A-67714, FEBRUARY 12, 1936, 15 COMP. GEN. 697

A-67714: Feb 12, 1936

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WITH AN INVOICING DELIVERY PROVISION THAT PRICE IS TO BE DETERMINED BY POSTED TANK-WAGON PRICES INCLUDING FEDERAL BUT EXCLUDING OTHER TAXES. THE INVOICE DELIVERY PRICE IS APPLICABLE UNLESS IN EXCESS OF THE MAXIMUM PRICE STIPULATED IN THE CONTRACT WHEN SAID MAXIMUM PRICE IS FOR PAYMENT. SAID MAXIMUM PRICES ARE NOT SUBJECT TO QUANTITY DISCOUNT DEDUCTION. THERE IS SOME DOUBT IN MY MIND AS TO THE MAXIMUM PRICE WHICH MAY BE PAID UNDER THE CONTRACT CITED IN THIS CASE. WITH THE FURTHER PROVISION THAT DELIVERIES WILL BE BILLED AT THE CONTRACTOR'S POSTED TANK-WAGON PRICE INCLUDING FEDERAL TAX AND EXCLUDING ALL STATE AND LOCAL TAXES. IT WAS HELD THAT THE CONSUMER'S QUANTITY DISCOUNT OF 2 CENTS PER GALLON WAS DEDUCTIBLE FROM THE MAXIMUM PRICE STIPULATED IN THE CONTRACT.

A-67714, FEBRUARY 12, 1936, 15 COMP. GEN. 697

CONTRACTS - GASOLINE - FEDERAL TAX AND QUANTITY DISCOUNT PROVISIONS WHERE GASOLINE CONTRACT PROVIDES FOR MAXIMUM PRICES ON BASIS OF AVERAGE POSTED TANK-WAGON PRICE INCLUDING FEDERAL BUT EXCLUDING OTHER TAXES, LESS QUANTITY DISCOUNTS, WITH AN INVOICING DELIVERY PROVISION THAT PRICE IS TO BE DETERMINED BY POSTED TANK-WAGON PRICES INCLUDING FEDERAL BUT EXCLUDING OTHER TAXES, LESS QUANTITY DISCOUNTS, BUT SUBJECT TO MAXIMUM NET PRICES INDICATED THEREIN, THE INVOICE DELIVERY PRICE IS APPLICABLE UNLESS IN EXCESS OF THE MAXIMUM PRICE STIPULATED IN THE CONTRACT WHEN SAID MAXIMUM PRICE IS FOR PAYMENT, BUT SAID MAXIMUM PRICES ARE NOT SUBJECT TO QUANTITY DISCOUNT DEDUCTION, AND THE FEDERAL TAX NEED NOT BE ELIMINATED FROM THE PRICE TO BE PAID UNDER EITHER PROVISION OF THE CONTRACT. (A-67600, JAN. 7, 1936, 15 COMP. GEN. 588.)

COMPTROLLER GENERAL MCCARL TO ALBERT MORRIS, REGIONAL FISCAL AGENT, FEBRUARY 12, 1936:

THERE HAS BEEN CONSIDERED YOUR LETTER OF NOVEMBER 13, 1935, AS FOLLOWS:

I TRANSMIT HEREWITH FORM 1034 VOUCHER IN FAVOR OF THE MAGNOLIA PETROLEUM COMPANY, OF EL PASO, TEXAS, IN THE AMOUNT OF $53.13, COVERING THE PURCHASE OF 440 GALLONS OF GASOLINE BY THE SUPERVISOR OF THE GILA NATIONAL FOREST AT SILVER CITY, NEW MEXICO, PURCHASE BEING MADE UNDER CONTRACT TPS-8152.

THERE IS SOME DOUBT IN MY MIND AS TO THE MAXIMUM PRICE WHICH MAY BE PAID UNDER THE CONTRACT CITED IN THIS CASE. THE CONTRACT PROVIDES A MAXIMUM PRICE OF 0.135 FOR GRADE A GASOLINE IN ZONE 4 AND 0.1237 IN ZONE 5, WITH THE FURTHER PROVISION THAT DELIVERIES WILL BE BILLED AT THE CONTRACTOR'S POSTED TANK-WAGON PRICE INCLUDING FEDERAL TAX AND EXCLUDING ALL STATE AND LOCAL TAXES, IN EFFECT AT TIME AND PLACE OF DELIVERY, LESS 2 CENTS PER GALLON ON GRADE A AND V GASOLINE. THE ATTACHED DISCOUNT COVERS THE PURCHASE OF 275 GALLONS IN ZONE 4 AND 165 GALLONS IN ZONE 5, OF GRADE A GASOLINE.

IN YOUR DECISION A-62290, DATED JUNE 19, 1935, IN CONNECTION WITH CONTRACT W-503, QM-14884, CONTINENTAL OIL COMPANY, IT WAS HELD THAT THE CONSUMER'S QUANTITY DISCOUNT OF 2 CENTS PER GALLON WAS DEDUCTIBLE FROM THE MAXIMUM PRICE STIPULATED IN THE CONTRACT, IN ARRIVING AT THE MAXIMUM WHICH COULD BE PAID UNDER THAT CONTRACT.

YOUR ADVANCE DECISION IS RESPECTFULLY REQUESTED WHETHER THE 2 CENTS CONSUMER'S ALLOWANCE UNDER THE CONTRACT CITED IN THE ATTACHED ACCOUNT IS DEDUCTIBLE FROM THE MAXIMUM PRICES STATED THEREIN. IT IS UNDERSTOOD, OF COURSE, THAT THE FEDERAL TAX OF 1 CENT PER GALLON SHALL BE DEDUCTED SINCE THE MAXIMUM PRICE INCLUDES SUCH TAX, FROM WHICH THE GOVERNMENT IS EXEMPT.

AN EARLY REPLY WILL BE GREATLY APPRECIATED BECAUSE OTHER VOUCHERS SIMILAR TO THE ONE TRANSMITTED HEREWITH ARE AWAITING PAYMENT PENDING THE OUTCOME OF THE QUESTION RAISED ON THIS VOUCHER.

CONTRACT TPS-8152, DATED SEPTEMBER 18, 1935, WITH THE MAGNOLIA PETROLEUM CO., UNDER WHICH THE PURCHASES IN QUESTION WERE MADE, PROVIDES FOR DELIVERY, DURING THE PERIOD OCTOBER 1 TO DECEMBER 31, 1935, OF ESTIMATED QUANTITIES OF SPECIFIED GRADES OF GASOLINE IN TANK WAGONS OR DRUMS TO VARIOUS DESTINATIONS, ZONED ACCORDING TO THE COUNTIES WHEREIN LOCATED IN THE STATES OF NEW MEXICO AND TEXAS, AND FOR DELIVERY IN TANK CARS TO CERTAIN DESTINATIONS IN THE STATE OF TEXAS, NOT HERE INVOLVED. THE MAXIMUM PRICES TO BE CHARGED FOR SAID DELIVERIES IN TANK WAGONS OR DRUMS, SO FAR AS PERTINENT HERE, ARE SHOWN IN THE PRICE BIDDING SHEET AS FOLLOWS:

CHART

NEW MEXICO

ESTIMATED PRICE, MAXIMUM

ITEM NO. ZONE GRADE QUANTITY PER GALLON NET

GALLONS

36 ----------- 4 G-101 2,816 0.125

37 ----------- 4 A-65 48,667 .135

38 ----------- 4 V-65 55 .135

39 ----------- 5 G-101 12,936 0.1137

40 ----------- 5 A-65 70,902 .1237

41 ----------- 5 V-65 12,700 .1237

THE METHOD USED FOR BASING THE MAXIMUM PRICES, AND THAT TO BE USED FOR INVOICING DELIVERIES, ARE SET FORTH IN THE CONTRACT AS FOLLOWS:

II. (A) FOR BASING MAXIMUM PRICES MAGNOLIA'S AVERAGE POSTED TANK WAGON PRICE TO CONSUMERS, INCLUDING FEDERAL TAX AND EXCLUDING ALL STATE AND LOCAL TAXES IN EFFECT ON DATE OF BID AND PLACE OF DELIVERY LESS MAXIMUM QUANTITY DISCOUNTS OF 1 CENT PER GALLON ON G-101 AND 2 CENTS PER GALLON ON A AND V 65 AND 75 GASOLINES.

(B) FOR INVOICING MAGNOLIA'S POSTED TANK-WAGON PRICE TO CONSUMERS INCLUDING FEDERAL TAX AND EXCLUDING ALL STATE AND LOCAL TAXES IN EFFECT AT THE TIME AND PLACE OF DELIVERY LESS MAXIMUM QUANTITY DISCOUNTS OF 1 CENT PER GALLON ON G-101 AND 2 CENTS PER GALLON ON A AND V 65 AND 75 GASOLINES, SUBJECT TO THE MAXIMUM NET PRICES INDICATED ON THE RESPECTIVE GRADES OF GASOLINE.

THE ABOVE QUOTATIONS APPLY ON SINGLE DELIVERIES OF 25 GALLONS OR MORE. ON DELIVERIES OF LESS THAN 25 GALLONS, MAGNOLIA'S POSTED SERVICE STATION PRICE IN EFFECT ON THE DATE AND AT THE POINT OF DELIVERY APPLIES, EXCLUSIVE OF ALL STATE AND LOCAL TAXES ONLY.

IT WILL BE NOTED THAT THE QUANTITY DISCOUNTS OF 1 CENT PER GALLON ON G- 101 AND 2 CENTS PER GALLON ON A AND V 65 AND 75 GASOLINES ARE INCLUDED IN THE METHOD OF BASING MAXIMUM PRICES SET FORTH IN PARAGRAPH II (A). ACCORDINGLY, IT MUST BE PRESUMED THAT SAID QUANTITY DISCOUNT HAS ALREADY BEEN DEDUCTED IN ARRIVING AT THE MAXIMUM PRICES SHOWN IN THE PRICE BIDDING SHEET, AND THERE IS NO AUTHORITY TO DEDUCT IT A SECOND TIME IN DETERMINING THE MAXIMUM PRICES CHARGEABLE FOR DELIVERIES. OF COURSE, THE QUANTITY DISCOUNT IS TO BE DEDUCTED FROM THE POSTED TANK-WAGON PRICE, AS SET FORTH IN PARAGRAPH II (B), IN DETERMINING THE INVOICE PRICE. THE QUANTITY DISCOUNT OF 2 CENTS PER GALLON DIRECTED IN A-62290, DATED JUNE 19, 1935, TO BE DEDUCTED IN COMPUTING THE MAXIMUM PRICE PAYABLE UNDER THE CONTRACT THEREIN CONSIDERED WAS A SPECIAL DISCOUNT APPLYING TO MONTHLY DELIVERIES AMOUNTING TO 10,000 GALLONS, AND THE DECISION IN THAT CASE IS NOT FOR APPLICATION HERE.

THE AMOUNT PROPERLY PAYABLE UNDER THE QUOTED PROVISIONS OF THE PRESENT CONTRACT IS THE POSTED TANK-WAGON PRICE TO CONSUMERS, INCLUDING FEDERAL TAX AND EXCLUDING STATE AND LOCAL TAXES, LESS THE QUANTITY DISCOUNTS SPECIFIED, UNLESS THE PRICE THUS OBTAINED IS IN EXCESS OF THE STIPULATED MAXIMUM PRICE APPLICABLE TO THE GRADE AND ZONE INVOLVED, IN WHICH EVENT SAID MAXIMUM PRICE WILL BE FOR CHARGING.

THE THREE INVOICES ACCOMPANYING YOUR SUBMISSION SHOW DELIVERY OF 165 GALLONS OF GASOLINE AT MIMBRES AND 110 GALLONS AT PINOS ALTOS, BOTH IN ZONE 4, NEW MEXICO, AND 165 GALLONS AT KINGSTON, N.MEX., IN ZONE 5. YOU STATE THAT ALL DELIVERIES WERE OF GRADE A GASOLINE.

THE TANK-WAGON PRICE FOR THE DELIVERIES IN ZONE 4 IS STATED ON INVOICES 12917 AND 12973 AS 14 1/2 CENTS, EXCLUSIVE OF ALL FEDERAL AND STATE SALES TAXES, AND THE INVOICES BEAR A CERTIFICATE THAT NO FEDERAL EXCISE TAX IMPOSED BY THE REVENUE ACT OF 1932, AS AMENDED, IS INCLUDED, SAID TANK- WAGON PRICE IS FURTHER REDUCED BY THE QUANTITY DISCOUNT OF 2 CENTS IN ACCORDANCE WITH PARAGRAPH II (B), SUPRA, AND THE RESULTING PRICES OF 12 1/2 CENTS IS LESS THAN THE MAXIMUM OF 13 1/2 CENTS FOR THE GRADE AND ZONE BY EXACTLY THE AMOUNT OF THE FEDERAL TAX WHICH WAS INCLUDED IN SAID MAXIMUM.

INVOICE 213604, FOR DELIVERY IN ZONE 5, SHOWS THE TANK-WAGON PRICE, EXCLUSIVE OF FEDERAL AND STATES TAXES, AS 13 1/2 CENTS. SINCE THIS PRICE, REDUCED BY THE 2-CENT QUANTITY DISCOUNT, WOULD EXCEED THE MAXIMUM PRICE IF THE FEDERAL TAX WERE SUBTRACTED FROM SAID MAXIMUM, THERE IS CHARGED 11.37 CENTS PER GALLON, WHICH IS LESS THAN THE MAXIMUM OF 12.37 BY EXACTLY THE AMOUNT OF THE FEDERAL TAX INCLUDED IN SAID MAXIMUM. IT THUS APPEARS THAT NONE OF THE INVOICES STATES A PRICE IN EXCESS OF THE MAXIMUM PRICE ALLOWABLE UNDER THE CONTRACT.

WITH RESPECT TO YOUR STATEMENT,"IT IS UNDERSTOOD, OF COURSE, THAT THE FEDERAL TAX OF 1 CENT PER GALLON SHALL BE DEDUCTED SINCE THE MAXIMUM PRICE INCLUDES SUCH TAX, FROM WHICH THE GOVERNMENT IS EXEMPT," ATTENTION IS INVITED TO THE DECISION OF JANUARY 7, 1936, A-67600, 15 COMP. GEN. 588, RELATIVE TO THE PROCEDURE TO BE FOLLOWED AS TO GOVERNMENT PURCHASES IN VIEW OF SECTIONS 620 AND 621 OF THE REVENUE ACT OF 1932, AS AMENDED BY SECTION 401 OF THE REVENUE ACT OF 1935, APPROVED AUGUST 30, 1935, 49 STAT. 1025, AND REGULATIONS ISSUED THEREUNDER BY THE COMMISSIONER OF INTERNAL REVENUE. SAID DECISION IS, IN PART, AS FOLLOWS:

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. * * *

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.

THE CONTRACT IN THIS CASE PROVIDED SPECIFICALLY, IN PARAGRAPH 5 OF THE CONDITIONS THEREOF, THAT THE PRICES BID INCLUDED ANY FEDERAL TAX THERETOFORE IMPOSED BY THE CONGRESS, AND BOTH THE FORMULA FOR BASING MAXIMUM PRICES AND THAT FOR INVOICING INCLUDE THE FEDERAL TAX. INASMUCH AS THE INVOICES WERE ACTUALLY SUBMITTED AS EXCLUSIVE OF THE FEDERAL TAX AND COMPARISON WITH THE CONTRACT BEARS OUT THE EXCLUSION, PAYMENT MAY BE MADE ON THE VOUCHER PREPARED, IF OTHERWISE CORRECT, AND TAX-EXEMPTION CERTIFICATES MAY BE FURNISHED THE CONTRACTOR FOR THE PURPOSE OF CLAIMING A CREDIT FOR THE AMOUNT OF THE FEDERAL TAX. IN GENERAL, HOWEVER, IN MAKING PAYMENTS UNDER THIS OR SIMILAR CONTRACTS THERE SHOULD BE FOLLOWED THE PROCEDURE SET FORTH IN A-67600, SUPRA. ..END :