B-145016, MAR. 21, 1961

B-145016: Mar 21, 1961

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THE MACHINES AND ATTACHMENTS IN QUESTION WERE ORDERED PURSUANT TO GENERAL SERVICES ADMINISTRATION. INCLUDED AMONG THE LOCATIONS OF THE CONTRACTOR'S SUPPLY AND SERVICE STATIONS ARE PHOENIX. PARAGRAPH 1 OF THE CONTRACT PROVIDES THAT ALL ORDERS FOR THE PURCHASE OF GOODS ARE TO BE FORWARDED TO CONTRACTOR'S NEAREST OFFICE OR TO ITS WASHINGTON. PARAGRAPH 4C PROVIDES AS FOLLOWS: "PRICES QUOTED ARE SUBJECT TO AN ADDITIONAL 1 PERCENT ON DELIVERED PRICES (INCLUSIVE OF FEDERAL EXCISE TAX) TO COVER THE ARIZONA TRANSACTION PRIVILEGE (SALES) TAX EXPENSE ON ALL SALES OF GOODS SHIPPED TO U.S. IS NEARER THAN PHOENIX. THERE IS LEVIED AND THERE SHALL BE COLLECTED BY THE COMMISSION FOR THE PURPOSE OF RAISING PUBLIC MONEY * * * ANNUAL PRIVILEGE TAXES MEASURED BY THE AMOUNT OR VOLUME OF BUSINESS TRANSACTED BY PERSONS ON ACCOUNT OF THEIR BUSINESS ACTIVITIES.

B-145016, MAR. 21, 1961

TO FINANCE AND ACCOUNTING OFFICER, THROUGH CHIEF OF FINANCE, DEPARTMENT OF THE ARMY:

THE OFFICE OF THE CHIEF OF FINANCE, DEPARTMENT OF THE ARMY, HAS FORWARDED BY LETTER DATED FEBRUARY 7, 1961, REFERENCE FINXE-B, ADDRESSOGRAPH AND MULTIGRAPH CORPORATION, YOUR LETTER DATED OCTOBER 11, 1960, AND ENCLOSURES, REQUESTING AN ADVANCE DECISION CONCERNING THE PROPRIETY OF PAYMENT OF THE ARIZONA TRANSACTION PRIVILEGE TAX IN THE AMOUNT OF $15.06 CONTAINED IN A VOUCHER FOR THE TOTAL AMOUNT OF $1,019.42 IN FAVOR OF THE ADDRESSOGRAPH-MULTIGRAPH CORPORATION, 3804 FOURTH AVENUE, SAN DIEGO, CALIFORNIA, COVERING CERTAIN ADDRESSOGRAPH MACHINES AND ATTACHMENTS.

YOU QUESTION THE PROPRIETY OF PAYMENT OF THE TAX ON "INTERSTATE PURCHASES BY THE FEDERAL GOVERNMENT, ITS DEPARTMENTS OR AGENCIES.'

THE MACHINES AND ATTACHMENTS IN QUESTION WERE ORDERED PURSUANT TO GENERAL SERVICES ADMINISTRATION, FEDERAL SUPPLY SERVICE CONTRACT NO. GS 00S-22630, COVERING THE PERIOD JULY 1, 1959-JUNE 30, 1960, WITH THE CONTRACTOR DESIGNATED AS ADDRESSOGRAPH-MULTIGRAPH CORPORATION, CLEVELAND, OHIO. INCLUDED AMONG THE LOCATIONS OF THE CONTRACTOR'S SUPPLY AND SERVICE STATIONS ARE PHOENIX, ARIZONA, AND SAN DIEGO, CALIFORNIA.

PARAGRAPH 1 OF THE CONTRACT PROVIDES THAT ALL ORDERS FOR THE PURCHASE OF GOODS ARE TO BE FORWARDED TO CONTRACTOR'S NEAREST OFFICE OR TO ITS WASHINGTON, D.C., OFFICE.

PARAGRAPH 4C PROVIDES AS FOLLOWS:

"PRICES QUOTED ARE SUBJECT TO AN ADDITIONAL 1 PERCENT ON DELIVERED PRICES (INCLUSIVE OF FEDERAL EXCISE TAX) TO COVER THE ARIZONA TRANSACTION PRIVILEGE (SALES) TAX EXPENSE ON ALL SALES OF GOODS SHIPPED TO U.S. GOVERNMENT AGENCIES WITHIN THE STATE OF ARIZONA.'

ON APRIL 7, 1960, THE DEPARTMENT OF THE ARMY, PURCHASING AND CONTRACTING OFFICE, YUMA TEST STATION, YUMA, ARIZONA, MAILED THE ORDER FOR GOODS TO THE ADDRESSOGRAPH-MULTIGRAPH CORPORATION, 3804 FOURTH AVENUE, SAN DIEGO, CALIFORNIA. (SAN DIEGO, CALIFORNIA, IS NEARER THAN PHOENIX, ARIZONA.) MAY 11, 1960, ADDRESSOGRAPH-MULTIGRAPH SHIPPED THE GOODS BY COMMON CARRIER FROM CALIFORNIA, F.O.B. DESTINATION WITH TRANSPORTATION CHARGES PREPAID. THE CORPORATION VOUCHER DIRECTED THAT PAYMENT BE MADE TO ITS SAN FRANCISCO, CALIFORNIA, OFFICE.

ADDRESSOGRAPH-MULTIGRAPH CORPORATION AND ITS SUBSIDIARIES MANUFACTURE AND SELL AN EXTENSIVE LINE OF NAME-AND-DATA WRITING OFFICE DUPLICATING AND OFFSET DUPLICATING MACHINES AND APPARATUS AND SUPPLIES AUXILIARY THERETO. MOODY'S INDUSTRIAL MANUAL, 1960, P. 1.

ARTICLE 1, CHAPTER 8, TITLE 42, ARIZONA REVISED STATUTES, PROVIDES, IN PART, AS FOLLOWS:

"SEC. 42-1309. * * *

"A. THERE IS LEVIED AND THERE SHALL BE COLLECTED BY THE COMMISSION FOR THE PURPOSE OF RAISING PUBLIC MONEY * * * ANNUAL PRIVILEGE TAXES MEASURED BY THE AMOUNT OR VOLUME OF BUSINESS TRANSACTED BY PERSONS ON ACCOUNT OF THEIR BUSINESS ACTIVITIES, AND IN THE AMOUNTS TO BE DETERMINED BY THE APPLICATION OF RATES AGAINST VALUES, GROSS PROCEEDS OF SALES, OR GROSS INCOME, AS THE CASE MAY BE, IN ACCORDANCE WITH THE SCHEDULE AS SET FORTH IN SECS. 42-1310 THROUGH 42-1315.

"SEC. 42-1312. * * *

"A. THE TAX IMPOSED BY SUBSECTION A OF SEC. 42-1309 SHALL BE LEVIED AND COLLECTED AT AN AMOUNT EQUAL TO TWO PERCENT OF THE GROSS PROCEEDS OF SALES OR GROSS INCOME FROM THE BUSINESS UPON EVERY PERSON ENGAGING OR CONTINUING WITHIN THIS STATE IN THE BUSINESS OF SELLING ANY TANGIBLE PERSONAL PROPERTY WHATEVER AT RETAIL * * *.

"SEC. 42-1321. * * *

"A. THIS ARTICLE SHALL NOT APPLY TO:

"4. SALES IN INTERSTATE OR FOREIGN COMMERCE WHEN PROHIBITED FROM BEING SO TAXED BY THE CONSTITUTION OF THE UNITED STATES OR THE CONSTITUTION OF THS STATE.

"B. AFTER JUNE 30, 1956, THE PROVISIONS OF THIS ARTICLE SHALL NOT APPLY TO SALES MADE IRECTLY:

"1. TO THE UNITED STATES GOVERNMENT, ITS DEPARTMENTS OR AGENCIES BY A MANUFACTURER, MODIFIER, ASSEMBLER OR REPAIRER.

"C. AFTER JUNE 30, 1956, THERE SHALL BE DEDUCTED FROM THE ANNUAL PRIVILEGE TAX FIFTY PERCENT OF THE AMOUNT OF TAX LEVIED UNDER THE PROVISIONS OF SEC. 42-1312 UPON ANY SALE OF TANGIBLE PERSONAL PROPERTY MADE DIRECTLY TO THE UNITED STATES GOVERNMENT, ITS DEPARTMENTS OR AGENCIES, WHICH IS NOT EXEMPT UNDER THE PROVISIONS OF SUBSECTION B OF THIS SECTION.'

THE LEGAL INCIDENCE OF THE ARIZONA TRANSACTION PRIVILEGE TAX IS ON THE VENDOR, RATHER THAN THE VENDEE. STATE TAX COMMISSION V. QUEBEDEAUX CHEVROLET, 226 P.2D 549. HENCE, THE CONSTITUTIONAL PRINCIPLE UPON WHICH THE FEDERAL GOVERNMENT IS IMMUNE FROM STATE TAXATION IS NOT FOR APPLICATION. ARIZONA STATE TAX COMMISSION V. GARRETT CORPORATION, 291 P.2D 208. HOWEVER SEC. 42-1321 B1, ARIZONA REVISED STATUTES, PROVIDES THAT THE TRANSACTION PRIVILEGE TAX SHALL NOT APPLY TO SALES MADE DIRECTLY TO THE UNITED STATES GOVERNMENT, ITS DEPARTMENTS OR AGENCIES BY A MANUFACTURER, MODIFIER, ASSEMBLER OR REPAIRER. INASMUCH AS THE TRANSACTION IN QUESTION CONSISTED OF A DIRECT SALE MADE BY A MANUFACTURER TO AN AGENCY OF THE U.S. GOVERNMENT, IT IS CLEAR THAT THE CORPORATION WAS NOT LEGALLY REQUIRED OR OBLIGED TO PAY THE TAX. CF. STATE TAX COMMISSION V. GRAYBAR ELECTRIC COMPANY, 344 P.2D 1008. THEREFORE, THE SALE WAS NOT SUBJECT TO THE TAX WITHIN THE MEANING OF PARAGRAPH 4C OF THE CONTRACT. VIEW THEREOF WE ARE NOT REQUIRED TO CONSIDER THE INTERSTATE COMMERCE ASPECTS OF THE TRANSACTION.

ACCORDINGLY, IF OTHERWISE CORRECT, THE VOUCHER MAY BE CERTIFIED FOR PAYMENT IN THE NET AMOUNT OF $1,004.36.