A-70629, FEBRUARY 25, 1936, 15 COMP. GEN. 728

A-70629: Feb 25, 1936

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TAXES - FEDERAL AND STATE - GASOLINE AND OIL - PURCHASES BY VETERANS' ADMINISTRATION EMPLOYEES AND BENEFICIARIES PURCHASES OF GASOLINE AND OIL BY EMPLOYEES OR BENEFICIARIES OF THE VETERANS' ADMINISTRATION TRAVELING UNDER OFFICIAL ORDERS ON AN ACTUAL EXPENSE BASIS FOR WHICH THE TRAVELER IS REIMBURSED BY THE GOVERNMENT MUST BE CONSIDERED PURCHASES FOR THE EXCLUSIVE USE OF THE UNITED STATES WITHIN THE MEANING OF SECTION 401 OF THE REVENUE ACT OF 1935. IT WILL NOT BE NECESSARY TO REQUIRE DEDUCTION OF THE FEDERAL TAX IN MAKING PAYMENT FOR SUCH PURCHASES. NO EXEMPTION CERTIFICATES COVERING SAID TAX SHOULD BE ISSUED TO DEALERS BY SUCH TRAVELERS UNLESS IT IS DEFINITELY ESTABLISHED THAT THE SALE PRICE IS EXCLUSIVE OF SUCH TAX.

A-70629, FEBRUARY 25, 1936, 15 COMP. GEN. 728

TAXES - FEDERAL AND STATE - GASOLINE AND OIL - PURCHASES BY VETERANS' ADMINISTRATION EMPLOYEES AND BENEFICIARIES PURCHASES OF GASOLINE AND OIL BY EMPLOYEES OR BENEFICIARIES OF THE VETERANS' ADMINISTRATION TRAVELING UNDER OFFICIAL ORDERS ON AN ACTUAL EXPENSE BASIS FOR WHICH THE TRAVELER IS REIMBURSED BY THE GOVERNMENT MUST BE CONSIDERED PURCHASES FOR THE EXCLUSIVE USE OF THE UNITED STATES WITHIN THE MEANING OF SECTION 401 OF THE REVENUE ACT OF 1935, 49 STAT. 1025, AND TAX EXEMPT EFFECTIVE OCTOBER 1, 1935, BUT IT WILL NOT BE NECESSARY TO REQUIRE DEDUCTION OF THE FEDERAL TAX IN MAKING PAYMENT FOR SUCH PURCHASES. NO EXEMPTION CERTIFICATES COVERING SAID TAX SHOULD BE ISSUED TO DEALERS BY SUCH TRAVELERS UNLESS IT IS DEFINITELY ESTABLISHED THAT THE SALE PRICE IS EXCLUSIVE OF SUCH TAX. THE PRACTICE OF REQUIRING EMPLOYEES OF THE VETERANS' ADMINISTRATION TRAVELING UNDER ORDERS FOR WHICH THE TRAVELER IS REIMBURSED BY THE GOVERNMENT TO USE STATE GASOLINE EXEMPTION FORMS IN MAKING PURCHASES OF GASOLINE OR FURNISH RECEIPTS IN DUPLICATE IN LIEU THEREOF WHERE SUCH EXEMPTION IS REFUSED BY DEALERS, SHOULD BE EXTENDED TO SIMILAR TRAVEL BY VETERANS' ADMINISTRATION BENEFICIARIES.

COMPTROLLER GENERAL MCCARL TO THE ADMINISTRATOR OF VETERANS' AFFAIRS, FEBRUARY 25, 1936:

THERE WAS RECEIVED YOUR LETTER OF JANUARY 31, 1936, AS FOLLOWS:

THERE HAS BEEN RECEIVED IN THIS ADMINISTRATION CIRCULAR LETTER NO. 124 OF THE TREASURY DEPARTMENT, PROCUREMENT DIVISION, BRANCH OF SUPPLY, DATED OCTOBER 2, 1935, ADDRESSED TO THE HEADS OF ALL DEPARTMENTS AND ESTABLISHMENTS ON THE SUBJECT OF TAX EXEMPTION ON PURCHASES FOR THE EXCLUSIVE USE OF THE UNITED STATES OF ARTICLES INCLUDED IN TITLE IV OF THE REVENUE ACT OF 1932, AS AMENDED.

ACCORDING TO THE PROVISIONS OF THIS CIRCULAR IT WILL ON OCTOBER 1, 1935, AND THEREAFTER BE NECESSARY TO DEDUCT THE AMOUNT OF THE FEDERAL EXCISE TAX FROM THE PURCHASE PRICE OF THE ARTICLES ENUMERATED IN TITLE IV OF THE REVENUE ACT OF 1932 WHEN SUCH ARTICLES ARE PURCHASED FOR THE EXCLUSIVE USE OF THE UNITED STATES. IT IS NOTED THAT GASOLINE AND LUBRICATING OILS ARE LISTED AS BEING AMONG THE ARTICLES ON WHICH THE FEDERAL EXCISE TAXES ARE TO BE DEDUCTED WHEN PAYMENTS ARE MADE FOR THE COMMODITIES BY THE FEDERAL GOVERNMENT. IN THIS CONNECTION IT MAY BE STATED THAT BOTH THE CENTRAL OFFICE AND THE FIELD ACTIVITIES OF THE VETERANS' ADMINISTRATION AUTHORIZE A CONSIDERABLE AMOUNT OF TRAVEL ON THE PART OF ITS EMPLOYEES AND ITS BENEFICIARIES ON AN ACTUAL TRAVEL EXPENSE BASIS, THE COST OF SUCH TRAVEL BEING EVENTUALLY BORNE BY THE UNITED STATES THROUGH THE PAYMENT OF CLAIMS OF EMPLOYEES AND BENEFICIARIES FOR REIMBURSEMENT FOR THE ACTUAL EXPENSES INCURRED IN PERFORMING THE TRAVEL AUTHORIZED, INCLUDING THE COSTS OF GASOLINE AND LUBRICATING OIL.

IN THE HANDLING OF THESE REIMBURSEMENT CLAIMS OF EMPLOYEES AT THE PRESENT TIME IT IS A REQUIREMENT THAT STATE GASOLINE TAX EXEMPTION BE SECURED THROUGH THE USE OF UNITED STATES GOVERNMENT MOTOR FUELS TAX EXEMPTION CERTIFICATE (STANDARD FORM NO. 44) OR THAT WHEN DEALERS REFUSE TO HONOR SUCH CERTIFICATES, RECEIPTS IN DUPLICATE SHOWING THE DIFFERENT CLASSES OF TAXES AND THE AMOUNTS THEREOF WHICH HAVE BEEN INCLUDED IN THE SELLING PRICE OF THE FUEL BE SUBMITTED BY THE TRAVELERS WITH THEIR CLAIMS FOR REIMBURSEMENT AS A CONDITION PRECEDENT TO THE APPROVAL OF REIMBURSEMENT FOR SUCH EXPENSES. NO SUCH REQUIREMENT HAS BEEN IMPOSED UPON BENEFICIARIES OF THIS ADMINISTRATION, AND TO ATTEMPT TO DO SO WOULD DOUBTLESS RESULT IN THE EXPENSES OF STATE TAXES BEING BORNE BY THE BENEFICIARIES THEMSELVES IN MANY CASES DUE TO UNFAMILIARITY WITH REQUIREMENTS AS TO EXECUTION OF RECEIPTS.

IT IS NOTED THAT CIRCULAR NO. 124 DIRECTS THAT CERTIFICATES AND RECEIPTS SIMILAR TO STANDARD FORMS NO. 44 AND NO. 1066 BE USED IN OBTAINING EXEMPTION FROM FEDERAL TAXES ON VARIOUS COMMODITIES, INCLUDING GASOLINE AND LUBRICATING OILS. WHILE THE MANDATORY LANGUAGE EMPLOYED IN THE CIRCULAR IS ACKNOWLEDGED TO BE BINDING UPON THE PROCUREMENT ACTIVITIES OF THIS ADMINISTRATION A QUESTION ARISES AS TO WHETHER THOSE NUMEROUS AND SMALL PURCHASES OF GASOLINE AND LUBRICATING OILS WHICH ARE MADE BY EMPLOYEES AND BENEFICIARIES OF THIS ADMINISTRATION FOR USE WHEN TRAVELING UNDER ORDERS ISSUED BY THE ADMINISTRATION ARE PURCHASES "* * * FOR THE EXCLUSIVE USE OF THE UNITED STATES * * *" WITHIN THE MEANING OF SECTION 620 OF THE REVENUE ACT OF 1932, AS AMENDED BY SECTION 401 OF THE REVENUE ACT OF 1935, APPROVED AUGUST 30, 1935. TO REQUIRE THAT EMPLOYEES WHO MUST NOW EXECUTE STANDARD FORMS NO. 44 AND NO. 1066 FOR EXEMPTION FROM STATE TAXES IN CONNECTION WITH EACH SMALL PURCHASE OF GASOLINE ALSO EXECUTE AN ADDITIONAL SET OF FORMS IN CONNECTION WITH EACH SUCH PURCHASE TO THE END THAT THERE WILL BE SAVED TO THE APPROPRIATIONS OF THIS ADMINISTRATION THE INCONSIDERABLE SUMS INCLUDED IN THE RETAIL PRICES OF THESE COMMODITIES AS FEDERAL EXCISE TAXES, WHICH SAVINGS WOULD BE OFFSET BY A CORRESPONDING DECLINE IN THE REVENUES OF THE UNITED STATES, WOULD APPEAR TO INVOLVE ENTIRELY UNWARRANTED EXPENDITURES OF TIME AND EFFORT.

FURTHERMORE, IT HAS BEEN THE EXPERIENCE OF THIS ADMINISTRATION WITH STANDARD FORMS NO. 44 AND NO. 1066 THAT MANY DEALERS FROM WHOM PURCHASES OF GASOLINE ARE ORDINARILY MADE BY EMPLOYEES OF THE ADMINISTRATION WILL NOT HONOR SUCH FORMS WHEN PRESENTED BY TRAVELERS, WHICH NECESSITATES THE TAKING OF RECEIPTS IN DUPLICATE BY THE TRAVELERS. THE PROVISIONS OF CIRCULAR LETTER NO. 124 OF THE PROCUREMENT DIVISION APPARENTLY DO NOT CONTEMPLATE THAT SUCH A CONTINGENCY WILL ARISE, BUT IT MAY BE EXPECTED THAT DEALERS IN GASOLINE AND OIL AND SUBORDINATE EMPLOYEES OF SUCH DEALERS WILL BE NO MORE INCLINED TO GRANT EXEMPTION FROM FEDERAL TAXES ON PURCHASES THAN TO GRANT STATE TAX EXEMPTION WHEN MAKING SALES TO INDIVIDUAL EMPLOYEES OR BENEFICIARIES.

IN VIEW OF THE UNCERTAINTY AS TO WHAT MAY BE REQUIRED IN DEALING WITH THE QUESTION OF EXEMPTION FROM FEDERAL EXCISE TAXES ON THIS CLASS OF PURCHASES, THE FOLLOWING QUESTIONS ARE PRESENTED FOR YOUR CONSIDERATION:

1. ARE THOSE PURCHASES OF GASOLINE AND OIL BY EITHER EMPLOYEES OR BENEFICIARIES OF THIS ADMINISTRATION WHEN TRAVELING UNDER ORDERS PERMITTING REIMBURSEMENT FOR THE COST OF GASOLINE AND OIL NECESSARY FOR THE PERFORMANCE OF SUCH TRAVEL TO BE CONSIDERED AS PURCHASES FOR THE EXCLUSIVE USE OF THE UNITED STATES WITHIN THE MEANING OF SECTION 620 OF THE REVENUE ACT OF 1932, AS AMENDED BY SECTION 401 OF THE REVENUE ACT OF 1935, APPROVED AUGUST 30, 1935?

2. IF SUCH PURCHASES COME WITHIN THE SCOPE OF SECTION 401, WHAT ADDITIONAL FORMS ARE TO BE EXECUTED BY THE TRAVELERS FOR THE PURPOSE OF OBTAINING EXEMPTION FROM FEDERAL EXCISE TAXES?

3. IN THE EVENT OF REFUSAL OF DEALERS TO HONOR REQUESTS FOR EXEMPTION FROM PAYMENT OF FEDERAL EXCISE TAXES, WHAT PROCEDURE SHOULD BE ADOPTED IN ORDER THAT THE APPROPRIATIONS OF THIS ADMINISTRATION MAY NOT BE UNNECESSARILY DEPLETED THROUGH PAYMENT OF FEDERAL EXCISE TAXES ON THESE ARTICLES INCLUDED IN REIMBURSEMENT CLAIMS FOR COSTS OF GASOLINE AND OIL?

AN EARLY REPLY TO THESE QUESTIONS WOULD BE APPRECIATED.

PURCHASES OF GASOLINE AND OIL BY EMPLOYEES OR BENEFICIARIES OF YOUR ADMINISTRATION WHILE TRAVELING UNDER OFFICIAL ORDERS, THE COST OF SUCH SUPPLIES BEING ULTIMATELY BORNE BY THE GOVERNMENT THROUGH REIMBURSEMENT TO THE TRAVELER, MUST BE CONSIDERED AS PURCHASES FOR THE EXCLUSIVE USE OF THE UNITED STATES UNDER 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. HOWEVER, IT DOES NOT NECESSARILY FOLLOW THAT THE FEDERAL EXCISE TAX MUST BE DEDUCTED IN CONNECTION WITH EVERY SUCH PURCHASE.

IN THIS CONNECTION IT APPEARS THAT MOST OF THE PURCHASES IN QUESTION ARE MADE FROM WAYSIDE DEALERS. THE LAW AS AMENDED ABOVE DOES NOT EXEMPT FROM THE TAX ARTICLES SOLD BY A MANUFACTURER, PRODUCER, OR IMPORTER TO A DEALER AND RESOLD BY SUCH DEALER TO THE UNITED STATES, BUT PROVIDES FOR CREDIT OR REFUND TO A MANUFACTURER, PRODUCER, OR IMPORTER IN THE AMOUNT OF THE TAX WITH RESPECT TO THE SALE OF ANY ARTICLE TO ANY VENDEE, IF THE MANUFACTURER, ETC., HAS IN HIS POSSESSION SUCH EVIDENCE AS THE REGULATIONS OF THE COMMISSIONER OF INTERNAL REVENUE MAY PRESCRIBE, THAT ON OR AFTER OCTOBER 1, 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 REGULATIONS ISSUED BY THE COMMISSIONER OF INTERNAL REVENUE AND APPROVED BY THE ACTING SECRETARY OF THE TREASURY NOVEMBER 12, 1935, TREASURY DECISIONS 4604 AND 4605, PROVIDE, IN PART, AS FOLLOWS:

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.

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.

IT IS NOT CLEAR THAT THE PROVISIONS OF CIRCULAR LETTER NO. 124, ISSUED OCTOBER 2, 1935, BY THE TREASURY DEPARTMENT, PROCUREMENT DIVISION, WERE INTENDED FOR APPLICATION TO PURCHASES OF THE CHARACTER HERE INVOLVED. BUT BE THAT AS IT MAY, IN DECISION OF THIS OFFICE DATED JANUARY 7, 1936, A- 67600, 15 COMP. GEN. 588 WITH RESPECT TO THE EFFECT OF THE LAW AND REGULATIONS, SUPRA, UPON CONTRACT PURCHASES OF GASOLINE BY THE UNITED STATES, IT WAS HELD:

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. * * *

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 QUOTED REASONING APPLIES WITH EQUAL FORCE TO TRANSIENT NONCONTRACT PURCHASES BY EMPLOYEES OR BENEFICIARIES OF YOUR ADMINISTRATION. ADDITION, IT WOULD APPEAR FAR SIMPLER TO PERMIT THE TRAVELER TO PAY THE TAX AND CLAIM REIMBURSEMENT FOR THE FULL PRICE OF THE GASOLINE OR OIL, INCLUDING THE TAX--- IN WHICH EVENT THERE WOULD BE NO REFUND OR CREDIT TO THE TAXPAYER--- THAN TO REQUIRE HIM TO PRESENT EXEMPTION CERTIFICATES, WITH THE ATTENDANT DIFFICULTY OF PERSUADING SMALL DEALERS TO ACCEPT SUCH CERTIFICATES AND THE INCREASED BOOKKEEPING WHICH SUCH PROCEDURE WOULD REQUIRE OF THE DEALERS, THE PRODUCERS, AND THE BUREAU OF INTERNAL REVENUE, WITHOUT ANY COMPENSATORY BENEFIT TO THE UNITED STATES.

ACCORDINGLY, YOU ARE ADVISED THAT IT WILL NOT BE NECESSARY TO REQUIRE DEDUCTION OF THE FEDERAL TAX FROM PAYMENT FOR PURCHASES OF GASOLINE AND OIL MADE BY EMPLOYEES OR BENEFICIARIES OF YOUR ADMINISTRATION TRAVELING ON AN ACTUAL EXPENSES BASIS, AND NO EXEMPTION CERTIFICATES ON THE FORM PRESCRIBED IN THE COMMISSIONER'S REGULATIONS, OR OTHERWISE, SHOULD BE ISSUED BY SUCH TRAVELERS COVERING THE FEDERAL TAX UNLESS IT BE DEFINITELY ESTABLISHED THAT THE SALE PRICE IS EXCLUSIVE OF SUCH TAX. THE ESTABLISHED PROCEDURE WITH RESPECT TO STATE GASOLINE TAXES WILL, OF COURSE, CONTINUE TO BE FOLLOWED BY THE EMPLOYEES OF YOUR ADMINISTRATION, AND IN THIS CONNECTION NO VALID REASON APPEARS FOR THE DISTINCTION WHICH HAS APPARENTLY BEEN HERETOFORE MADE, AS TO PAYMENT OF STATE TAXES, BETWEEN PURCHASES BY EMPLOYEES AND BY BENEFICIARIES, SINCE PURCHASES BY BOTH CLASSES ARE EQUALLY FOR THE USE OF THE UNITED STATES.