGOING, OR THE DISTRICT OF COLUMBIA.'

PRIOR TO OCTOBER 1, 1935, THE VETERANS' ADMINISTRATION ENTERED INTO CERTAIN CONTRACTS (SEE VAS-1599, VAS-1600, VAS-1605), STILL IN EFFECT, COVERING ITS REQUIREMENTS FOR TOILET SOAP AND THE CONTRACT PRICES INCLUDE THE FEDERAL EXCISE TAX IMPOSED ON THIS COMMODITY BY SECTION 603, TITLE IV OF THE "REVENUE ACT OF 1932.' PLEASE ADVISE WHETHER THE AMOUNT OF TAX APPLICABLE TO TOILET SOAP DELIVERED PURSUANT TO THESE CONTRACTS ON AND AFTER OCTOBER 1, 1935, SHOULD BE DEDUCTED FROM CONTRACTORS' VOUCHERS AND, IF SO, WILL THE ITEMIZATION OF THE TAX IN THE CERTIFIED VOUCHER OF A CONTRACTOR BE ACCEPTABLE EVIDENCE THAT THE AMOUNT OF THE TAX THUS INDICATED IS THE CORRECT AMOUNT, AND IF NOT, WHAT DATA WILL BE REQUIRED BY YOUR OFFICE TO ESTABLISH THE AMOUNT DEDUCTIBLE WHEN THE CONTRACTOR PAYS THE TAX DIRECTLY TO THE GOVERNMENT, AND WHAT DATA WILL BE REQUIRED TO ESTABLISH THE AMOUNT DEDUCTIBLE WHEN THE CONTRACTOR DOES NOT PAY THE TAX DIRECTLY TO THE GOVERNMENT?

APROPOS OF THIS SUBMISSION, YOUR ATTENTION IS RESPECTFULLY INVITED TO BUREAU OF INTERNAL REVENUE REGULATIONS NOS. 44 AND 46, RELATING TO EXCISE TAXES IMPOSED UNDER TITLE IV OF THE ,REVENUE ACT OF 1932" ON SALES OF THE COMMODITIES ENUMERATED IN THOSE REGULATIONS.

PARAGRAPH 5 OF THE RESPECTIVE CONTRACTS IN QUESTION PROVIDES:

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.

THE CONTRACTS EXPRESSLY PROVIDE FOR ADJUSTMENT OF PRICE IN ACCORDANCE WITH SUBSEQUENT INCREASE OR DECREASE IN TAXES APPLICABLE TO THE ARTICLES PURCHASED THEREUNDER. AT THE TIME THE CONTRACTS WERE EXECUTED, THERE WERE IN EFFECT CERTAIN EXCISE TAXES ON TOILET PREPARATIONS SOLD BY THE MANUFACTURER, PRODUCER, OR IMPORTER THEREOF. THE CONTRACT PRICES INCLUDE SUCH TAXES. BY PUBLIC, NO. 407, SEVENTY FOURTH CONGRESS, AMENDING THE REVENUE ACT OF 1932, WHEN SOLD OR RESOLD "FOR THE EXCLUSIVE USE OF THE UNITED STATES, ANY STATE, TERRITORY OF THE UNITED STATES, OR ANY POLITICAL SUBDIVISION OF THE FOREGOING, OR THE DISTRICT OF COLUMBIA" TOILET PREPARATIONS WERE EXEMPTED FROM SUCH TAXES. THAT WAS A CHANGE IN THE APPLICABLE TAXES WITHIN THE MEANING OF THE CONTRACTS UNDER CONSIDERATION FOR WHICH A PRICE ADJUSTMENT HAS BEEN STIPULATED THEREIN.

ARTICLES DELIVERED UNDER THE CONTRACTS IN QUESTION ON AND AFTER OCTOBER 1, 1935, ARE EXEMPT FROM THE TAXES IMPOSED BY SECTION 603 OF THE REVENUE ACT OF 1932. SUCH TAXES WERE IMPOSED AS A PERCENTAGE OF THE SELLING PRICE AND MAY BE DETERMINED DEFINITELY BY SIMPLE CALCULATIONS. AN AMOUNT EQUAL TO THE TAXES IN EFFECT AND APPLICABLE TO THE ARTICLES IN QUESTION AT THE TIME CONTRACTS WERE EXECUTED SHOULD BE DEDUCTED FROM THE CONTRACT PRICE ON ALL ARTICLES DELIVERED UNDER THE CONTRACTS IN QUESTION AFTER SEPTEMBER 30, 1935. IT WILL BE FOR THE CONTRACTORS TO MAKE SUCH SHOWING TO THE BUREAU OF INTERNAL REVENUE AS MAY BE NECESSARY TO SECURE EXEMPTION FROM SUCH TAXES ON THE ARTICLES IN QUESTION DELIVERED AFTER OCTOBER 1, 1935, OR IF THE TAXES ARE PAID, TO SECURE REFUND THEREOF.