B-103550, JULY 3, 1951, 31 COMP. GEN. 1

B-103550: Jul 3, 1951

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THE LEGAL INCIDENCE OF WHICH IS ON THE VENDOR. MAY NOT BE REIMBURSED UNDER A CONTRACT WHICH DID NOT CONTAIN A PROVISION FOR ADJUSTMENT IN PRICE IN THE EVENT SAID TAXES WERE MADE APPLICABLE TO SALES TO THE GOVERNMENT DURING THE LIFE OF THE CONTRACT. EVEN THOUGH THE PRACTICE OF THE STATE IN ACCEPTING UNITED STATES TAX EXEMPTION CERTIFICATES AT THE TIME THE CONTRACT WAS ENTERED INTO WAS SUBSEQUENTLY DISCONTINUED BY THE STATE. 1951: REFERENCE IS MADE TO YOUR LETTER OF MAY 14. WHEREIN ADVICE IS REQUESTED AS TO THE PROPRIETY OF CERTIFYING FOR PAYMENT A VOUCHER TRANSMITTED THEREWITH IN FAVOR OF THE CARTER OIL COMPANY IN THE AMOUNT OF $162.90 REPRESENTING STATE OF MONTANA GASOLINE TAXES PAID BY THE CARTER OIL COMPANY INCIDENT TO THE SALE OF GASOLINE TO THE CIVIL AERONAUTICS ADMINISTRATION.

B-103550, JULY 3, 1951, 31 COMP. GEN. 1

TAXES - STATE - GASOLINE - PURCHASES IN MONTANA GASOLINE TAXES IMPOSED BY THE STATE OF MONTANA, THE LEGAL INCIDENCE OF WHICH IS ON THE VENDOR, MAY NOT BE REIMBURSED UNDER A CONTRACT WHICH DID NOT CONTAIN A PROVISION FOR ADJUSTMENT IN PRICE IN THE EVENT SAID TAXES WERE MADE APPLICABLE TO SALES TO THE GOVERNMENT DURING THE LIFE OF THE CONTRACT, EVEN THOUGH THE PRACTICE OF THE STATE IN ACCEPTING UNITED STATES TAX EXEMPTION CERTIFICATES AT THE TIME THE CONTRACT WAS ENTERED INTO WAS SUBSEQUENTLY DISCONTINUED BY THE STATE.

COMPTROLLER GENERAL WARREN TO W. V. STEEN, DEPARTMENT OF COMMERCE, JULY 3, 1951:

REFERENCE IS MADE TO YOUR LETTER OF MAY 14, 1951, TRANSMITTED HERE UNDER DATE OF MAY 17, 1951, BY THE CHIEF, ACCOUNTING DIVISION, CIVIL AERONAUTICS ADMINISTRATION, WHEREIN ADVICE IS REQUESTED AS TO THE PROPRIETY OF CERTIFYING FOR PAYMENT A VOUCHER TRANSMITTED THEREWITH IN FAVOR OF THE CARTER OIL COMPANY IN THE AMOUNT OF $162.90 REPRESENTING STATE OF MONTANA GASOLINE TAXES PAID BY THE CARTER OIL COMPANY INCIDENT TO THE SALE OF GASOLINE TO THE CIVIL AERONAUTICS ADMINISTRATION, UNDER CONTRACT NO. C7CA- 3845, DATED JUNE 14, 1950.

AT THE TIME THE CONTRACT IN QUESTION, WHICH COVERED THE PERIOD JULY 1, 1950, TO JUNE 30, 1951, WAS ENTERED INTO, IT WAS THE PRACTICE OF THE MONTANA STATE BOARD OF EQUALIZATION TO ACCEPT UNITED STATES TAX EXEMPTION CERTIFICATES ( FORM 1094) IN LIEU OF TAXES DUE ON THE SALE OF GASOLINE TO AGENCIES OF THE UNITED STATES GOVERNMENT WITHIN THAT STATE. HOWEVER, THE SAID BOARD SUBSEQUENTLY ADOPTED A RESOLUTION TO THE EFFECT THAT ON AND AFTER JANUARY 1, 1951, UNITED STATES TAX EXEMPTION CERTIFICATES NO LONGER WOULD BE ACCEPTED IN LIEU OF TAXES ON GASOLINE SOLD UNITED STATES AGENCIES WITHIN THE STATE OF MONTANA.

THE PRICE FIXED IN THE CONTRACT WAS EXCLUSIVE OF THE MONTANA GASOLINE TAXES AND NO PROVISION WAS CONTAINED IN THE CONTRACT FOR AN ADJUSTMENT IN PRICE IN THE EVENT THE SAID TAXES WERE MADE APPLICABLE TO SALES TO THE GOVERNMENT DURING THE LIFE OF THE CONTRACT. ASIDE FROM THE FACT THAT THE PARTIES DID NOT CONTEMPLATE THAT THE STATE OF MONTANA WOULD REFUSE TO HONOR UNITED STATES TAX EXEMPTION CERTIFICATES, IT IS INDICATED IN YOUR LETTER THAT THE GASOLINE WAS PURCHASED FOR OFF HIGHWAY USE AND THAT THE UNITED STATES COULD SECURE REFUND OF THE TAXES INVOLVED BY FILING APPLICATION THEREFOR WITH THE MONTANA TAXING AUTHORITIES PURSUANT TO TITLE 84, SECTION 1818, REVISED CODES OF MONTANA, VOLUME 5, 1950 CUMULATIVE SUPPLEMENT.

UNDER THE LAWS OF MONTANA THE VENDOR RATHER THAN THE VENDEE IS LIABLE FOR THE GASOLINE TAX (SEE DECISION OF MARCH 12, 1951, B-101428, COPY ENCLOSED). IN THE ABSENCE OF A CONTRACTUAL PROVISION TO THE CONTRARY, THE UNITED STATES AS VENDEE IS UNDER NO LEGAL OBLIGATION TO REIMBURSE THE VENDOR THE AMOUNT OF GASOLINE TAXES PAID TO THE STATE OF MONTANA INCIDENT TO GASOLINE SALES TO FEDERAL AGENCIES WITHIN THAT STATE. THE CONTRACT HERE INVOLVED IMPOSED NO SUCH LIABILITY UPON THE UNITED STATES. MOREOVER, THERE IS NO INDICATION THAT THE CONTRACT AS WRITTEN FAILED TO EXPRESS THE TRUE INTENTION OF THE PARTIES. THE SUBSEQUENT ACTION ON THE PART OF THE STATE OF MONTANA IN REFUSING TO HONOR UNITED STATES TAX EXEMPTION CERTIFICATES, WHILE MAKING PERFORMANCE MORE BURDENSOME FOR THE VENDOR, DID NOT INVALIDATE THE CONTRACT OR LEGALLY AFFECT THE RIGHTS OF THE PARTIES THEREUNDER, AND NEITHER DOES IT AFFORD ANY PROPER BASIS FOR THE REFORMATION OF SUCH CONTRACT.

TITLE 84, SECTION 1818, OF THE REVISED CODES OF MONTANA, SUPRA, PROVIDES, IN PART, AS FOLLOWS:

REFUND OF GASOLINE LICENSE TAX--- PROCEDURE. (1) ANY PERSON WHO SHALL PURCHASE AND USE GASOLINE, WITH REFERENCE TO WHICH THERE HAS BEEN PAID INTO THE TREASURY OF THE STATE OF MONTANA, UNDER THE LAWS OF THIS STATE LICENSING DEALERS IN GASOLINE, A STATE GALLONAGE TAX, FOR THE PURPOSE OF OPERATING OR PROPELLING STATIONARY GAS ENGINES, TRACTORS USED FOR PURPOSES OTHER THAN ON THE PUBLIC HIGHWAYS OR STREETS OF THIS STATE, MOTOR BOATS, AEROPLANES OR AIRCRAFT, OR FOR CLEANING OR DYEING, OR FOR ANY COMMERCIAL USE OTHER THAN PROPELLING VEHICLES UPON ANY OF THE PUBLIC HIGHWAYS OR STREETS OF THIS STATE, AND WHO HAS PAID SAID TAX EITHER DIRECTLY TO THE STATE OF MONTANA OR INDIRECTLY AS A PART OF THE PURCHASE PRICE OF SAID GASOLINE, SHALL BE ALLOWED AND PAID AS A REFUND OR DRAWBACK AN AMOUNT OF MONEY EQUAL TO THE UNIT STATE GALLONAGE TAX, MULTIPLIED BY THE NUMBER OF GALLONS OF GASOLINE SO PURCHASED AND USED * * *. ( ITALICS SUPPLIED.)

IT IS NOT CLEAR FROM THE RECORD THAT ALL THE GASOLINE PURCHASED BY THE GOVERNMENT UNDER THE CONTRACT IN QUESTION ACTUALLY WAS PROCURED FOR NON- HIGHWAY USE BUT EVEN IF THAT WERE THE CASE ANY MODIFICATION OF THE CONTRACT SO AS TO AUTHORIZE REIMBURSEMENT TO THE CONTRACTOR OF THE AMOUNT OF THE TAX WOULD NOT BE LEGALLY JUSTIFIED UNLESS SUPPORTED BY NEW AND VALUABLE CONSIDERATION MOVING TO THE GOVERNMENT. SEE 22 COMP. GEN. 915. MOREOVER, ANY SUCH MODIFICATION WOULD APPEAR TO BE AGAINST THE INTEREST OF THE UNITED STATES, SINCE IT WOULD PLACE UPON THE UNITED STATES THE RISK OF LOSS OF TAX REFUNDS IN THE EVENT IN PARTICULAR CASES THE CIRCUMSTANCES SHOULD BE SUCH AS TO PRECLUDE IT FROM MEETING THE PROCEDURAL REQUIREMENTS OF THE STATE OF MONTANA INCIDENT TO PROCURING SUCH REFUNDS.

ACCORDINGLY, THE VOUCHER, WHICH IS RETURNED HEREWITH, MAY NOT BE CERTIFIED FOR PAYMENT.