B-141256, DECEMBER 22, 1959, 39 COMP. GEN. 459

B-141256: Dec 22, 1959

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TAXES - STATE - FLORIDA - FEDERAL IMMUNITY - PURCHASE BY CONTRACTORS NOTWITHSTANDING THAT THE INCIDENCE OF THE FLORIDA SALES TAX IS ON THE VENDEE (BUYER) AND NOT ON THE VENDOR (SELLER). THE DETERMINATION BEING THAT WHEN A PURCHASE IS MADE BY A CONTRACTOR IN HIS OWN NAME AND WITH TITLE TO THE PERSONALTY NOT VESTING IMMEDIATELY IN THE GOVERNMENT. THE GOVERNMENT IS NOT THE PURCHASER. SO THAT THE TAX IS NOT DIRECTLY ON THE GOVERNMENT. EVEN THOUGH THE ULTIMATE ECONOMIC BURDEN OF THE TAX IS BORNE BY THE GOVERNMENT. THE GOVERNMENT IS THE PURCHASER. IS IN CONFLICT WITH THE CONSTITUTIONAL IMMUNITY OF THE FEDERAL GOVERNMENT FROM STATE TAXATION. "THAT A VENDOR OF SUPPLIES TO THE FEDERAL GOVERNMENT IS NOT EXEMPT FROM A STATE TAX WHERE THE LEGAL INCIDENCE OF THE TAX IS NOT ON THE VENDEE" AND TO THE CASE OF FEDERAL LAND BANK V.

B-141256, DECEMBER 22, 1959, 39 COMP. GEN. 459

TAXES - STATE - FLORIDA - FEDERAL IMMUNITY - PURCHASE BY CONTRACTORS NOTWITHSTANDING THAT THE INCIDENCE OF THE FLORIDA SALES TAX IS ON THE VENDEE (BUYER) AND NOT ON THE VENDOR (SELLER), A FLORIDA STATUTE WHICH REMOVES THE SALES TAX EXEMPTION FOR SALES MADE TO THE UNITED STATES GOVERNMENT, DOES NOT INFRINGE THE FEDERAL GOVERNMENT'S CONSTITUTIONAL IMMUNITY FROM STATE TAXATION, THE DETERMINATION BEING THAT WHEN A PURCHASE IS MADE BY A CONTRACTOR IN HIS OWN NAME AND WITH TITLE TO THE PERSONALTY NOT VESTING IMMEDIATELY IN THE GOVERNMENT, THE GOVERNMENT IS NOT THE PURCHASER, SO THAT THE TAX IS NOT DIRECTLY ON THE GOVERNMENT, EVEN THOUGH THE ULTIMATE ECONOMIC BURDEN OF THE TAX IS BORNE BY THE GOVERNMENT, BUT WHEN THE CONTRACTOR DESIGNATED AS PURCHASING AGENT FOR THE GOVERNMENT MAKES A PURCHASE IN THE NAME OF THE GOVERNMENT, PLEDGING THE GOVERNMENT'S CREDIT, AND TITLE IMMEDIATELY VESTS IN THE GOVERNMENT, THE GOVERNMENT IS THE PURCHASER, AND UNDER THE FLORIDA STATUTE SUCH PURCHASE WOULD BE EXEMPT FROM THE SALES TAX.

TO THE POSTMASTER GENERAL, DECEMBER 22, 1959:

BY LETTER DATED NOVEMBER 13, 1959, THE DEPUTY POSTMASTER GENERAL REQUESTED OUR DECISION AS TO WHETHER SECTION 212.08 (7), FLORIDA STATUTES, AS AMENDED EFFECTIVE JULY 1, 1959, IS IN CONFLICT WITH THE CONSTITUTIONAL IMMUNITY OF THE FEDERAL GOVERNMENT FROM STATE TAXATION.

IT APPEARS THAT THE FLORIDA STATE LEGISLATURE DURING ITS 37TH REGULAR SESSION AMENDED THE FLORIDA REVENUE ACT OF 1949 SO AS TO REMOVE THE EXEMPTION FROM THE STATE SALES TAX FORMERLY ENJOYED BY CONTRACTORS EMPLOYED BY THE FEDERAL GOVERNMENT WHERE THE TANGIBLE PERSONAL PROPERTY INVOLVED WENT INTO AND BECAME PART OF PUBLIC WORKS.

SUBSECTION (7) OF SECTION 212.08, FLORIDA STATUTES, FORMERLY PROVIDED AS FOLLOWS:

THERE SHALL ALSO BE EXEMPT FROM THE TAX IMPOSED BY THIS CHAPTER SALES MADE TO THE UNITED STATES GOVERNMENT, THE STATE OR ANY COUNTY, MUNICIPALITY OR POLITICAL SUBDIVISION OF THIS STATE, INCLUDING SALES OF TANGIBLE PERSONAL PROPERTY MADE TO CONTRACTORS EMPLOYED BY ANY SUCH GOVERNMENT OR POLITICAL SUBDIVISION THEREOF WHERE SUCH TANGIBLE PERSONAL PROPERTY GOES INTO AND BECOMES A PART OF PUBLIC WORKS OWNED BY SUCH GOVERNMENT OR POLITICAL SUBDIVISION THEREOF * * *

SUBSECTION (7) OF SECTION 212.08, FLORIDA STATUTES, AS AMENDED, READS AS FOLLOWS:

THERE SHALL BE EXEMPT FROM THE TAX IMPOSED BY THIS CHAPTER SALES MADE TO THE UNITED STATES GOVERNMENT, THE STATE OR ANY COUNTY, MUNICIPALITY OR POLITICAL SUBDIVISION OF THIS STATE; PROVIDED, THIS EXEMPTION SHALL NOT INCLUDE SALES OF TANGIBLE PERSONAL PROPERTY MADE TO CONTRACTORS EMPLOYED EITHER DIRECTLY OR AS AGENTS OF ANY SUCH GOVERNMENT OR POLITICAL SUBDIVISION THEREOF WHERE SUCH TANGIBLE PERSONAL PROPERTY GOES INTO OR BECOMES A PART OF PUBLIC WORKS OWNED BY SUCH GOVERNMENT OR POLITICAL SUBDIVISION THEREOF, EXCEPT PUBLIC WORKS IN PROGRESS * * * ( ITALICS SUPPLIED.)

THE DEPUTY POSTMASTER GENERAL SAYS THAT COGNIZANCE HAS BEEN GIVEN TO THE DECISION OF THE SUPREME COURT OF THE UNITED STATES IN THE CASE OF ALABAMA V. KING AND BOOZER, 314 U.S. 1 (1941),"THAT A VENDOR OF SUPPLIES TO THE FEDERAL GOVERNMENT IS NOT EXEMPT FROM A STATE TAX WHERE THE LEGAL INCIDENCE OF THE TAX IS NOT ON THE VENDEE" AND TO THE CASE OF FEDERAL LAND BANK V. BISMARCK LUMBER CO., 314 U.S. 95 (1941),"WHICH IS DIRECT AUTHORITY FOR THE PROPOSITION THAT THE DETERMINATION THE HIGHEST COURT OF A STATE IS CONTROLLING UPON THE QUESTION AS TO WHETHER THE LEGAL INCIDENCE OF A TAX IMPOSED BY A LAW OF THAT STATE IS UPON THE VENDOR OR VENDEE.' HE ALSO SAYS THAT IT APPEARS IN ACCORDANCE WITH FLORIDA STATUTES THAT THE INCIDENCE OF THE FLORIDA RETAIL SALES TAX IS ON THE VENDEE AND THAT THIS ASSUMPTION IS STRENGTHENED BY THE DECISION RENDERED IN DAVIS V. PONTE VERDA CLUB, FLA., 78 SO.2D 858 (1955), WHICH HELD THAT A SELLER IS MERELY THE AGENT OF THE STATE WHO IS CHARGED WITH THE DUTY OF COLLECTING STATE SALES TAXES, AND ANY NEGLIGENCE OR FAILURE ON HIS PART TO COLLECT THE TAX FROM THE PURCHASER DOES NOT RELIEVE THE TAX-PAYING PURCHASER FROM HIS TAX LIABILITY, AND THE FACT THAT THE STATE MAY PROCEED AGAINST THE SELLER DOES NOT PRECLUDE IT FROM ALSO PROCEEDING AGAINST THE PURCHASER.

THE DEPUTY POSTMASTER GENERAL STATES THE PROBLEM AS FOLLOWS:

IN VIEW OF THE FOREGOING, WE ARE INCLINED TO BELIEVE THAT THE AMENDMENT TO SUBSECTION (7) OF SECTION 212.08, FLORIDA STATUTE EFFECTIVE JULY 1, 1959, TO REMOVE THE EXEMPTION FROM SALES TAX OF CONTRACTORS EMPLOYED EITHER DIRECTLY OR AS AGENTS OF ANY GOVERNMENT AGENCY IS IN CONFLICT WITH THE CONSTITUTIONAL IMMUNITY OF THE FEDERAL GOVERNMENT FROM STATE TAXATION (WHERE THE INCIDENCE OF SUCH TAX IS ON THE VENDEE).

IN ORDER TO HAVE A BASIS FOR PAYMENT, OR NONPAYMENT, WHICHEVER THE CASE MAY BE, A RULING IS REQUESTED BY YOUR OFFICE AS TO THE LEGALITY OF THIS TAX.

SECTION 212.05, FLORIDA STATUTES, DECLARES IT TO BE "THE LEGISLATIVE INTENT THAT EVERY PERSON IS EXERCISING A TAXABLE PRIVILEGE WHO ENGAGES IN THE BUSINESS OF SELLING TANGIBLE PERSONAL PROPERTY AT RETAIL IN THIS STATE.' FOR THE EXERCISE OF "SAID PRIVILEGE" THE STATUTE LEVIES A TAX "AT THE RATE OF THREE PERCENT OF THE SALES PRICE OF EACH ITEM OR ARTICLE OF TANGIBLE PERSONAL PROPERTY WHEN SOLD AT RETAIL IN THIS STATE.' SECTION 212.07 (1) PROVIDES THAT " THE PRIVILEGE TAX HEREIN LEVIED MEASURED BY RETAIL SALES SHALL BE COLLECTED BY THE DEALERS FROM THE PURCHASER OR CONSUMER; " SECTION 212.07 (2) PROVIDES THAT DEALERS SHALL, AS FAR AS PRACTICABLE "ADD THE AMOUNTS OF THE TAX IMPOSED UNDER THIS CHAPTER TO THE SALE PRICE OR CHARGE, WHICH SHALL BE A DEBT FROM THE PURCHASER OR CONSUMER TO THE DEALER; " SECTION 212.07 (3) MAKES IT A MISDEMEANOR FOR A DEALER TO FAIL, NEGLECT OR REFUSE TO COLLECT THE TAX FROM THE PURCHASER OR CONSUMER; AND SECTION 212.07 (4) PROVIDES THAT A PERSON ENGAGED IN BUSINESS TAXABLE THEREUNDER SHALL NOT ADVERTISE OR HOLD OUT TO THE PUBLIC THAT HE WILL ABSORB ANY PART OF THE TAX OR THAT HE WILL RELIEVE THE PURCHASER OF THE PAYMENT OF ANY PART OF THE TAX.

IT WOULD APPEAR THAT THE TAX IMPOSED ON RETAIL SALES HERE UNDER CONSIDERATION IS A TAX AGAINST THE BUYER AND NOT AGAINST THE SELLER. THE FLORIDA SUPREME COURT EXPLAINED IT THUS IN SPENCER V. MERO, FLA., 52 SO.2D 679 (1951):

THERE IS AN AMBIGUITY AS TO WHETHER THE TAX IS LEVIED ON THE VENDOR OR THE VENDEE BUT IT IS CLEAR THAT THE LAW REQUIRES THE VENDOR TO BEAR THE AMOUNT OF THE TAX. THE SELLER IS REQUIRED TO COLLECT IT FROM THE BUYER. THE BUYER IS LIABLE FOR IT. WE CONCLUDE THAT IT IS A TAX AGAINST THE BUYER. THE SELLER IS COERCED TO COLLECT THE TAX AND REMIT. TO SAY THAT IT IS A TAX ON THE SELLER IS OVERCOME BY THE FACT THAT HE IS REQUIRED TO EXACT IT OF THE PURCHASER. THE SPIRIT AND INTENT OF THE LAW IS THAT THE PURCHASER, AND NOT THE SELLER, SHALL PAY IT. ( ITALICS SUPPLIED.)

FURTHER SUPPORT FOR THIS VIEW IS PROVIDED BY THE CASE OF DAVIS V. PONTE VERDA CLUB, SUPRA, WHICH HOLDS THAT IN THE EVENT THE SELLER DOES NOT COLLECT THE TAX, THE STATE MAY PROCEED AGAINST THE PURCHASER. THE COURT THERE SAID:

THE SELLER IS MERELY AN AGENT OF THE STATE WHO IS CHARGED WITH THE DUTY OF COLLECTING THE TAX AND ANY NEGLIGENCE OR FAILURE ON HIS PART TO COLLECT THE TAX FROM THE PURCHASER DOES NOT RELIEVE THE TAX PAYING PURCHASER FROM HIS TAX LIABILITY.

IN VIEW OF THE FOREGOING WE CONCLUDE, AS INDICATED IN THE LETTER, THAT THE INCIDENCE OF THE FLORIDA SALES TAX IS ON THE VENDEE AND NOT ON THE VENDOR. HOWEVER, SUCH CONCLUSION IS NOT DETERMINATIVE OF THE QUESTION AS TO WHETHER THE REMOVAL OF THE EXEMPTION FROM THE SALES TAX OF CONTRACTORS EMPLOYED EITHER DIRECTLY OR AS AGENTS OF THE GOVERNMENT INFRINGES THE CONSTITUTIONAL IMMUNITY OF THE FEDERAL GOVERNMENT FROM STATE TAXATION.

IN ALABAMA V. KING AND BOOZER, SUPRA, TO WHICH THE DEPUTY POSTMASTER GENERAL REFERS, THE COURT HELD (AS EXPLAINED IN 96 L.ED. 270) THAT, ABSENT APPROPRIATE EXEMPTION BY CONGRESS, A STATE TAX OF 2 PERCENT ON THE GROSS RETAIL SALES PRICE OF TANGIBLE PERSONAL PROPERTY, IN TERMS LAID UPON THE SELLER AS THE "TAXPAYER," BUT REQUIRED TO BE ADDED TO THE SALES PRICE AND COLLECTED BY HIM FROM THE PURCHASER, DID NOT INFRINGE ANY CONSTITUTIONAL IMMUNITY OF THE UNITED STATES FROM TAXATION, WHEN IMPOSED WITH RESPECT TO LUMBER SOLD ON THE ORDER OF COST-PLUS-A-FIXED FEE CONTRACTORS, FOR USE BY THE LATTER IN CONSTRUCTING AN ARMY CAMP FOR THE UNITED STATES, WHERE THE UNITED STATES WAS NOT IN FACT THE "PURCHASER" WITHIN THE MEANING OF THE TAX STATUTE. IT APPEARED THAT BY THE CONTRACTUAL TERMS (1) TITLE TO MATERIALS AND SUPPLIES FOR WHICH THE CONTRACTORS WERE ENTITLED TO BE REIMBURSED WAS TO VEST IN THE GOVERNMENT UPON DELIVERY AT THE SITE OF WORK OR AT AN APPROVED STORAGE SITE AND UPON INSPECTION AND ACCEPTANCE IN WRITING BY THE GOVERNMENT'S OFFICERS; (2) THE GOVERNMENT RESERVED THE RIGHT TO FURNISH MATERIALS AND MAKE PAYMENTS DIRECTLY TO MATERIAL SUPPLIERS AND AGREED TO ASSUME, UPON TERMINATION OF THE CONTRACT, ALL OBLIGATIONS UNDERTAKEN BY THE CONTRACTORS IN GOOD FAITH OR INCURRED PURSUANT TO THE CONTRACT; (3) PURCHASES MADE BY THE CONTRACTORS WERE TO BE ON THEIR OWN CREDIT, WITHOUT BINDING THE GOVERNMENT; AND (4) THE CONTRACTORS, AFTER SECURING BY SELLERS FOR MATERIALS PURCHASED, PAID THE SELLERS AND WERE REIMBURSED BY THE GOVERNMENT. THE COURT SAID THAT THE CONTRACTORS WERE NOT RELIEVED OF THE LIABILITY TO PAY THE TAX EITHER BECAUSE, IN A LOOSE AND GENERAL SENSE, THEY WERE ACTING FOR THE GOVERNMENT IN PURCHASING THE LUMBER OR BECAUSE THE ECONOMIC BURDEN OF THE TAX WOULD BE SHIFTED TO THE GOVERNMENT BY REASON OF ITS CONTRACT TO REIMBURSE THE CONTRACTORS. IT WAS ALSO SAID THAT REGARDLESS OF THE EXTENT TO WHICH THE GOVERNMENT MAY HAVE RESERVED THE RIGHT TO RESTRICT OR CONTROL THE ACTION OF THE CONTRACTORS IN OTHER RESPECTS, NEITHER THE RESERVATION NOR THE EXERCISE OF THAT POWER GAVE TO THE CONTRACTORS THE STATUS OF AGENTS OF THE GOVERNMENT TO ENTER INTO CONTRACTS OR PLEDGE ITS CREDIT.

AS WE UNDERSTAND THE KING AND BOOZER CASE, THE LEGAL INCIDENCE OF THE TAX THERE UNDER CONSIDERATION DID IN FACT FALL ON THE VENDEE (PURCHASER) BUT SUCH VENDEE WAS HELD TO BE THE COST-PLUS CONTRACTOR AND NOT THE GOVERNMENT. THE CRUCIAL POINT IN THAT CASE WAS THE DETERMINATION THAT THE GOVERNMENT WAS NOT THE "PURCHASER" WITHIN THE MEANING OF THE TAX STATUTE. EVEN THOUGH THE GOVERNMENT BORE THE ECONOMIC BURDEN OF THE TAX, SUCH TAX WAS NOT IMPOSED DIRECTLY ON THE GOVERNMENT. THEREFORE, IF THE LEGAL INCIDENCE OF THE TAX WAS NOT ON THE GOVERNMENT, NO INFRINGEMENT OF CONSTITUTIONAL IMMUNITY WAS INVOLVED. ON SUCH A BASIS WE HAVE HELD THAT THERE IS NO INFRINGEMENT OF CONSTITUTIONAL IMMUNITY IN CASES OF DIRECT SALE TO THE FEDERAL GOVERNMENT AS VENDEE WHERE THE LEGAL INCIDENCE OF THE PARTICULAR STATE TAX UNDER CONSIDERATION FALLS ON THE VENDOR. SEE, FOR EXAMPLE, 21 COMP. GEN. 843; 33 ID. 453.

ON THE OTHER HAND, A STATE SALES TAX WHOSE LEGAL INCIDENCE FALLS ON THE VENDEE WOULD INFRINGE THE CONSTITUTIONAL IMMUNITY OF THE GOVERNMENT IN CASES WHERE IT IS DETERMINED THAT THE GOVERNMENT IS IN FACT THE VENDEE. SEE IN THIS CONNECTION KERN-LIMERICK, INC. V. SCURLOCK, 347 U.S. 110 (1954).

THE FACTS OF THAT CASE WERE VERY SIMILAR TO THE FACTS OF THE KING AND BOOZER CASE EXCEPT FOR ONE IMPORTANT DIFFERENCE; THE SUPREME COURT HELD THAT THERE THE GOVERNMENT WAS IN FACT THE PURCHASER ON THE BASIS THAT THE CONTRACTOR PURCHASED THE SUPPLIES FOR AND IN THE NAME OF THE GOVERNMENT AND THE TITLE THERETO VESTED IMMEDIATELY IN THE GOVERNMENT. THUS IT WAS A SALE TO THE GOVERNMENT. IN KING AND BOOZER THE CONTRACTOR MADE THE PURCHASES IN HIS OWN NAME AND TITLE DID NOT VEST IN THE GOVERNMENT UNTIL DELIVERY AT THE SITE OF THE WORK AND ACCEPTANCE BY THE GOVERNMENT. THUS THAT CASE INVOLVED A SALE TO THE CONTRACTOR AND NOT TO THE GOVERNMENT.

REGARDING THE QUESTION PRESENTED IN THE LETTER, SECTION 212.08 (7), FLORIDA STATUTES, AS AMENDED, PROVIDES THAT SALES MADE TO THE " UNITED STATES GOVERNMENT" SHALL BE EXEMPT FROM THE TAX BUT THAT THE EXEMPTION SHALL NOT EXTEND TO SALES MADE TO "CONTRACTORS EMPLOYED EITHER DIRECTLY OR AS AGENTS OF SUCH GOVERNMENT.' WE HAVE FOUND NO FLORIDA OR FEDERAL DECISIONS INTERPRETING SUCH LANGUAGE AS APPEARING IN THE FLORIDA STATUTE, BUT IT WOULD APPEAR THAT TO THE EXTENT THE STATUTE REMOVES THE EXEMPTION WITH RESPECT TO SALES MADE TO "CONTRACTORS" BUT SPECIFICALLY CONTINUES IT WITH RESPECT TO SALES MADE TO "THE UNITED STATES GOVERNMENT," NO INFRINGEMENT OF CONSTITUTIONAL FEDERAL IMMUNITY FROM STATE TAXATION IS INVOLVED. WITH REGARD TO THE AGENCY FEATURE OF THE STATUTE, WE SHOULD LIKE TO POINT OUT THAT UNDER THE KERN-LIMERICK DECISION SALES OF SUPPLIES OR MATERIALS WOULD BE EXEMPT FROM THE FLORIDA TAX UNDER CONSIDERATION WHERE THE CONTRACTOR IS DESIGNATED AS A PURCHASING AGENT FOR THE GOVERNMENT, PURCHASING THE SUPPLIES OR MATERIALS IN THE NAME OF THE GOVERNMENT, PLEDGING THE GOVERNMENT'S CREDIT, AND TITLE THERETO VESTING IMMEDIATELY IN THE GOVERNMENT, SUCH BEING SALES TO THE GOVERNMENT RATHER THAN TO THE CONTRACTOR.