B-120992, NOV 5, 1954

B-120992: Nov 5, 1954

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FEDERAL HOUSING ADMINISTRATION: REFERENCE IS MADE TO YOUR LETTER OF AUGUST 10. YOU STATE THAT OTHER SIMILAR CLAIMS ARE PENDING AND THAT CONSIDERABLE CORRESPONDENCE HAS BEEN CARRIED ON WITH THE OFFICE OF THE ATTORNEY GENERAL OF SOUTH CAROLINA AND WITH THE DIRECTOR OF THE TAX COMMISSION OF THAT STATE RELATIVE TO THE MATTER. IT APPEARS THAT THE PROJECT HERE INVOLVED WAS ACQUIRED BY THE FHA AS THE RESULT OF DEFAULT ON A MORTGAGE LOAN WHICH WAS INSURED UNDER SECTION 608 OF THE NATIONAL HOUSING ACT. IT IS OPERATED AS A RENTAL PROJECT FOR THE FHA BY THE O.M. THE MATTER WAS PRESENTED IN YOUR LETTER OF AUGUST 10 ON THE BASIS THAT THE SALE WAS TO THE O.M. DANTZLER AGENCY AND THE OUTCOME DEPENDENT UPON WHETHER THAT AGENCY WAS AN INDEPENDENT CONTRACTOR OF THE GOVERNMENT OR MERELY ITS AGENT.

B-120992, NOV 5, 1954

PRECIS-UNAVAILABLE

LESTER W. THOMPSON, FEDERAL HOUSING ADMINISTRATION:

REFERENCE IS MADE TO YOUR LETTER OF AUGUST 10, 1954 (AC-S), TRANSMITTING A VOUCHER, TOGETHER WITH RELATED PAPERS, STATED IN FAVOR OF THE ESSO STANDARD OIL COMPANY, 300 GERVAIS STREET, COLUMBIA 1, SOUTH CAROLINA, IN THE AMOUNT OF $35.49, AS REIMBURSEMENT FOR THAT AMOUNT PAID BY IT TO THE STATE OF SOUTH CAROLINA AS SALES TAX ON FUEL OIL FURNISHED BY THE COMPANY FROM DECEMBER 4, 1953, TO MARCH 25, 1954, TO THE EDWARD ARMS APARTMENTS IN GREENWOOD, SOUTH CAROLINA, A HOUSING PROJECT OF THE FEDERAL HOUSING ADMINISTRATION. YOUR LETTER REQUESTS A DECISION WHETHER THE VOUCHER MAY BE CERTIFIED FOR PAYMENT. THERE HAS ALSO BEEN RECEIVED YOUR LETTER OF OCTOBER 25, 1954 (AC-S), FORWARDING CONTRACTS NOS. HA(054WFH-13 AND 054-7, MADE BY THE FEDERAL HOUSING ADMINISTRATION WITH THE ESSO STANDARD OIL COMPANY FOR THE FURNISHING BY THAT COMPANY OF FUEL OIL TO THE EDWARD ARMS APARTMENTS.

YOU STATE THAT OTHER SIMILAR CLAIMS ARE PENDING AND THAT CONSIDERABLE CORRESPONDENCE HAS BEEN CARRIED ON WITH THE OFFICE OF THE ATTORNEY GENERAL OF SOUTH CAROLINA AND WITH THE DIRECTOR OF THE TAX COMMISSION OF THAT STATE RELATIVE TO THE MATTER.

IT APPEARS THAT THE PROJECT HERE INVOLVED WAS ACQUIRED BY THE FHA AS THE RESULT OF DEFAULT ON A MORTGAGE LOAN WHICH WAS INSURED UNDER SECTION 608 OF THE NATIONAL HOUSING ACT, AS AMENDED, 12 U.S.C. 1743. IT IS OPERATED AS A RENTAL PROJECT FOR THE FHA BY THE O.M. DANTZLER AGENCY, OF GREENWOOD, SOUTH CAROLINA, UNDER A CONTRACT DATED AUGUST 5, 1953, WITH THE UNITED STATES, ACTING THROUGH THE FHA.

THE MATTER WAS PRESENTED IN YOUR LETTER OF AUGUST 10 ON THE BASIS THAT THE SALE WAS TO THE O.M. DANTZLER AGENCY AND THE OUTCOME DEPENDENT UPON WHETHER THAT AGENCY WAS AN INDEPENDENT CONTRACTOR OF THE GOVERNMENT OR MERELY ITS AGENT. HOWEVER, IN VIEW OF YOUR LETTER OF OCTOBER 25, IT IS NOW UNDERSTOOD THAT THE FUEL OIL WAS FURNISHED TO FHA UNDER THE ABOVE DESIGNATED CONTRACT NO. HA(054WFH-13, UNDER WHICH ESSO CONTRACTED DIRECTLY WITH FHA RATHER THAN THE DANTZLER AGENCY TO FURNISH FUEL OIL, IN AN ESTIMATED QUANTITY OF 30,000 GALLONS, FOR THE PROJECT FOR THE 12-MONTH PERIOD BEGINNING FROM THE DATE OF THE EXECUTION OF THE CONTRACT BY THE GOVERNMENT - WHICH DATE WAS MAY 11, 1953. WHAT IS HEREINAFTER SAID IS ON THE BASIS THAT IT WAS SO PURCHASED. CONTRACT NO. 054-7 COVERS THE PERIOD MAY 11, 1954, THROUGH MAY 10, 1955, AND DOES NOT APPEAR FOR CONSIDERATION IN THE PRESENT CASE.

THE SALES TAX LAW OF SOUTH CAROLINA APPEARS IN SECTIONS 65-1401 TO 65- 1411 OF THE 1952 CODE OF THAT STATE. SECTION 65-1401 IMPOSES THE TAX ON EVERY PERSON ENGAGED OR CONTINUING WITHIN THE STATE IN THE BUSINESS OF SELLING AT RETAIL ANY TANGIBLE PERSONAL PROPERTY WHATSOEVER, INCLUDING MERCHANDISE AND COMMODITIES OF EVERY KIND AND CHARACTER, AT CERTAIN RATES STATED THEREIN. SECTION 65-1407 PROVIDES THAT EVERY PERSON OR COMPANY ENGAGED IN OR CONTINUING WITHIN THE STATE A BUSINESS FOR WHICH THE PAYMENT OF SUCH TAX IS REQUIRED SHALL ADD TO THE SALES PRICE AND COLLECT FROM THE PURCHASER THE SAME TAX. IT APPEARS FROM THE PAPERS SUBMITTED WITH YOUR LETTER OF AUGUST 10 THAT THE FIRST PARAGRAPH OF SECTION 65-1407 WAS AMENDED, EFFECTIVE MARCH 20, 1954, BY PROVIDING THAT EVERY SUCH PERSON OR COMPANY MAY ADD TO THE SALES PRICE "THE FOLLOWING" - BY WHICH, IT IS UNDERSTOOD, A SALES TAX AT THE RATES ORIGINALLY PROVIDED IN THE SECTION. SECTION 65-1409 PROVIDES THAT THE FAILURE TO PASS ON THE TAX TO THE PURCHASER OR CONSUMER SHALL IN NO WAY RELIEVE THE PERSON OR COMPANY WHICH IS REQUIRED TO PAY THE TAX.

THUS, WHILE THE STATE STATUTE ORIGINALLY DIRECTED THE VENDOR TO COLLECT THE TAX FROM THE VENDEE AND ON AND AFTER MARCH 20, 1954, AUTHORIZED HIM TO DO SO, THE TAX IS IMPOSED ON THE VENDOR BY SECTION 65 1401. THUS, IT IS APPARENT THAT THE LEGAL INCIDENCE OF THE TAX IS ON THE SELLER RATHER THAN UPON THE PURCHASER AND, CONSEQUENTLY, THE CONSTITUTIONAL PRINCIPLE UNDER WHICH THE FEDERAL GOVERNMENT IS IMMUNE TO STATE TAXATION IS NOT APPLICABLE HERE. SEE ESSO STANDARD OIL CO. V. EVANS, 345 U.S. 495, AND 24 COMP. GEN. 150.

CONTRACT NO. HA(054WFH-13 PROVIDES THAT ESSO WILL FURNISH THE FUEL OIL AT ITS POSTED CONSUMER TANK CAR PRICE IN EFFECT AT CHARLESTON, SOUTH CAROLINA ON DATE OF DELIVERY PLUS FREIGHT FROM CHARLESTON TO GREENWOOD. PARAGRAPH 10 (C) OF THE GENERAL PROVISIONS, ATTACHED TO AND FORMING A PART OF THE CONTRACT, PROVIDES THAT EXCEPT AS MAY BE OTHERWISE PROVIDED IN THE CONTRACT, THE CONTRACT PRICE DOES NOT INCLUDE ANY STATE OR LOCAL DIRECT TAX IN EFFECT ON THE CONTRACT DATE AND NO SUCH EXCEPTION APPEARS IN THE CONTRACT. PARAGRAPH 10 (A)(I) DEFINES "DIRECT TAX" AS INCLUDING, AMONG OTHERS, A TAX DIRECTLY APPLICABLE TO THE SALE OF THE SUPPLIES INVOLVED AND ANY TAX LEVIED ON, WITH RESPECT TO, OR MEASURED BY SALES OR RECEIPTS FROM SALES COVERED BY THE CONTRACT. THUS, IN VIEW OF THE CHARACTER OF THE TAX AS PROVIDED IN SECTION 65-1401 OF THE SOUTH CAROLINA CODE, IT APPEARS TO BE A DIRECT TAX WITHIN THE MEANING OF THE CONTRACT.

UNDER PARAGRAPH 10 (D) OF THE GENERAL PROVISIONS, THE GOVERNMENT AGREES, UPON THE REQUEST OF THE CONTRACTOR, TO FURNISH A TAX EXEMPTION CERTIFICATE OR OTHER SIMILAR EVIDENCE OF EXEMPTION WITH RESPECT TO ANY DIRECT TAX NOT INCLUDED IN THE CONTRACT PRICE. PARAGRAPH 10 (E) PROVIDES, IN PART, THAT IF ANY STATE OR LOCAL GOVERNMENT REFUSES TO ACCEPT THE EVIDENCE OF EXEMPTION WITH RESPECT TO ANY DIRECT TAX EXCLUDED FROM THE CONTRACT PRICE AND IF THE CONTRACTOR IS OBLIGED TO AND DOES PAY OR BEAR THE BURDEN OF ANY SUCH TAX, THE CONTRACT PRICE SHOULD BE CORRESPONDINGLY INCREASED. THE RECORD DOES NOT SHOW WHETHER TAX EXEMPTION CERTIFICATES WERE ISSUED, BUT IT SEEMS CLEAR FROM THE POSITION OF THE STATE AS OUTLINED IN THE ENCLOSURES OF YOUR LETTER OF AUGUST 10 THAT SUCH CERTIFICATES, IF ISSUED, WOULD NOT BE HONORED.

THUS, IT APPEARS THAT SINCE THE INCIDENCE OF THE TAX IS ON THE VENDOR AND THE VENDOR IS RESPONSIBLE THEREFOR, THE CONTRACT PRICE FOR THE FUEL OIL IS TO BE INCREASED BY THE AMOUNT OF THE TAX.

ACCORDINGLY, CERTIFICATION OF THE VOUCHER FOR PAYMENT IS AUTHORIZED, IF OTHERWISE PROPER. THE VOUCHER AND RELATED PAPERS, INCLUDING THE TWO CONTRACTS FORWARDED WITH YOUR LETTER OF OCTOBER 25, ARE RETURNED HEREWITH.