A-67600, JANUARY 7, 1936, 15 COMP. GEN. 588

A-67600: Jan 7, 1936

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WHETHER THE AMOUNT OF SUCH TAX HAS BEEN CONSIDERED IN FIXING THE AMOUNT OF THE BID AND WHETHER HE HAS CLAIMED OR WILL CLAIM EXEMPTION FROM. IS UNNECESSARY EITHER PRIOR OR SUBSEQUENT TO AWARD. VARIOUS QUESTIONS HAVE ARISEN. ON WHICH IT IS DESIRED THAT A RULING BE OBTAINED FROM THE COMPTROLLER GENERAL. 2. IN THE ISSUANCE OF FUTURE SPECIFICATIONS COVERING THE PURCHASE OF ARTICLES ON WHICH A TAX IS IMPOSED BY THE REVENUE ACT OF 1932. IT IS PROPOSED TO INCLUDE A STIPULATION SIMILAR TO THAT USED IN THE PAST WITH RESPECT TO STATE TAXES. THAT THE BID PRICE IS EXCLUSIVE OF THE FEDERAL TAX. UPON WHICH THE TAX IS BASED ON THE MANUFACTURER'S SALE PRICE. IT IS CONTEMPLATED THAT SPECIFICATIONS WILL CONTINUE TO BE ISSUED CONTAINING THE FOLLOWING TAX CLAUSE: "IT IS UNDERSTOOD THAT THE PRICES SET FORTH IN THIS BID INCLUDE.

A-67600, JANUARY 7, 1936, 15 COMP. GEN. 588

CONTRACTS - TAX-EXEMPT ARTICLES - REVENUE ACT OF 1935 FUTURE CONTRACT SPECIFICATIONS INVOLVING ARTICLES SUBJECT TO EXCISE TAX UNDER THE REVENUE ACT OF 1932 BUT MADE TAX EXEMPT EFFECTIVE OCTOBER 1, 1935, BY THE REVENUE ACT OF 1935, 49 STAT. 1025, IF SOLD FOR THE EXCLUSIVE USE OF THE UNITED STATES, ETC., SHOULD REQUIRE ONLY THAT THE BIDDER STATE, IF HE BE A MANUFACTURER, PRODUCER, OR IMPORTER, WHETHER THE AMOUNT OF SUCH TAX HAS BEEN CONSIDERED IN FIXING THE AMOUNT OF THE BID AND WHETHER HE HAS CLAIMED OR WILL CLAIM EXEMPTION FROM, CREDIT FOR, OR REFUND OF SUCH TAX. DEDUCTION FROM THE BID PRICE OF THE AMOUNT OF THE TAX IMPOSED ON ARTICLES UNDER THE REVENUE ACT OF 1932, MADE TAX EXEMPT EFFECTIVE OCTOBER 1, 1935, BY THE REVENUE ACT OF 1935, 49 STAT. 1025, IF SOLD FOR THE EXCLUSIVE USE OF THE UNITED STATES, ETC., IS UNNECESSARY EITHER PRIOR OR SUBSEQUENT TO AWARD, AND PAYMENTS FOR DELIVERIES MADE ON OR AFTER OCTOBER 1, 1935, UNDER CONTRACTS ENTERED INTO PRIOR TO THAT DATE SHOULD BE MADE AT THE CONTRACT PRICE, BUT IN SUCH CASES NO ADMINISTRATIVE CERTIFICATE SHOULD BE FURNISHED THE CONTRACTOR TO ENABLE HIM TO CLAIM A REFUND OF THE TAX PAID.

COMPTROLLER GENERAL MCCARL TO THE SECRETARY OF THE NAVY, JANUARY 7, 1936:

THERE HAS BEEN RECEIVED YOUR ENDORSEMENT OF NOVEMBER 12, 1935, REQUESTING DECISION OF CERTAIN QUESTIONS PRESENTED IN A LETTER OF NOVEMBER 1, 1935, FROM THE COMMANDANT OF THE MARINE CORPS, AS FOLLOWS:

1. IN CONNECTION WITH THE PURCHASE AND PAYMENT FOR MATERIAL AFFECTED BY THE PROVISIONS OF SECTION 620 OF THE REVENUE ACT OF 1932, AS AMENDED BY SECTION 401 OF THE REVENUE ACT OF 1935, VARIOUS QUESTIONS HAVE ARISEN, ON WHICH IT IS DESIRED THAT A RULING BE OBTAINED FROM THE COMPTROLLER GENERAL.

2. IN THE ISSUANCE OF FUTURE SPECIFICATIONS COVERING THE PURCHASE OF ARTICLES ON WHICH A TAX IS IMPOSED BY THE REVENUE ACT OF 1932, BASED ON QUANTITY, SUCH AS GASOLINE, LUBRICATING OIL, TIRES, TUBES, ETC., WHERE THE AMOUNT OF TAX CAN BE ACCURATELY DETERMINED, IT IS PROPOSED TO INCLUDE A STIPULATION SIMILAR TO THAT USED IN THE PAST WITH RESPECT TO STATE TAXES, I.E., THAT THE BID PRICE IS EXCLUSIVE OF THE FEDERAL TAX. WITH REGARD TO OTHER ARTICLES, HOWEVER, UPON WHICH THE TAX IS BASED ON THE MANUFACTURER'S SALE PRICE, IT IS CONTEMPLATED THAT SPECIFICATIONS WILL CONTINUE TO BE ISSUED CONTAINING THE FOLLOWING TAX CLAUSE:

"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 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 AND ENTERED ON INVOICE AS A SEPARATE ITEM.'

THE CONTINUED USE OF THE ABOVE CLAUSE IS PROPOSED BY REASON OF THE FACT THAT WHERE ARTICLES OF THE CLASS IN QUESTION ARE PURCHASED FROM A RETAILER OR DISTRIBUTOR AFTER HAVING BEEN INVOLVED IN VARIOUS TRANSACTIONS FROM THE MANUFACTURER TO THE CONTRACTOR, THE TAX LOSES ITS IDENTITY, BECOMING, IN SOME CASES, MERELY A PART OF THE PRICE AND IN OTHERS BEING ENTIRELY ABSORBED, THUS MAKING IT DIFFICULT TO DETERMINE WHAT AMOUNT OF TAX, IF ANY, IS REFLECTED IN THE BID PRICE. APPLYING THE PRINCIPLE ESTABLISHED BY DECISIONS OF THE COMPTROLLER GENERAL, REFERENCES (C) AND (D), IT APPEARS THAT IN THE CASE OF BIDS OPENED SUBSEQUENT TO 30 AUGUST 1935, THE DATE OF APPROVAL OF THE ACT, THE BIDDER SHOULD BE PRESUMED TO HAVE KNOWLEDGE OF THE FACT THAT, EFFECTIVE 1 OCTOBER 1935, THE TAX IMPOSED BY THE REVENUE ACT OF 1932 IS NOT APPLICABLE TO MATERIAL SOLD TO THE GOVERNMENT, AND ACCORDINGLY SUBMIT HIS BID EXCLUSIVE OF SUCH TAX. A DECISION IS DESIRED AS TO WHETHER THE ABOVE CLAUSE MAY BE SO INTERPRETED AND WHETHER, IN MAKING PAYMENTS UNDER CONTRACTS BASED ON SUCH BIDS, THE FULL CONTRACT PRICE MAY BE ALLOWED. IN THIS CONNECTION, A DECISION IS SPECIFICALLY DESIRED AS TO THE AMOUNT TO BE PAID UNDER CONTRACT NOM-18968, DATED 28 SEPTEMBER 1935 WITH THE COLONIAL OIL COMPANY FOR FURNISHING GASOLINE TO THE MARINE BARRACKS, PARRIS ISLAND, S.C., DURING THE PERIOD 1 OCTOBER TO 31 DECEMBER 1935 AT $0.0847 PER GALLON, THE BID HAVING BEEN OPENED 20 SEPTEMBER 1935, AND NO PROVISION REGARDING TAX HAVING BEEN INCLUDED THEREIN OTHER THAN THE ABOVE CLAUSE.

3. IN CONNECTION WITH DELIVERIES OF MATERIAL ON OR AFTER 1 OCTOBER 1935 UNDER CONTRACTS BASED ON BIDS OPENED PRIOR TO 30 AUGUST 1935, CONTAINING THE ABOVE CLAUSE, A QUESTION ARISES AS TO THE METHOD OF MAKING ADJUSTMENTS IN PRICE BY REASON OF THE INCLUSION OF THE TAX. NO DIFFICULTY IN MAKING SUCH ADJUSTMENTS WILL BE EXPERIENCED IN CONNECTION WITH ARTICLES SUBJECT TO THE TAX BASED ON QUANTITY. CONSIDERABLE DIFFICULTY IS ANTICIPATED, HOWEVER, FOR THE REASONS MENTIONED IN THE PRECEDING PARAGRAPH IN DETERMINING THE AMOUNT TO BE DEDUCTED IN CONNECTION WITH ARTICLES SUBJECT TO TAX BASED ON MANUFACTURER'S SALE PRICE. IT IS,THEREFORE BELIEVED THAT IT WOULD BE ADVANTAGEOUS, PROVIDED THAT A DEDUCTION IN THE SETTLEMENT OF THE ACCOUNT ON THE ONE HAND, AND A CORRESPONDING REFUND FROM THE COLLECTOR OF INTERNAL REVENUE ON THE OTHER HAND, IS NOT A MANDATORY REQUIREMENT OF THE LAW, TO MAKE PAYMENT AT THE FULL CONTRACT PRICE AND BALANCE THE TRANSACTION BY WITHHOLDING THE EXEMPTION CERTIFICATE WHICH WOULD OTHERWISE BE FURNISHED TO ENABLE THE MANUFACTURER TO OBTAIN A REFUND. THE RESULT WOULD BE THE SAME INSOFAR AS THE TOTAL OUTLAY OF PUBLIC FUNDS IS CONCERNED, THE ONLY DIFFERENCE BEING THAT THE PROPOSED PROCEDURE WOULD EFFECT A SAVING IN REVENUE COLLECTIONS AND A CORRESPONDING CHARGE AGAINST THE APPROPRIATION FROM WHICH THE AMOUNT IS PAYABLE. IT IS BELIEVED, HOWEVER, THAT THE AMOUNT INVOLVED WOULD NOT BE SUFFICIENT TO PRESENT A SERIOUS OBJECTION. IF THE PROPOSED PROCEDURE IS NOT APPROVED, IT IS DESIRED THAT A DECISION BE RENDERED AS TO THE PROPER METHOD OF DETERMINING THE AMOUNT TO BE DEDUCTED AS REPRESENTING TAX.

THE TAX TO WHICH THE LETTER APPEARS TO HAVE DIRECT REFERENCE IS THE "MANUFACTURERS' EXCISE TAX" IMPOSED BY TITLE IV OF THE REVENUE ACT OF 1932, AS AMENDED BY THE ACT OF MAY 10, 1934, 48 STAT. 762, ON ARTICLES LISTED THEREIN. THE TAX WAS LAID ON SUCH ARTICLES SOLD IN THE UNITED STATES BY THE MANUFACTURER, PRODUCER, OR IMPORTER INTO THE UNITED STATES, TO BE PAID BY THE MANUFACTURER, PRODUCER, OR IMPORTER, OR IN CERTAIN INSTANCES BY THOSE WHO ACQUIRED FROM THE MANUFACTURER, PRODUCER, OR IMPORTER BY OPERATION OF LAW OR AS A RESULT OF ANY TRANSACTION NOT TAXABLE UNDER THE TITLE, THE RIGHT TO SELL AN ARTICLE SUBJECT TO THE TAX.

SECTION 401 OF THE REVENUE ACT OF 1935, APPROVED AUGUST 30, 1935, 49 STAT. 1025, AMENDED SECTION 620,"TAX-FREE SALES," OF THE REVENUE ACT OF 1932, AS AMENDED BY SECTION 4 OF THE ACT OF JUNE 16, 1933, 48 STAT. 255, SO AS TO PROVIDE IN SUBSTANCE THAT UNDER REGULATIONS PRESCRIBED BY THE COMMISSIONER OF INTERNAL REVENUE WITH THE APPROVAL OF THE SECRETARY OF THE TREASURY, NO TAX UNDER SAID TITLE IV SHALL BE IMPOSED WITH RESPECT TO THE SALE OF ANY ARTICLE 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.

SECTION 621,"CREDITS AND RETURNS," OF THE 1932 ACT, AS AMENDED BY SECTION 4 OF THE ACT OF JUNE 16, 1933, 48 STAT. 255, WAS FURTHER AMENDED BY THE ACT OF AUGUST 30, 1935, TO PROVIDE THAT A CREDIT AGAINST TAX UNDER THE TITLE OR A REFUND, MAY BE ALLOWED OR MADE TO A MANUFACTURER, PRODUCER, OR IMPORTER IN THE AMOUNT OF THE TAX PAID BY HIM UNDER THE TITLE WITH RESPECT TO THE SALE OF ANY ARTICLE TO ANY VENDEE, IF THE MANUFACTURER, PRODUCER, OR IMPORTER, HAS IN HIS POSSESSION SUCH EVIDENCE AS THE REGULATIONS MAY PRESCRIBE THAT ON OR AFTER THE FIRST DAY OF THE SECOND MONTH FOLLOWING THE DATE OF THE ENACTMENT OF THE REVENUE ACT OF 1935, SUCH ARTICLE WAS, BY ANY PERSON, 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.

THE COMMISSIONER OF INTERNAL REVENUE HAS ISSUED REGULATIONS AND AMENDMENTS TO EXISTING REGULATIONS TO MEET THE PROVISIONS OF THE REVENUE ACT OF 1935. THOSE REGULATIONS WERE APPROVED BY THE ACTING SECRETARY OF THE TREASURY, NOVEMBER 12, 1935, ARE DESIGNATED TREASURY DECISIONS 4604 AND 4605, AND ARE IN PERTINENT PART AS FOLLOWS:

ON AND AFTER OCTOBER 1, 1935, NO TAX ATTACHES IF THE ARTICLE IS SOLD BY THE MANUFACTURER DIRECT TO THE UNITED STATES, ANY STATE, TERRITORY OF THE UNITED STATES, OR ANY POLITICAL SUBDIVISION OF THE FOREGOING, OR THE DISTRICT OF COLUMBIA, FOR ITS EXCLUSIVE USE, PROVIDED THE EXEMPT CHARACTER OF THE SALE IS ESTABLISHED AS REQUIRED BY THESE REGULATIONS.

ON AND AFTER OCTOBER 1, 1935, NO SALE MAY BE MADE TAX FREE BY THE MANUFACTURER TO A DEALER FOR RESALE TO THE UNITED STATES, ANY STATE, TERRITORY OF THE UNITED STATES, OR ANY POLITICAL SUBDIVISION OF THE FOREGOING, OR THE DISTRICT OF COLUMBIA, EVEN THOUGH IT IS KNOWN AT THE TIME OF THE SALE THAT THE ARTICLE WILL BE SO RESOLD. HOWEVER, WHERE ANY DEALER RESELLS A TAX-PAID ARTICLE ON OR AFTER OCTOBER 1, 1935, TO ANY OF THE GOVERNMENTAL UNITS NAMED ABOVE FOR ITS EXCLUSIVE USE, THE MANUFACTURER WHO PAID THE TAX TO THE UNITED STATES ON HIS SALE OF THE ARTICLE IN QUESTION MAY SECURE A REFUND OR CREDIT IN ACCORDANCE WITH THE PROVISIONS OF ARTICLE 71, AS AMENDED.

TO ESTABLISH THE RIGHT TO EXEMPTION FROM TAX WHERE THE SALE OF AN ARTICLE IS MADE BY THE MANUFACTURER ON OR AFTER OCTOBER 1, 1935, DIRECT TO THE UNITED STATES, ANY STATE, TERRITORY OF THE UNITED STATES, OR ANY POLITICAL SUBDIVISION OF THE FOREGOING, OR THE DISTRICT OF COLUMBIA, FOR ITS EXCLUSIVE USE, IT IS NECESSARY THAT (1) THE MANUFACTURER HAVE DEFINITE KNOWLEDGE PRIOR TO OR AT THE TIME OF SALE, THAT THE ARTICLE IN QUESTION IS PURCHASED FOR SUCH USE, AND (2) HE OBTAIN FROM AUTHORIZED OFFICER OF THE UNITED STATES, STATE, TERRITORY OF THE UNITED STATES, POLITICAL SUBDIVISION, OR DISTRICT OF COLUMBIA, AS THE CASE MAY BE, AND RETAIN IN HIS POSSESSION A PROPERLY EXECUTED EXEMPTION CERTIFICATE IN THE FORM PRESCRIBED BY THIS ARTICLE.

IN THE CASE OF A SALE OF A TAXABLE ARTICLE BY A MANUFACTURER TO A DEALER, WHERE TITLE PASSES THROUGH ONE OR MORE PERSONS IN A CHAIN OF SALES FROM THE MANUFACTURER TO A CONSUMER, AND SUCH ARTICLE IS, ON AND AFTER OCTOBER 1, 1935, USED OR RESOLD FOR A PURPOSE OR USE SPECIFIED IN SECTION 621 (A) (3) (A), THE MANUFACTURER WHO PAID THE TAX TO THE UNITED STATES MAY BE ALLOWED A REFUND OR MAY TAKE CREDIT AGAINST THE TAX SHOWN TO BE DUE UPON ANY SUBSEQUENT MONTHLY RETURN IN THE AMOUNT OF TAX PAID BY HIM WITH RESPECT TO THE SALE OF SUCH ARTICLE, PROVIDED HE CAN ESTABLISH BY SATISFACTORY EVIDENCE (1) THAT SUCH ARTICLE HAS BEEN USED, OR RESOLD, FOR ONE OF THE USES SPECIFIED IN SUCH SECTION; (2) THE NAME AND ADDRESS OF THE ULTIMATE VENDOR, (3) THE NAME AND ADDRESS OF THE CONSUMER, AND THE USE MADE OR TO BE MADE OF SUCH ARTICLE; (4) THE DATE THE TAX ON HIS SALE OF SUCH ARTICLE WAS PAID TO THE UNITED STATES; AND (5) THAT HE HAS REPAID OR AGREED TO REPAY THE AMOUNT OF SUCH TAX TO THE ULTIMATE VENDOR, OR HAS OBTAINED THE CONSENT OF THE ULTIMATE VENDOR TO THE ALLOWANCE OF THE CREDIT OR REFUND.

THESE REGULATIONS AND THE REGULATIONS WHICH THEY AMEND PRESCRIBE IN DETAIL THE PROCEDURE TO BE FOLLOWED BY THE MANUFACTURER, PRODUCER, OR IMPORTER TO OBTAIN A CREDIT AGAINST THE TAX OR A REFUND THEREOF, BOTH WHERE A SALE IS MADE BY THE MANUFACTURER, PRODUCER, OR IMPORTER, DIRECT TO THE UNITED STATES, OR TO OTHERS WHO RESELL TO THE UNITED STATES. THE WHOLE PROCEDURE IS DEPENDENT UPON THE PRODUCTION BY THE MANUFACTURER, PRODUCER, OR IMPORTER OF EVIDENCE SATISFACTORY TO THE COMMISSIONER OF INTERNAL REVENUE THAT THE ARTICLES INVOLVED HAVE IN FACT BEEN SOLD EITHER DIRECTLY OR THROUGH OTHER PURCHASERS, FOR THE EXCLUSIVE USE OF THE UNITED STATES AND THAT THE UNITED STATES HAS NOT PAID THE AMOUNT OF THE TAX AS A PART OF THE PURCHASE PRICE OR OTHERWISE.

NEITHER THE REVENUE LAW NOR THE REGULATIONS OF THE COMMISSIONER APPEAR TO BE MANDATORY UPON THE SELLER SO FAR AS SALES TO THE UNITED STATES ARE CONCERNED, THAT IS TO SAY, UNDER SAID LAW AND REGULATIONS SUCH SALES MAY BE MADE WITHOUT PAYMENT OF THE TAX THEREON OR THE TAX MAY BE PAID AND REFUND CLAIMED. THE LAW PROVIDES THAT "UNDER REGULATIONS ISSUED BY THE COMMISSIONER" NO TAX SHALL BE IMPOSED. THE REGULATIONS ISSUED BY THE COMMISSIONER PLACE UPON THE MANUFACTURER THE ENTIRE RESPONSIBILITY OF ESTABLISHING THE FACTS ENTITLING HIM TO CREDIT OR REFUND. IT APPEARS THAT BOTH THE LAW AND THE REGULATIONS LEAVE A BIDDER, MANUFACTURER OR OTHERWISE, FREE TO INCLUDE OR EXCLUDE THE AMOUNT OF THE TAX IN SUBMITTING BIDS TO THE GOVERNMENT, SUBJECT TO THE PROVISION THAT IF THE BID EXCLUDES THE TAX, THE CONTRACTOR MAY COMPLY WITH THE COMMISSIONER'S REGULATIONS AND OBTAIN RELIEF THEREFROM, WHILE IF THE PRICE INCLUDES THE TAX HE, OF COURSE, WOULD NOT BE ENTITLED TO RELIEF. IT WOULD APPEAR FURTHER THAT SO FAR AS THE GOVERNMENT IS CONCERNED, THE NET RESULT IS THE SAME IN EITHER EVENT. THAT IS TO SAY, THE EXCLUSION OF THE TAX IN PRICES BID TO THE GOVERNMENT WOULD RESULT IN CONSERVING APPROPRIATED FUNDS FOR THE DEPARTMENT INVOLVED WHILE TREASURY RECEIPTS WOULD BE DIMINISHED BY THE AMOUNT OF THE TAX, WHEREAS INCLUSION OF THE TAX WOULD INCREASE THE CHARGE UNDER THE APPROPRIATION INVOLVED WITH A CORRESPONDING INCREASE IN TREASURY RECEIPTS.

IN VIEW OF THE TERMS OF THE LAW AND THE REGULATIONS OF THE COMMISSIONER OF INTERNAL REVENUE, IT APPEARS DESIRABLE IN FUTURE SPECIFICATIONS TO REQUIRE ONLY THAT WHERE THE BIDDER IS MANUFACTURER, PRODUCER, OR IMPORTER OF ANY ARTICLE SUBJECT TO EXCISE TAX UNDER TITLE IV OF THE REVENUE ACT OF 1932, AS AMENDED, THE BIDDER STATE WHETHER THE AMOUNT OF SUCH TAX HAS BEEN CONSIDERED IN FIXING THE AMOUNT OF HIS BID AND WHETHER HE HAS CLAIMED OR WILL CLAIM EXEMPTION FROM, CREDIT FOR, OR REFUND OF SUCH TAX WITH RESPECT TO THE SALE OF SAID ARTICLES. THERE IS SUGGESTED THE FOLLOWING, WHICH WOULD APPEAR ADEQUATE: TO BE EXECUTED ONLY WHERE THE BIDDER IS MANUFACTURER, PRODUCER, OR IMPORTER OF ANY ARTICLE BID ON WHICH IS SUBJECT TO EXCISE TAX UNDER TITLE IV OF THE REVENUE ACT OF 1932, AS AMENDED.--- THE AMOUNT OF FEDERAL TAXES PAID OR PAYABLE ON ARTICLES SUBJECT TO TAX UNDER TITLE IV OF THE REVENUE ACT OF 1932, AS AMENDED, ARE (INCLUDED--- EXCLUDED) IN THE PRICES BID HEREIN, AND THE BIDDER (HAS--- HAS NOT) CLAIMED AND/OR (WILL--- WILL NOT)CLAIM EXEMPTION FROM, CREDIT FOR, OR REFUND OF SUCH TAX WITH RESPECT TO SALE OF SAID ARTICLES, AS PROVIDED BY LAW.

NO OTHER PROVISION WITH RESPECT TO ANY EXISTING FEDERAL TAX SHOULD APPEAR IN THE BID OR CONTRACT.

WITH REFERENCE TO THE QUESTION RAISED ON PAGE 2 OF THE LETTER, SUPRA, RELATIVE TO BIDS OPENED SUBSEQUENT TO AUGUST 30, 1935, YOU ARE INFORMED THAT THE TWO DECISIONS OF THIS OFFICE CITED IN THE SUBMISSION, 14 COMP. GEN. 44 AND 14 COMP. GEN. 516, ARE NOT FOR APPLICATION. FOR THE PURPOSE OF PAYMENT UNDER A GOVERNMENT CONTRACT, THE CONTRACTOR MAY BE PRESUMED TO HAVE INCLUDED IN HIS BID PRICE ALL NECESSARY ELEMENTS OF COST, BUT WHERE THE INTERESTS OF THE GOVERNMENT ARE CONCERNED IT MAY NOT BE PRESUMED THAT A BIDDER HAS EXCLUDED AN UNAUTHORIZED ITEM. IT IS TO BE OBSERVED FURTHER, THAT IN ORDER TO OBTAIN A CREDIT OR REFUND OF THE TAX IN THE EVENT IT IS NOT INCLUDED, THAT FACT MUST BE ESTABLISHED BY A CONTRACTOR OR THE MANUFACTURER, PRODUCER, OR IMPORTER ENTITLED THERETO. IN ORDER TO OBTAIN SUCH RELIEF THERE MUST BE FURNISHED AN AFFIDAVIT BY A RESPONSIBLE REPRESENTATIVE OF THE GOVERNMENT TO THAT EFFECT. IT WOULD SEEM, THEREFORE, BOTH IN THE INTERESTS OF THE CONTRACTOR AND THE UNITED STATES THAT IT BE DEFINITELY ESTABLISHED IN EVERY INSTANCE THAT THE TAX HAS OR HAS NOT BEEN INCLUDED IN THE BID PRICE, AS THE CASE MAY BE. HOWEVER, THE ULTIMATE RESULT WILL BE SAME IN EITHER EVENT. IF THE BID PRICE INCLUDED THE TAX THE CONTRACT PRICE SHOULD BE PAID BUT NO REPRESENTATIVE OF A DEPARTMENT OR AGENCY OF THE GOVERNMENT SHOULD MAKE ANY AFFIDAVIT OR STATEMENT WHEREBY A CONTRACTOR MAY OBTAIN RELIEF. IF, ON THE OTHER HAND, IT BE ESTABLISHED THAT THE TAX WAS EXCLUDED IN SUBMISSION OF THE BID, THE CONTRACTOR WOULD BE ENTITLED, UPON ESTABLISHMENT OF THAT FACT, TO CLAIM A REFUND FROM THE COMMISSIONER OF INTERNAL REVENUE.

WITH PARTICULAR REFERENCE TO THE INQUIRY AS TO PAYMENT UNDER CONTRACT NOM -18968, SEPTEMBER 28, 1935, WITH THE COLONIAL OIL CO., IT WOULD APPEAR PROPER TO PAY FOR THE GASOLINE DELIVERED AT THE CONTRACT PRICE OF $0.0847 PER GALLON. IF, HOWEVER, IT IS DETERMINED THAT THE CONTRACT PRICE PER GALLON IS INCLUSIVE OF THE FEDERAL TAX NO STATEMENT OR CERTIFICATE SHOULD BE GIVEN THE CONTRACTOR WITH REFERENCE THERETO SUCH AS WOULD PERMIT THE CONTRACTOR TO CLAIM A REFUND OF THE TAX.

IN VIEW OF THE CONCLUSION REACHED ABOVE, NO ADJUSTMENT IN PRICE BY REASON OF THE INCLUSION OF THE TAX IN CONNECTION WITH DELIVERIES OF MATERIAL ON OR AFTER OCTOBER 1, 1935, ON CONTRACTS BASED ON BIDS OPENED PRIOR TO AUGUST 30, 1935, APPEARS NECESSARY. WHERE A BIDDER IN SUBMITTING A BID CERTIFIED THAT THE PRICES INCLUDED FEDERAL TAX, PAYMENT SHOULD BE MADE AT THE CONTRACT PRICE AND NO POSSIBLE UNDERTAKING TO OBTAIN RELIEF FROM THE TAXES SHOULD BE CONSIDERED.

SINCE THE RIGHT OF A CONTRACTOR TO RELIEF FROM OR REFUND OF THE TAX IMPOSED BY TITLE IV OF THE REVENUE ACT OF 1932, AS AMENDED, IS WHOLLY DEPENDENT UPON THE ESTABLISHMENT BY THE CONTRACTOR THAT THE ARTICLES INVOLVED HAVE BEEN SOLD TO THE GOVERNMENT TAX-FREE, OR THAT THE PRICE TO THE GOVERNMENT DID NOT INCLUDE ANY AMOUNT AS A RESULT OF THE TAX, THE CONCLUSION STATED IN CIRCULAR LETTER NO. 124, OCTOBER 2, 1935, OF THE TREASURY DEPARTMENT, PROCUREMENT DIVISION, THAT---

IT WILL BE NECESSARY TO DEDUCT THE AMOUNT OF THE FEDERAL EXCISE TAX FROM THE PURCHASE PRICE OF THE ARTICLES ENUMERATED IN SAID TITLE IV OF THE REVENUE ACT OF 1932.

DOES NOT APPEAR TO BE IN ENTIRE ACCORD WITH THE LAW AND REGULATIONS, SUPRA. AS POINTED OUT, THE RIGHT OF THE CONTRACTOR TO REMISSION OR REFUND OF THE TAX IS DEPENDENT UPON WHETHER A SALE IS ACTUALLY MADE TO THE GOVERNMENT TAX-FREE. THE NECESSITY FOR DEDUCTION OF THE TAX FROM THE BID PRICE EITHER PRIOR OR SUBSEQUENT TO AWARD DOES NOT APPEAR UNDER THE CIRCUMSTANCES.