B-130764, MAR. 5, 1957

B-130764: Mar 5, 1957

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IS IN AN INDEFINITE AMOUNT FOR STEVEDORING TERMINAL OPERATIONS AND RELATED SERVICES AT SUNNY POINT ARMY TERMINAL. THE VOUCHER IS REPORTED TO REPRESENT THE AMOUNT OF NORTH CAROLINA SALES TAX IMPOSED ON THE SELLER AND PASSED ON TO THE CONTRACTOR FOR MATERIALS. APPROVAL OF THE CONTRACTING OFFICER WILL BE OBTAINED. ITEMIZED AS TO COST AND PROPERLY CERTIFIED BY THE CONTRACTING OFFICER'S REPRESENTATIVE WILL BE PRESENTED FOR REIMBURSEMENT. THIS DECISION IS LIMITED TO THE ITEMS OF TAXES ON SALES OF PROPERTY. IT IS STATED THAT THE CONTRACTOR WAS FURNISHED TAX EXEMPTION FORMS SF FORM NO. 1094. HAVE REFUSED TO HONOR THE CERTIFICATES AND HAVE STATED THAT THE PURCHASES MADE BY THE CONTRACTOR UNDER THE CONTRACT CLAUSE ARE TAXABLE.

B-130764, MAR. 5, 1957

TO CAPTAIN L. T. FRITCH, DISBURSING OFFICER, DEPARTMENT OF THE ARMY:

YOUR LETTER OF JANUARY 14, 1957, CONCERNING WHETHER VOUCHERS SUBMITTED BY THE IMPARATO STEVEDORING CORPORATION UNDER CONTRACT NO. DA-31-126-TC-1 MAY BE PAID HAS BEEN FORWARDED TO US UNDER THIRD INDORSEMENT BY THE ASSISTANT CHIEF OF FINANCE.

THE CONTRACT, DATED OCTOBER 24, 1955, IS IN AN INDEFINITE AMOUNT FOR STEVEDORING TERMINAL OPERATIONS AND RELATED SERVICES AT SUNNY POINT ARMY TERMINAL. THE VOUCHER IS REPORTED TO REPRESENT THE AMOUNT OF NORTH CAROLINA SALES TAX IMPOSED ON THE SELLER AND PASSED ON TO THE CONTRACTOR FOR MATERIALS, SUPPLIES AND SPARE PARTS PROCURED BY HIM AND USED ON BEHALF OF THE GOVERNMENT IN PERFORMANCE UNDER CLAUSE 1, ITEM 1M (2) OF THE CONTRACT, WHICH PROVIDES:

"THE CONTRACTOR SHALL SUPPLY DUNNAGE, CORDWOOD, LUMBER, LASHINGS, TURNBUCKLES, SHACKLES, CLIPS, ETC., AS MAY BE REQUIRED FOR THE SAFE AND PROPER STOWAGE OF CARGO IN VESSEL OR RAILROAD CAR, AND THE CONTRACTOR SHALL BE REIMBURSED FOR THE COST OF SUCH MATERIALS UPON PRESENTATION OF THE VENDOR'S PAID INVOICE AND THE VENDOR'S VERIFIED DELIVERY TICKET. PRIOR TO THE PURCHASE OF SUCH SUPPLIES, APPROVAL OF THE CONTRACTING OFFICER WILL BE OBTAINED, SUCH APPROVAL TO COVER QUALITY, QUANTITY AND PRICE OF SUPPLIES TO BE PROCURED FOR THE GOVERNMENT'S ACCOUNT. FOR ANY MATERIAL FURNISHED FROM THE CONTRACTOR'S STOCK, A SIGNED CERTIFICATE LISTING MATERIALS FURNISHED, ITEMIZED AS TO COST AND PROPERLY CERTIFIED BY THE CONTRACTING OFFICER'S REPRESENTATIVE WILL BE PRESENTED FOR REIMBURSEMENT. HOWEVER, UPON NOTIFICATION TO THE CONTRACTOR BY THE CONTRACTING OFFICER, THE GOVERNMENT MAY FURNISH ANY OR ALL OF SAID MATERIALS.'

IT APPEARS THAT THE VOUCHER ALSO INCLUDES SEVERAL ITEMS OF TAX ON TRANSPORTATION OF PERSONNEL OF THE CONTRACTOR. IN THE ABSENCE OF ANY EXPLANATION OF THOSE ITEMS, THIS DECISION IS LIMITED TO THE ITEMS OF TAXES ON SALES OF PROPERTY.

IT IS STATED THAT THE CONTRACTOR WAS FURNISHED TAX EXEMPTION FORMS SF FORM NO. 1094, IN CONNECTION WITH PURCHASES UNDER THE QUOTED CONTRACT PROVISION. THE NORTH CAROLINA STATE AUTHORITIES, HOWEVER, HAVE REFUSED TO HONOR THE CERTIFICATES AND HAVE STATED THAT THE PURCHASES MADE BY THE CONTRACTOR UNDER THE CONTRACT CLAUSE ARE TAXABLE. SECTION 105-168 (B) OF THE GENERAL STATUTES OF NORTH CAROLINA PROVIDES FOR THE LEVYING OF THE TAX ON RETAIL MERCHANTS IN THE AMOUNT OF 3 PERCENT OF GROSS SALES. "RETAIL" IS DEFINED IN SECTION 105 167 AS "THE SALE OF ANY ARTICLES OF COMMERCE IN ANY QUANTITY OR QUANTITIES FOR ANY USE OR PURPOSE ON THE PART OF THE PURCHASER OTHER THAN FOR RESALE.' SECTION 105-169 (1) EXEMPTS FROM THE TAX, SALES OF PRODUCTS OF FORESTS MADE BY THE PRODUCERS IN THEIR ORIGINAL OR UNMANUFACTURED STATE. A SECOND INDORSEMENT DATED DECEMBER 27, 1956, FROM THE PROCUREMENT LAW DIVISION TO THE CHIEF OF TRANSPORTATION, WHICH IS ATTACHED TO YOUR SUBMISSION, INDICATES THAT THE EXEMPTION IS NOT APPLICABLE IN THIS CASE SINCE EVEN IF THE SELLER IS A PRODUCER, THE ITEMS IN QUESTION ARE CONSIDERED TO BE MANUFACTURED AND THEREFORE NOT WITHIN THE EXEMPTION. NO OTHER EXEMPTION APPEARS TO BE APPLICABLE.

IN A SIMILAR SITUATION, THE SUPREME COURT HELD IN ALABAMA V. KING AND BOOZER, 314 U.S. 1, THAT SINCE THE PURCHASER WAS THE CONTRACTOR AND NOT THE UNITED STATES, THE CONTRACTOR WAS REQUIRED TO PAY THE EQUIVALENT TAX LEVIED BY THE STATE OF ALABAMA. ON PAGE 12 OF THE OPINION, THE COURT STATED:

"* * * THE CONTRACTORS WERE THUS PURCHASERS OF THE LUMBER, WITHIN THE MEANING OF THE TAXING STATUTE, AND AS SUCH WERE SUBJECT TO THE TAX. THEY WERE NOT RELIEVED OF THE LIABILITY TO PAY THE TAX EITHER BECAUSE THE CONTRACTORS, IN A LOOSE AND GENERAL SENSE, WERE ACTING FOR THE GOVERNMENT IN PURCHASING THE LUMBER OR * * * BECAUSE THE ECONOMIC BURDEN OF THE TAX IMPOSED UPON THE PURCHASER WOULD BE SHIFTED TO THE GOVERNMENT BY REASON OF ITS CONTRACT TO REIMBURSE THE TRACTOR.'

SINCE THE STATE SALES TAXES IN CONNECTION WITH THE PURCHASE OF MATERIALS, PURSUANT TO CLAUSE 1, ITEM 1M (2) OF THE CONTRACT, WERE PART OF THE COST TO THE CONTRACTOR, HE MAY BE REIMBURSED THEREFOR. WE MAKE NO DECISION, HOWEVER, WITH REGARD TO THE TRANSPORTATION ITEMS LISTED IN THE INVOICE ATTACHED TO THE VOUCHER. THE VOUCHER IS ENCLOSED.