A-83445, MARCH 1, 1937, 16 COMP. GEN. 790

A-83445: Mar 1, 1937

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CONTRACTS - PRICE ADJUSTMENTS - SOCIAL SECURITY TAXES THERE IS NO AUTHORITY FOR COAL CONTRACT PRICE ADJUSTMENTS TO INCLUDE THE SO-CALLED SOCIAL SECURITY TAXES IMPOSED BY SECTIONS 804 AND 901 OF THE ACT OF AUGUST 14. 1937: THERE WAS RECEIVED YOUR LETTER OF JANUARY 5. AS FOLLOWS: WE ARE SHIPPING A CERTAIN AMOUNT OF COAL ON GOVERNMENT CONTRACTS. WHICH WERE TAKEN AROUND JULY 1ST. WHICH ARE EFFECTIVE JANUARY 1ST. KINDLY ADVISE HOW OUR CLAIMS FOR THIS INCREASED COST ARE TO BE PRESENTED. THE RECORDS HERE SHOW THAT YOU HAVE CONTRACTS NOM-20160. THAT THESE CONTRACTS CONTAIN SOMEWHAT SIMILAR STIPULATIONS TO THE EFFECT THAT THE CONTRACT PRICES INCLUDED ANY FEDERAL TAX THERETOFORE IMPOSED BY THE CONGRESS WHICH WAS APPLICABLE TO THE COAL DELIVERED UNDER THE CONTRACTS AND THAT.

A-83445, MARCH 1, 1937, 16 COMP. GEN. 790

CONTRACTS - PRICE ADJUSTMENTS - SOCIAL SECURITY TAXES THERE IS NO AUTHORITY FOR COAL CONTRACT PRICE ADJUSTMENTS TO INCLUDE THE SO-CALLED SOCIAL SECURITY TAXES IMPOSED BY SECTIONS 804 AND 901 OF THE ACT OF AUGUST 14, 1935, 49 STAT. 637, 639, NOTWITHSTANDING THE CONTRACT PROVISION FOR ADJUSTMENT TO THE EXTENT OF SUBSEQUENT SALES TAX, PROCESSING TAX, ADJUSTMENT CHARGE, OR OTHER TAX OR CHARGE CHANGES MADE BY THE CONGRESS "DIRECTLY UPON PRODUCTION, MANUFACTURE OR SALE OF THE SUPPLIES COVERED BY THIS CONTRACT," SOCIAL SECURITY TAXES BEING EXCISE TAXES ON THE CONTRACTOR "WITH RESPECT TO HAVING INDIVIDUALS IN HIS EMPLOY" AND NOT TAXES ON THE COAL, OR ITS PRODUCTION OR SALE, AND THE CONTRACT HAVING BEEN ENTERED INTO SUBSEQUENT TO THE ENACTMENT OF THE TAX-IMPOSING STATUTE.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE SOVEREIGN POCAHONTAS COMPANY, MARCH 1, 1937:

THERE WAS RECEIVED YOUR LETTER OF JANUARY 5, 1937, AS FOLLOWS:

WE ARE SHIPPING A CERTAIN AMOUNT OF COAL ON GOVERNMENT CONTRACTS, WHICH WERE TAKEN AROUND JULY 1ST, 1936, AND EXPIRE JUNE 30TH, 1937. OUR COST OF PRODUCTION HAS BEEN INCREASED BY THE SOCIAL SECURITY TAXES, WHICH ARE EFFECTIVE JANUARY 1ST, 1937.

KINDLY ADVISE IF THE GOVERNMENT COAL CONTRACTS PERMIT THE ADDING OF THIS INCREASED COST TO THE CONTRACT PRICES, AND IF SO, KINDLY ADVISE HOW OUR CLAIMS FOR THIS INCREASED COST ARE TO BE PRESENTED.

THE RECORDS HERE SHOW THAT YOU HAVE CONTRACTS NOM-20160, DATED AUGUST 12, 1936; NOS-49935, DATED JULY 27, 1936; NOS-49899, DATED AUGUST 1, 1936; TPS -13476, DATED AUGUST 3, 1936; AND W 626 QM-21492, DATED JUNE 23, 1936, FOR THE DELIVERY OF VARIOUS KINDS OF COAL AT PRICES AS STIPULATED IN THE RESPECTIVE CONTRACTS; ALSO, THAT THESE CONTRACTS CONTAIN SOMEWHAT SIMILAR STIPULATIONS TO THE EFFECT THAT THE CONTRACT PRICES INCLUDED ANY FEDERAL TAX THERETOFORE IMPOSED BY THE CONGRESS WHICH WAS APPLICABLE TO THE COAL DELIVERED UNDER THE CONTRACTS AND THAT---

* * * 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 THE BID UPON WHICH THIS CONTRACT IS BASED AND MADE APPLICABLE DIRECTLY UPON PRODUCTION, MANUFACTURE, OR SALE OF THE SUPPLIES COVERED BY THIS CONTRACT, AND ARE PAID TO THE GOVERNMENT BY THE CONTRACTOR ON THE ARTICLES OR SUPPLIES HEREIN CONTRACTED FOR, THEN THE PRICES NAMED IN THIS CONTRACT WILL BE INCREASED OR DECREASED ACCORDINGLY. * * *

THE TAXES IMPOSED BY SECTIONS 804 AND 901 OF THE ACT OF AUGUST 14, 1935, 49 STAT. 637, AND 639, ON EVERY EMPLOYER UNDER CERTAIN PRESCRIBED CONDITIONS ARE EXCISE TAXES "WITH RESPECT TO HAVING INDIVIDUALS IN HIS EMPLOY.' THAT IS TO SAY, THE SO-CALLED SOCIAL SECURITY TAXES ARE NOT TAXES ON COAL, OR ON THE PRODUCTION OR SALE OF COAL, BUT ARE TAXES ON THE CONTRACTOR "WITH RESPECT TO HAVING INDIVIDUALS IN HIS EMPLOY.' IT MAY BE THAT SUCH SOCIAL SECURITY TAXES INCREASED YOUR COST OF PRODUCTION OF COAL FROM THE MINES, BUT THE TAX IS NOT "APPLICABLE DIRECTLY UPON PRODUCTION, MANUFACTURE, OR SALE OF" THE COAL REQUIRED TO BE DELIVERED UNDER THE CONTRACTS. FURTHERMORE, THE STATUTE IMPOSING THE TAXES HERE INVOLVED WAS ENACTED AUGUST 14, 1935, WHEREAS THE CONTRACTS UNDER WHICH YOU ARE DELIVERING COAL TO THE GOVERNMENT WERE NOT ENTERED INTO UNTIL 1936.

CONSEQUENTLY, YOU MUST BE ADVISED THAT THERE IS NO LEGAL AUTHORITY IN ABOVE CITED CONTRACTS FOR PAYING YOU ANY AMOUNT IN ADDITION TO THE CONTRACT PRICE BY REASON OF THE SOCIAL SECURITY TAXES.