B-132398, DEC. 6, 1957

B-132398: Dec 6, 1957

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REQUESTING AN ADVANCE DECISION WHETHER PAYMENT IS AUTHORIZED ON A VOUCHER IN THE AMOUNT OF $1. - IT WAS PROVIDED THAT THE CONTRACTOR WOULD BE REIMBURSED FOR SUCH OF HIS ACTUAL EXPENDITURES IN THE PERFORMANCE OF THE WORK AS MAY BE APPROVED OR RATIFIED BY THE CONTRACTING OFFICER INCLUDING (ARTICLE III-E. DESIGNS AND SPECIFICATIONS ARE TO BECOME THE PROPERTY OF THE GOVERNMENT ON COMPLETION THEREOF AS OUTLINED IN THIS CONTRACT. * * *" ATTACHED TO THE RECLAIM VOUCHER IS THE CONTRACTING OFFICER'S STATEMENT. WHICH PURCHASES PREDOMINANTLY HAVE BEEN AND ARE FOR BLUEPRINTS. IS NOT SUBJECT TO THE SALES TAX. IT WAS FURTHER RULED THAT EXPENDABLE SUPPLIES AND SERVICES. ARE SUBJECT TO TAX BECAUSE THE CONTRACT CONTAINS NO SPECIFIC PROVISION FOR THE VESTING OF TITLE TO SUCH PURCHASES IN THE GOVERNMENT.

B-132398, DEC. 6, 1957

TO MR. H. T. BAKER, FINANCE OFFICER, DEPARTMENT OF THE ARMY:

BY SEVENTH INDORSEMENT DATED JUNE 27, 1957, THE CHIEF OF FINANCE REFERRED TO OUR OFFICE YOUR FOURTH INDORSEMENT OF JUNE 5, 1957, REQUESTING AN ADVANCE DECISION WHETHER PAYMENT IS AUTHORIZED ON A VOUCHER IN THE AMOUNT OF $1,327.10, STATED IN FAVOR OF METCALF AND EDDY AND ALFRED HOPKINS AND ASSOCIATES, COST-PLUS-A-FIXED-FEE CONTRACTOR UNDER CONTRACT NO. DA-49-129- ENG-109, DATED DECEMBER 28, 1950.

THE AMOUNT IN CONTROVERSY REPRESENTS THE AMOUNT OF NEW YORK SALES TAXES ON SERVICES AND SUPPLIES, MAINLY BLUEPRINTS, PAID FOR BY AND REIMBURSED TO THE CONTRACTOR, BUT SUBSEQUENTLY DEDUCTED FROM OTHER SUMS DUE THE CONTRACTOR AS THE RESULT OF EXCEPTIONS THERETO TAKEN BY THE GENERAL ACCOUNTING OFFICE.

UNDER THE TERMS OF THE CONTRACT--- WHICH COVERED DESIGNATED ARCHITECT- ENGINEER SERVICES--- IT WAS PROVIDED THAT THE CONTRACTOR WOULD BE REIMBURSED FOR SUCH OF HIS ACTUAL EXPENDITURES IN THE PERFORMANCE OF THE WORK AS MAY BE APPROVED OR RATIFIED BY THE CONTRACTING OFFICER INCLUDING (ARTICLE III-E, PARAGRAPH IV/---

"THE AMOUNT OF ALL TAXES, FEES, DUTIES, AND/OR CHARGES OF ALL KINDS WHICH MAY BE REQUIRED ON ACCOUNT OF THE PERFORMANCE OF THIS CONTRACT, * * *"

ARTICLE III-M, PARAGRAPH 1, OF THE CONTRACT PROVIDES, IN PERTINENT PART, THAT---

"ALL DRAWINGS, DESIGNS AND SPECIFICATIONS ARE TO BECOME THE PROPERTY OF THE GOVERNMENT ON COMPLETION THEREOF AS OUTLINED IN THIS CONTRACT, * * *"

ATTACHED TO THE RECLAIM VOUCHER IS THE CONTRACTING OFFICER'S STATEMENT, DATED NOVEMBER 1, 1956, WHICH READS, IN PART, AS FOLLOWS:

"A. SINCE THE COMMENCEMENT OF PERFORMANCE OF THIS CONTRACT, THE CONTRACTOR HAS PAID THE NEW YORK CITY SALES TAX ON PURCHASE WITHIN NEW YORK CITY OF BLUEPRINTS AND OTHER SUPPLIES AND SERVICES, WHICH PURCHASES PREDOMINANTLY HAVE BEEN AND ARE FOR BLUEPRINTS. SO FAR AS THE FILE DISCLOSES, THE CONTRACTOR CONTINUES TO PAY THE SALES TAX ON THESE PURCHASES. IN RESPONSE TO REQUESTS FOR EXEMPTION BY THE CONTRACTOR AND THE NORTHEAST DISTRICT ENGINEER, ON 12 MAY 1952, MR. MORRIS W. WEINER, SPECIAL DEPUTY COMPTROLLER, CITY OF NEW YORK, RULED THAT ALL ITEMS OF OFFICE EQUIPMENT PURCHASED BY THE CONTRACTOR, TITLE TO WHICH VESTS IN THE GOVERNMENT PURSUANT TO ARTICLE III-C, PARAGRAPH 1A OF THE CONTRACT, IS NOT SUBJECT TO THE SALES TAX. IT WAS FURTHER RULED THAT EXPENDABLE SUPPLIES AND SERVICES, SUCH AS BLUEPRINT SERVICES, MIMEOGRAPH SERVICES, STATIONERY SUPPLIES, ARE SUBJECT TO TAX BECAUSE THE CONTRACT CONTAINS NO SPECIFIC PROVISION FOR THE VESTING OF TITLE TO SUCH PURCHASES IN THE GOVERNMENT, EITHER BY WAY OF AN AGENCY PURCHASE OR BY A RESALE TO THE GOVERNMENT. LETTER, DATED 4 MARCH 1953, TO THE NORTHEAST DISTRICT ENGINEER, THE CONTRACTOR INQUIRED WHETHER TO APPLY TO THE NEW YORK CITY COMPTROLLER FOR REFUND OF SALES TAX PREVIOUSLY PAID, APPARENTLY TO SATISFY THE ARMY AUDIT AGENCY THAT THE TAX WAS PROPERLY PAID. BY LETTER (EOGHB), DATED 9 MARCH 1953, SUBJECT: "NEW YORK CITY SALES TAX," COLONEL CLAUS A. TORNELL, COMPTROLLER, OFFICE OF THE NORTHEAST DISTRICT ENGINEER, SUGGESTED TO THE CONTRACTOR "* * * THAT NO FURTHER ACTION BE TAKEN BY YOUR OFFICE PENDING A FINAL DETERMINATION BETWEEN THIS OFFICE AND THE GENERAL ACCOUNTING OFFICE OF THE REIMBURSABLE STATUS OF THE NEW YORK CITY SALES TAX.' ON 1 MAY 1956, THE CONTRACTOR MADE FORMAL APPLICATION TO THE NEW YORK CITY COMPTROLLER FOR REFUND OF ALL NEW YORK CITY SALES TAX PAID BY THE CONTRACTOR IN PERFORMANCE OF THE CONTRACT. NO FINAL ACTION HAS BEEN TAKEN ON THIS PETITION FOR REFUND, WHICH SETS FORTH NO MATERIAL NOT PREVIOUSLY SUBMITTED TO THE NEW YORK AUTHORITY, AND WHICH MAY NOT MEET THE SUBSTANTIATION FOR A PETITION FOR REFUND REQUIRED BY N.Y. CITY COMPT. REG., ART. 27.'

THE QUESTION AS TO THE REIMBURSABILITY OF THE SALES TAXES IN QUESTION WAS RAISED IN OUR AUDIT BECAUSE OF THE REGULATIONS AND PROCEDURES ESTABLISHED BY THE COMPTROLLER OF THE CITY OF NEW YORK WHEREBY VENDORS COULD GAIN RELIEF FROM THE NEW YORK CITY SALES TAX ON SALES TO GOVERNMENT CPFF CONTRACTORS FOR GOVERNMENT ACCOUNTS. B 46930, JANUARY 29, 1945. AND IT HAS BEEN ASCERTAINED UPON FURTHER REVIEW OF THE TRANSACTIONS INVOLVED THAT THE BULK OF SUPPLIES UPON WHICH THE CITY OF NEW YORK SALES TAX HAS BEEN PAID WERE BLUEPRINTS, BLACK AND WHITE PRINTS, AND TRANSPARENCIES. THESE SUPPLIES WERE PURCHASED BETWEEN JANUARY 1951 AND MAY 1952.

IN SUPPORT OF THE CLAIM, THERE IS ATTACHED TO THE VOUCHER AN OPINION DATED OCTOBER 15, 1956, OF THE JUDGE ADVOCATE GENERAL IN WHICH IT IS STATED THAT, IN APPLYING FOR THE EXEMPTION DURING THE SPRING OF 1951, BOTH THE CONTRACTOR AND THE NORTHEAST DISTRICT ENGINEER OVERLOOKED THE PROVISIONS OF ARTICLE III-H, PARAGRAPH 1, SUPRA, WHICH, THROUGH ITS OPERATION, WOULD VEST TITLE TO ALL DRAWINGS, DESIGNS AND SPECIFICATIONS IN THE UNITED STATES. THE JUDGE ADVOCATE GENERAL STATES FURTHER THAT IT IS LIKELY THAT TITLE TO SOME, IF NOT MOST, OF THE SUPPLIES INVOLVED HAS PASSED TO THE UNITED STATES AND IT IS CONCLUDED, THEREFORE, THAT TO THE EXTENT THAT TITLE TO SUCH SUPPLIES PASSED TO THE UNITED STATES, THE PURCHASES WERE EXEMPT AS BEING PURCHASES FOR RESALE IN THE REGULAR COURSE OF BUSINESS, CITING N.Y. CITY ADMIN. CODE SEC. N 41-1.1 (7); N.Y. CITY COMPT. EG., ART. 10 AND 78; BETHLEHEM STEEL CO. V. JOSEPH, 284 APP. DIV. 5, 130 N.Y. SUPP.2D 178; AND THE RULING OF MAY 12, 1952, REFERRED TO IN THE CONTRACTING OFFICER'S STATEMENT, QUOTED ABOVE.

WHILE THE RECORD DOES NOT CLEARLY ESTABLISH WHAT PART OF THE ITEMS IN QUESTION ULTIMATELY BECAME THE PROPERTY OF THE GOVERNMENT, WE MUST ASSUME, IN THE ABSENCE OF A CLEAR SHOWING TO THE CONTRARY, THAT THE SUPPLIES IN QUESTION WERE PURCHASED BY THE CONTRACTOR FOR THE ACCOUNT OF THE GOVERNMENT, AND IT IS MANIFEST THAT THE CONTRACT MAY NOT BE CONSTRUED TO COMPREHEND REIMBURSEMENT TO THE CONTRACTOR FOR A TAX WHICH ADMITTEDLY WAS NOT APPLICABLE TO SUPPLIES SO PURCHASED.

WHILE IT MAY BE, AS INDICATED BY THE JUDGE ADVOCATE GENERAL, THAT ANY LACK OF DILIGENCE ON THE PART OF THE CONTRACTOR WAS EQUALLY SHARED IN BY THE REPRESENTATIVES OF THE CONTRACTING OFFICER, WHO ACQUIESCED IN THE PAYMENT OF THE TAX BY THE CONTRACTOR, THIS CANNOT SERVE TO ALTER THE LEGAL ASPECTS OF THE MATTER. AND ANY MISAPPREHENSION THAT THE CONTRACTOR AND THE GOVERNMENT REPRESENTATIVES MAY HAVE HAD AS TO THE LEGAL EFFECT OF THE TERMS OF THE NEW YORK CITY TAX REGULATIONS, INSOFAR AS THE QUESTION OF THEIR APPLICABILITY TO THE SUPPLIES PURCHASED BY THE CONTRACTOR IS CONCERNED, MUST BE REGARDED AS A MUTUAL MISTAKE OF LAW FOR WHICH OUR OFFICE IS NOT REQUIRED OR AUTHORIZED TO GRANT RELIEF. 23 COMP. GEN. 957.

ACCORDINGLY, THE VOUCHER, TOGETHER WITH SUPPORTING PAPERS, IS RETURNED HEREWITH, AND YOU ARE ADVISED THAT PAYMENT THEREON IS NOT AUTHORIZED.