A-69751, FEBRUARY 3, 1936, 15 COMP. GEN. 686

A-69751: Feb 3, 1936

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WHERE SUCH DECREASE IS NOT EXPRESSLY PROVIDED FOR IN THE CONTRACT. PARTICULARLY WHERE CLAIM WILL NOT BE FILED BY THE CONTRACTOR FOR EXEMPTION FROM THE EXCISE TAXES INVOLVED. AS FOLLOWS: THERE IS ENCLOSED A COPY OF A LETTER OF NOVEMBER 27. TPS 7808 WITH GENERAL MOTORS FLEET SALES CORPORATION FOR THE REASON THAT THE CONTRACT "DOES NOT PROVIDE FOR ANY DECREASE IN THE CONTRACT PRICE BY REASON OF THE ELIMINATION OF ANY TAXES EXISTING AT THE TIME THE CONTRACT WAS SIGNED AND LATER REMOVED BY LAW.'. YOUR ATTENTION IS CALLED TO THE FACT THAT DEDUCTION OF THE EXCISE TAXES (WHEN INCLUDED IN THE AMOUNT BID) DOES NOT EFFECT A REDUCTION IN THE CONTRACT PRICE. " AND AT THE TIME THE CONTRACTS WERE EXECUTED THERE WERE IN EFFECT EXCISE TAXES WHICH WERE INCLUDED IN THE CONTRACT PRICE.

A-69751, FEBRUARY 3, 1936, 15 COMP. GEN. 686

CONTRACTS - PRICE ADJUSTMENT - TAX EXEMPT ARTICLES - REVENUE ACT OF 1935 CONTRACT PRICES SHOULD NOT BE DECREASED BY THE AMOUNT OF EXCISE TAXES IMPOSED BY THE REVENUE ACT OF 1932 ON THE MATERIALS INVOLVED AND LATER REMOVED BY LAW IF SOLD FOR THE EXCLUSIVE USE OF THE UNITED STATES, ETC., WHERE SUCH DECREASE IS NOT EXPRESSLY PROVIDED FOR IN THE CONTRACT, PARTICULARLY WHERE CLAIM WILL NOT BE FILED BY THE CONTRACTOR FOR EXEMPTION FROM THE EXCISE TAXES INVOLVED.

COMPTROLLER GENERAL MCCARL TO THE SECRETARY OF THE TREASURY, FEBRUARY 3, 1936:

CONSIDERATION HAS BEEN GIVEN TO YOUR LETTER OF JANUARY 8, 1936, AS FOLLOWS:

THERE IS ENCLOSED A COPY OF A LETTER OF NOVEMBER 27, 1935, ADDRESSED TO THE DIRECTOR OF PROCUREMENT, TREASURY DEPARTMENT, BY MR. J. B. WOODSIDE, MANAGER OF THE WASHINGTON OFFICE OF THE GENERAL MOTORS FLEET SALES CORPORATION RELATIVE TO PROCUREMENT DIVISION CIRCULAR LETTER NO. 124 (COPY ATTACHED), ISSUED PURSUANT 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 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---

"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.'

MR. WOODSIDE SUGGESTS THAT PURCHASING OFFICERS THROUGHOUT THE GOVERNMENT SERVICE BE ADVISED THAT EXCISE TAXES IMPOSED BY THE SAID ACT ON MOTOR PARTS BE NOT DEDUCTED IN CONNECTION WITH CONTRACT NO. TPS 7808 WITH GENERAL MOTORS FLEET SALES CORPORATION FOR THE REASON THAT THE CONTRACT "DOES NOT PROVIDE FOR ANY DECREASE IN THE CONTRACT PRICE BY REASON OF THE ELIMINATION OF ANY TAXES EXISTING AT THE TIME THE CONTRACT WAS SIGNED AND LATER REMOVED BY LAW.'

YOUR ATTENTION IS CALLED TO THE FACT THAT DEDUCTION OF THE EXCISE TAXES (WHEN INCLUDED IN THE AMOUNT BID) DOES NOT EFFECT A REDUCTION IN THE CONTRACT PRICE, BUT MERELY ADJUSTS THE TAX BY RELIEVING THE APPROPRIATION OF THE PURCHASING AGENCY. THE MANUFACTURER THEN OBTAINS REFUND (OR EXEMPTION FROM PAYMENT OF TAX, IF NOT ALREADY PAID) FOR THE ITEMS IN QUESTION.

IN DECISION A-67334 OF NOVEMBER 29, 1935, YOU ADVISED THE ADMINISTRATOR OF VETERANS' AFFAIRS THAT WHERE CONTRACTS EXPRESSLY PROVIDE "FOR ADJUSTMENT OF PRICE IN ACCORDANCE WITH SUBSEQUENT INCREASE OR DECREASE IN TAXES APPLICABLE TO THE ARTICLES PURCHASED THEREUNDER," AND AT THE TIME THE CONTRACTS WERE EXECUTED THERE WERE IN EFFECT EXCISE TAXES WHICH WERE INCLUDED IN THE CONTRACT PRICE, SUCH ARTICLES ARE EXEMPT FROM THE TAXES IMPOSED BY SECTION 603 OF THE REVENUE ACT OF 1932 AND SHOULD BE DEDUCTED FROM THE CONTRACT PRICE ON ALL ARTICLES DELIVERED UNDER THE CONTRACTS IN QUESTION AFTER SEPTEMBER 30, 1935.

IN VIEW OF THE FACT THAT THE ABOVE-MENTIONED CONTRACT OF GENERAL MOTORS FLEET CORPORATION DOES NOT EXPRESSLY PROVIDE FOR DECREASE IN THE CONTRACT PRICE BY REASON OF THE ELIMINATION OF TAXES EXISTING AT THE TIME THE CONTRACT WAS SIGNED AND LATER REMOVED BY LAW, YOUR DECISION IS REQUESTED AS TO WHETHER SUCH PRICE SHOULD BE DECREASED BY THE AMOUNT OF SUCH TAXES.

THE APPLICABLE TERMS OF THE CONTRACT TPS-7808, DATED JULY 27, 1935, TO WHICH YOU HAVE REFERRED, ARE CONTAINED ON PAGE 2 OF SPECIAL CONDITIONS AND NOTICES THERETO AS FOLLOWS:

PRICES BID HEREIN INCLUDE ANY FEDERAL TAX HERETOFORE IMPOSED BY THE CONGRESS WHICH IS APPLICABLE TO THE MATERIAL ON THIS BID. ANY SALES TAX, DUTIES, IMPOSTS, REVENUES, EXCISE, OR OTHER TAXES WHICH MAY HEREAFTER (THE DATE SET FOR OPENING OF THIS BID) BE IMPOSED BY THE CONGRESS AND MADE APPLICABLE TO THE MATERIAL ON THIS BID WILL BE CHARGED TO THE GOVERNMENT AND ENTERED ON INVOICES AS SEPARATE ITEMS.

THIS STIPULATION IS UNLIKE THAT CONSIDERED IN THE REFERRED TO DECISION OF NOVEMBER 29, 1935, A-67334, 15 COMP. GEN. 452, IN THAT THERE IS NO PROVISION IN THE CONTRACT IN THIS CASE FOR REDUCTION OF THE AGREED PRICE BY THE AMOUNT OF ANY REDUCTION IN TAX AND THE GENERAL MOTORS FLEET SALES CORPORATION HAS REPORTED IN LETTER OF JANUARY 9, 1936, THAT IT ABSORBED THE TAX FROM PROFITS, INCLUDING NOTHING IN THE CONTRACT PRICES FOR THE PARTS TO TAKE CARE OF THE TAX ITEM. ALSO, IN A LETTER OF JANUARY 10, 1936, THAT---

* * * NO CLAIM WILL BE FILED FOR AN EXEMPTION OF EXCISE TAXES ON PARTS SOLD TO THE GOVERNMENT, UNDER OUR CONTRACT TPS-7808 IN THE EVENT IT IS HELD BY THE COMPTROLLER GENERAL THAT NO DEDUCTION OF TAXES MAY BE MADE BY THE PAYING OFFICERS, FROM THE CONTRACT PRICES INVOLVED TO THE GOVERNMENT.

UNDER ALL OF THESE CIRCUMSTANCES YOU ARE ADVISED THAT IN MAKING PAYMENTS UNDER CONTRACT TPS-7808, DATED JULY 27, 1935, NO DEDUCTION SHOULD BE MADE BECAUSE AN EXCISE TAX WAS CONSIDERED IN COMPUTING THE CONTRACT PRICE. SEE DECISION OF JANUARY 7, 1936, A-67600, 15 COMP. GEN. 588.