A-91470, JANUARY 20, 1938, 17 COMP. GEN. 584

A-91470: Jan 20, 1938

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WHICH IS NOT A REFINER OF SUGAR AND HAS NOT PAID TO THE GOVERNMENT THE TAX ON THE MANUFACTURE OR IMPORTATION OF SUGAR SUBSEQUENTLY IMPOSED BY THE ACT OF SEPTEMBER 1. MAY NOT BE PAID ANY AMOUNT IN ADDITION TO THE CONTRACT PRICE ON THE BASIS THAT THE TAX WAS PASSED ON TO IT BY THE REFINER BY WAY OF INCREASED PRICE. REQUESTING DECISION WHETHER PAYMENT IS AUTHORIZED ON VOUCHER TRANSMITTED THEREWITH IN FAVOR OF STATE PRODUCTS CO. FINAL ACTION ON THE BILL WHICH BECAME THE SAID ACT WAS TAKEN BY THE CONGRESS ON AUGUST 20. THE ACT WAS APPROVED BY THE PRESIDENT AND BECAME EFFECTIVE SEPTEMBER 1. THE CONTRACT HERE INVOLVED WAS EXECUTED WHEREBY THE STATE PRODUCTS CO. AMONG OTHER THINGS THE CONTRACT PROVIDES: PRICES SET FORTH HEREIN INCLUDE ANY FEDERAL TAX HERETOFORE IMPOSED BY THE CONGRESS WHICH IS APPLICABLE TO THE MATERIAL PURCHASED UNDER THIS CONTRACT.

A-91470, JANUARY 20, 1938, 17 COMP. GEN. 584

TAXES - FEDERAL - SUGAR - CONTRACT PRICE ADJUSTMENT - TAX NOT PAID BY CONTRACTOR WHERE CONTRACT TO FURNISH SUGAR FOR A PRICE INCLUDING "ANY FEDERAL TAX HERETOFORE IMPOSED," PROVIDED THAT IN CASE OF SUBSEQUENT IMPOSITION OF TAX AND PAYMENT THEREOF BY THE CONTRACTOR TO THE GOVERNMENT, THE CONTRACT PRICE WOULD BE INCREASED ACCORDINGLY, CONTRACTOR, WHICH IS NOT A REFINER OF SUGAR AND HAS NOT PAID TO THE GOVERNMENT THE TAX ON THE MANUFACTURE OR IMPORTATION OF SUGAR SUBSEQUENTLY IMPOSED BY THE ACT OF SEPTEMBER 1, 1937, 50 STAT. 903, MAY NOT BE PAID ANY AMOUNT IN ADDITION TO THE CONTRACT PRICE ON THE BASIS THAT THE TAX WAS PASSED ON TO IT BY THE REFINER BY WAY OF INCREASED PRICE.

ACTING COMPTROLLER GENERAL ELLIOTT TO LT. COL. M. T. LEGG, UNITED STATES ARMY, JANUARY 20, 1938:

THERE HAS BEEN RECEIVED, BY REFERENCE FROM THE CHIEF OF FINANCE, YOUR SECOND INDORSEMENT DATED DECEMBER 15, 1937, REQUESTING DECISION WHETHER PAYMENT IS AUTHORIZED ON VOUCHER TRANSMITTED THEREWITH IN FAVOR OF STATE PRODUCTS CO. FOR $523.09, REPRESENTING AN AMOUNT EQUAL TO THE TAX IMPOSED UPON THE MANUFACTURE OR IMPORTATION OF SUGAR UNDER TITLE IV OF THE ACT OF SEPTEMBER 1, 1937, PUBLIC, NO. 414, IN ADDITION TO THE CONTRACT PRICE FOR SUGAR DELIVERED UNDER PURCHASE ORDER NO. 1270, CONTRACT NO. W-626-QM- 23535, DATED AUGUST 24, 1937. FINAL ACTION ON THE BILL WHICH BECAME THE SAID ACT WAS TAKEN BY THE CONGRESS ON AUGUST 20, 1937, AND THE ACT WAS APPROVED BY THE PRESIDENT AND BECAME EFFECTIVE SEPTEMBER 1, 1937.

ON AUGUST 24, 1937, THE CONTRACT HERE INVOLVED WAS EXECUTED WHEREBY THE STATE PRODUCTS CO. AGREED TO FURNISH SPECIFIED QUANTITIES OF BEANS AND SUGAR TO VARIOUS UNITED STATES ARMY POSTS. AMONG OTHER THINGS THE CONTRACT PROVIDES:

PRICES SET FORTH HEREIN INCLUDE ANY FEDERAL TAX HERETOFORE IMPOSED BY THE CONGRESS WHICH IS APPLICABLE TO THE MATERIAL PURCHASED UNDER THIS CONTRACT. 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, AND ANY AMOUNT DUE THE CONTRACTOR AS A RESULT OF SUCH CHANGE WILL BE CHARGED TO THE GOVERNMENT AND ENTERED ON VOUCHERS (OR INVOICES) AS SEPARATE ITEMS.

AFTER THE EFFECTIVE DATE OF THE TAXES, THE CLAIMANT FURNISHED CERTAIN QUANTITIES OF SUGAR AND BILLED THE GOVERNMENT IN ADDITION TO THE CONTRACT PRICE FOR AN AMOUNT EQUAL TO THE TAXES IMPOSED UNDER THE ABOVE-MENTIONED ACT. IN MAKING PAYMENT FOR THE SUGAR DELIVERED THE ADDITIONAL AMOUNT CHARGED AS TAX WAS DEDUCTED AND THE CONTRACT PRICE ONLY WAS PAID. CLAIMANT CONTENDS THAT THE ADDITIONAL AMOUNT CHARGED IS AUTHORIZED BY THE PROVISION OF THE CONTRACT QUOTED ABOVE AND THAT NO DEDUCTION SHOULD HAVE BEEN MADE. THIS CONTENTION CAN NOT BE SUSTAINED.

IT IS ADMITTED THAT THE CLAIMANT IS NOT THE REFINER OF THE SUGAR FURNISHED AND DID NOT PAY THE TAX TO THE GOVERNMENT. IT IS CLAIMED THAT THE REFINER PAID THE TAX ON THE SUGAR IN QUESTION AND THAT THE AMOUNT THEREOF WAS PASSED ON TO THE CONTRACTOR IN THE WAY OF INCREASED PRICE. THAT IS NOT SUFFICIENT TO AUTHORIZE PAYMENT IN THIS CASE. THE CONTRACT PROVIDES FOR AN INCREASE IN PRICE ONLY IN CASE THE ADDITIONAL TAXES IMPOSED "ARE PAID TO THE GOVERNMENT BY THE CONTRACTOR.' THAT IS NOT THE CASE HERE. THE CONTRACTOR DID NOT PAY THE TAX TO THE GOVERNMENT AND THAT IS A CONDITION PRECEDENT TO INCREASING THE CONTRACT PRICE ON ACCOUNT OF ADDITIONAL TAXES. UNDER THE CIRCUMSTANCES, NO ADDITIONAL PAYMENT IS AUTHORIZED ON THE VOUCHER WHICH WILL BE RETAINED IN THE FILES OF THIS OFFICE.