B-131417, MAY 7, 1957

B-131417: May 7, 1957

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- "* * * THEY HAVE NO AUTHORITY UNDER EXISTING REGULATIONS FOR PAYING THE TAX. INASMUCH AS THE MONEY WHICH IS FURNISHED THEM FOR THIS PURPOSE IS PROVIDED AS LAND-GRANT UNIVERSITY. WE SHALL ASSUME FOR THE PURPOSE OF OUR DISCUSSION THAT BY THE USE OF THE TERM "STATE SALES TAX" YOU ARE REFERRING TO THE MOTOR VEHICLE FUEL TAX. THE QUESTION OF WHERE THE LEGAL INCIDENCE OF THE TAX FALLS IS THE DETERMINING FACTOR IN DECIDING WHETHER FEDERAL FUNDS MAY BE USED TO PAY FOR PURCHASES. THE TRANSACTION PRIVILEGE TAXES LAW CITED ABOVE IS ALMOST IDENTICAL WITH SECTION 73-1303 A.C.A. 1939 AND THE ARIZONA SUPREME COURT HAS HELD THAT THE LEGAL INCIDENCE OF THE TAX IMPOSED BY THE LATTER SECTION IS ON THE VENDOR.

B-131417, MAY 7, 1957

TO MR. R. R. EAGAR, STANDARD OIL COMPANY OF CALIFORNIA:

YOUR LETTER OF APRIL 2, 1957, REQUESTS OUR ADVISE AS TO WHETHER THE UNIVERSITY OF ARIZONA MAY PROPERLY PAY FROM FUNDS DERIVED FROM THE FEDERAL GOVERNMENT FOR THE SUPPORT OF A STATE COLLEGE TEACHING BRANCHES OF LEARNING RELATING TO AGRICULTURE AND MECHANICAL ARTS AND IN FURTHERANCE OF AGRICULTURAL EXTENSION AND EXPERIMENTAL WORK, THE AMOUNT OF ARIZONA STATE SALES TAX WHEN MAKING PAYMENT FOR PURCHASES MADE ON CREDIT CARD SYSTEMS.

YOU SAY THAT THE UNIVERSITY REFUSES TO PAY THE STATE SALES TAX BECAUSE---

"* * * THEY HAVE NO AUTHORITY UNDER EXISTING REGULATIONS FOR PAYING THE TAX, INASMUCH AS THE MONEY WHICH IS FURNISHED THEM FOR THIS PURPOSE IS PROVIDED AS LAND-GRANT UNIVERSITY. THEY REFER TO THE COMPTROLLER GENERAL'S DECISION NO. A-46031 FOR THEIR AUTHORITY.'

WE SHALL ASSUME FOR THE PURPOSE OF OUR DISCUSSION THAT BY THE USE OF THE TERM "STATE SALES TAX" YOU ARE REFERRING TO THE MOTOR VEHICLE FUEL TAX, ARTICLE I, CHAPTER 9, TITLE 28 (SECTIONS 28-1501 TO 1527) AND TRANSACTION PRIVILEGE TAXES, ARTICLE I, CHAPTER 8, TITLE 42 (SECTIONS 42-1301 TO 1347) ARIZONA REVISED STATUTES ANNOTATED.

THE QUESTION OF WHERE THE LEGAL INCIDENCE OF THE TAX FALLS IS THE DETERMINING FACTOR IN DECIDING WHETHER FEDERAL FUNDS MAY BE USED TO PAY FOR PURCHASES, PART OF THE PRICE OF WHICH INCLUDES A CHARGE OR SUM EQUAL TO THE TAX. IF THE LEGAL INCIDENCE OF THE TAX FALLS UPON THE VENDOR PAYMENT OF THE FULL PURCHASE PRICE GENERALLY MAY BE MADE. CF. ALABAMA V. KING AND BOOZER, 314 U.S. 11; KERN-LIMERICK INC., ET AL. V. SCURLOCK, COMMISSIONER OF REVENUE FOR ARKANSAS, 347 U.S. 110.

THE TRANSACTION PRIVILEGE TAXES LAW CITED ABOVE IS ALMOST IDENTICAL WITH SECTION 73-1303 A.C.A. 1939 AND THE ARIZONA SUPREME COURT HAS HELD THAT THE LEGAL INCIDENCE OF THE TAX IMPOSED BY THE LATTER SECTION IS ON THE VENDOR. CF. ARIZONA STATE TAX COMMISSION V. THE GARRETT CORPORATION, 291 P.2D 208. IN 30 COMP. GEN. 520, WE HELD THAT THE LEGAL INCIDENCE OF THE ARIZONA MOTOR VEHICLE FUEL TAX WAS ON THE VENDOR.

THE INVOLVED FUNDS ARE GRANTED TO THE STATES THROUGH THE UNITED STATES DEPARTMENT OF AGRICULTURE FOR SPECIFIC PURPOSES AND MAY NOT BE DIVERTED THEREFROM. HOWEVER, THE PURCHASE PRICE OF SUPPLIES NECESSARY TO CARRY OUT THE AUTHORIZED PURPOSES--- INCLUDING AMOUNTS EQUIVALENT TO TAXES IMPOSED ON THE VENDOR BUT THE INCIDENCE OF WHICH IS NOT ON THE FEDERAL GOVERNMENT OR THE COLLEGE--- APPEARS PROPERLY PAYABLE FROM SUCH FUNDS. SUCH PAYMENTS DO NOT REPRESENT A DIVERSION OF THE FUNDS FROM THE AUTHORIZED PURPOSES BUT ARE EXPENDITURES IN FURTHERANCE THEREOF.

IN VIEW OF THE FOREGOING, WE WILL NOT OBJECT TO THE UNIVERSITY'S MAKING FULL PAYMENT FOR ANY PURCHASES INCIDENT TO THE PURPOSES FOR WHICH THE FUNDS WERE MADE AVAILABLE EVEN THOUGH THE PRICE OF THE SUPPLIES MAY INCLUDE AN AMOUNT EQUAL TO, AND ON ACCOUNT OF, THE INVOLVED TAXES.

OUR CONCLUSION IS LIMITED TO THE MATTERS DISCUSSED AND IS BASED ON THE ASSUMPTION THAT THE ONLY OBJECTIONS THE UNIVERSITY HAS FOR NOT PAYING THE "STATE SALES TAX" ARE THOSE CONTAINED IN THE FIRST PARAGRAPH OF YOUR LETTER AND QUOTED THEREIN.

COPIES OF THIS LETTER AND YOUR LETTER OF APRIL 2, 1957, ARE BEING FORWARDED TO THE UNITED ..END :