B-15363, MAY 9, 1941, 20 COMP. GEN. 752

B-15363: May 9, 1941

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HOLDING THAT SINCE THE ILLINOIS RETAILERS' OCCUPATION TAX WAS NOT "ON THE SALES BUT A PERSONAL TAX ON THE PRIVILEGE OF DOING BUSINESS WITHIN THE STATE MEASURED BY THE GROSS RECEIPTS FROM SALES FOR DELIVERY WITHIN THE STATE. " THERE WAS NO OBJECTION TO THE ACCEPTANCE OF A BID FOR THE FURNISHING OF SUPPLIES TO THE FEDERAL GOVERNMENT IN THAT STATE IN WHICH A CHARGE EQUAL TO THE AMOUNT OF SUCH TAX HAD BEEN INCLUDED. IF IT IS DETERMINED THAT SUCH TAXES ARE NOT LEGALLY APPLICABLE TO THE SALE. ARE VAGUE. SINCE THERE IS NO SUBSTANTIAL BASIS FOR THE BELIEF THAT VENDORS OF GOODS TO THE GOVERNMENT FOR DELIVERY IN ILLINOIS MAY BE EXEMPTED FROM THE STATE RETAILERS' OCCUPATION TAX. WHERE BIDS ARE SUBMITTED ON A TAX INCLUSIVE BASIS.

B-15363, MAY 9, 1941, 20 COMP. GEN. 752

TAXES - STATE - ILLINOIS RETAILERS - INCLUSION OR EXCLUSION FROM BID PRICE DECISION IN 17 COMP. GEN. 863, HOLDING THAT SINCE THE ILLINOIS RETAILERS' OCCUPATION TAX WAS NOT "ON THE SALES BUT A PERSONAL TAX ON THE PRIVILEGE OF DOING BUSINESS WITHIN THE STATE MEASURED BY THE GROSS RECEIPTS FROM SALES FOR DELIVERY WITHIN THE STATE," THERE WAS NO OBJECTION TO THE ACCEPTANCE OF A BID FOR THE FURNISHING OF SUPPLIES TO THE FEDERAL GOVERNMENT IN THAT STATE IN WHICH A CHARGE EQUAL TO THE AMOUNT OF SUCH TAX HAD BEEN INCLUDED, AFFIRMED. THE ADVANTAGES OF THE INCLUSION IN AN INVITATION TO BID OF A PROVISION TO THE EFFECT THAT THE BIDDER CONSENTS TO A REDUCTION IN THE CONTRACT PRICE IN THE AMOUNT OF ANY STATE OR LOCAL SALES, OCCUPATIONAL, OR USE TAXES INCLUDED IN THE PRICE, IF IT IS DETERMINED THAT SUCH TAXES ARE NOT LEGALLY APPLICABLE TO THE SALE, ARE VAGUE, UNCERTAIN, AND DIFFICULT OF EVALUATION. SEE 19 COMP. GEN. 1, CONCERNING THE UNDESIRABILITY OF A SOMEWHAT SIMILAR PROVISION IN RESPECT TO THE CALIFORNIA STATE TAX. SINCE THERE IS NO SUBSTANTIAL BASIS FOR THE BELIEF THAT VENDORS OF GOODS TO THE GOVERNMENT FOR DELIVERY IN ILLINOIS MAY BE EXEMPTED FROM THE STATE RETAILERS' OCCUPATION TAX, BIDS SUBMITTED ON THE BASIS EITHER OF EXCLUDING SUCH TAX OR, WHILE INCLUDING THE TAX, OF EXPRESSING WILLINGNESS TO DEDUCT THE AMOUNT THEREOF UPON RECEIPT OF EXEMPTION CERTIFICATES, SHOULD BE EVALUATED ON THE BASIS OF THE NET PRICE, BUT WHERE BIDS ARE SUBMITTED ON A TAX INCLUSIVE BASIS, WITH NO DEDUCTION TO BE MADE UNDER ANY CIRCUMSTANCES, OR TO BE MADE ONLY IF THE TAX IS DETERMINED TO BE INAPPLICABLE, THE TOTAL AMOUNT SHOULD BE CONSIDERED AS THE BID PRICE.

COMPTROLLER GENERAL WARREN TO THE SECRETARY OF WAR, MAY 9, 1941:

THERE HAS BEEN CONSIDERED YOUR LETTER OF MARCH 6, 1941, AS FOLLOWS:

WHILE SOME RECENT DECISIONS OF THE SUPREME COURT HAVE CAST DOUBT UPON THE DOCTRINE OF INTERGOVERNMENTAL IMMUNITY FROM TAXATION, THIS DEPARTMENT HAS CONSISTENTLY TAKEN THE POSITION THAT A PURCHASE BY THE GOVERNMENT IS NOT SUBJECT TO A STATE SALES, OCCUPATIONAL, OR USE TAX. ( SEE PAR. 7A (3), AR 5-100.) WITH THE EXCEPTION OF THE ILLINOIS RETAILERS' OCCUPATION TAX, THE COMPTROLLER GENERAL HAS CONSISTENTLY HELD THAT PURCHASES BY THE GOVERNMENT ARE NOT SUBJECT TO STATE SALES,OCCUPATIONAL OR USE TAXES, REGARDLESS OF WHETHER THE TAX IS UPON THE SELLER OR THE BUYER, WHETHER THE TAX IS DIRECTLY UPON THE SALE OR IS UPON A "PRIVILEGE" MEASURED BY RECEIPTS FROM SALES, OR WHETHER THE THE TAX IS INCLUDED IN OR ADDED TO THE PURCHASE PRICE. (18 COMP. GEN. 832; 19 COMP. GEN. 1; 19 COMP. GEN. 822; 19 COMP. GEN. 909.) IN 17 COMP. GEN. 863 THE FORMER ACTING COMPTROLLER GENERAL HELD IN EFFECT THAT THE ILLINOIS RETAILERS' OCCUPATION TAX, BEING A PERSONAL TAX UPON THE "PRIVILEGE" OF ENGAGING IN BUSINESS, WAS APPLICABLE TO SALES TO THE GOVERNMENT. HOWEVER, THIS DECISION APPEARS TO HAVE BEEN REVERSED BY 19 COMP. GEN. 921.

RELYING IN PART UPON THE DECISION IN 17 COMP. GEN. 863, THE DEPARTMENT OF FINANCE OF THE STATE OF ILLINOIS HAS BEEN AND IS TAKING THE POSITION THAT SALES TO THE GOVERNMENT BY RETAILERS IN ILLINOIS FOR DELIVERY IN THAT STATE ARE SUBJECT TO THE ILLINOIS RETAILERS' OCCUPATION TAX ACT ( S.B. NO. 665, LAWS 1933). IN THE PAST THE ILLINOIS TAX HAS NOT PRESENTED ANY SERIOUS PROBLEM TO THIS DEPARTMENT, AS MOST GOVERNMENT PURCHASES IN ILLINOIS HAVE BEEN EITHER FOR DELIVERY OUTSIDE THE STATE OR FOR DELIVERY WITHIN A FEDERAL AREA IN THE STATE. HOWEVER, FOR VARIOUS REASONS DEEMED TO BE NECESSARY TO THE EXPEDITIOUS BUILDING UP OF THE NATIONAL DEFENSE, THE PROCUREMENT PROCEDURE HAS BEEN CHANGED SO AS TO PROVIDE IN MOST CASES FOR DELIVERY F.O.B. THE CONTRACTOR'S PLANT OR FACTORY. FURTHERMORE, PUBLIC NO. 819, SEVENTY SIXTH CONGRESS, WHICH IS APPLICABLE TO SALES MADE AFTER DECEMBER 31, 1940, PROVIDES THAT NO SALE SHALL BE EXEMPT FROM A STATE SALES TAX UPON THE GROUND THAT THE SALE WITH RESPECT TO WHICH SUCH A TAX IS LEVIED OCCURRED IN WHOLE OR IN PART WITHIN A FEDERAL AREA, AND THAT A STATE SHALL HAVE FULL JURISDICTION AND POWER TO LEVY A SALES TAX IN ANY FEDERAL AREA WITHIN SUCH A STATE TO THE SAME EXTENT AS THOUGH SUCH AREA WERE NOT A FEDERAL AREA.

THE ILLINOIS RETAILERS' OCCUPATION TAX ACT PROVIDES AS FOLLOWS:

"SECTION 2. A TAX IS IMPOSED UPON PERSONS ENGAGED IN THE BUSINESS OF SELLING TANGIBLE PERSONAL PROPERTY AT RETAIL IN THIS STATE AT THE RATE OF THREE PERCENT (3 PERCENT) OF THE GROSS RECEIPTS FROM SUCH SALES IN THIS STATE OF TANGIBLE PERSONAL PROPERTY MADE IN THE COURSE OF SUCH BUSINESS PRIOR TO JULY 1, 1941 AND TWO PERCENT (2 PERCENT) OF THE GROSS RECEIPTS FROM SUCH SALES AFTER JUNE 30, 1941. HOWEVER, SUCH TAX IS NOT IMPOSED UPON THE PRIVILEGE OF ENGAGING IN ANY BUSINESS IN INTERSTATE COMMERCE OR OTHERWISE, WHICH BUSINESS MAY NOT, UNDER THE CONSTITUTION AND STATUTES OF THE UNITED STATES, BE MADE THE SUBJECT OF TAXATION BY THE STATE. ( AS AMENDED BY H.B. NO. 93, SECOND SPECIAL SESSION, LAWS 1935-36; H.B. NO. 563, LAWS 1937; S.B. NO. 1, LAWS 1939; AND S.B. NO. 304, LAWS 1939.)

"SECTION 1. FOR THE PURPOSE OF THIS ACT: "SALE AT RETAIL" MEANS ANY TRANSFER OF THE OWNERSHIP OF, OR TITLE TO, TANGIBLE PERSONAL PROPERTY TO THE PURCHASER FOR USE OR CONSUMPTION AND NOT FOR RESALE IN ANY FORM AS TANGIBLE PERSONAL PROPERTY, FOR A VALUABLE CONSIDERATION * * *"

RULE NO. 59 (RELEASED MAY 28, 1940) OF THE DEPARTMENT OF FINANCE OF THE STATE OF ILLINOIS PROVIDES:

"A SALE OCCURS UNDER THE RETAILERS' OCCUPATION TAX ACT WHEN THERE HAS BEEN EITHER (A) THE TRANSFER OF OWNERSHIP OF OR (B) THE TRANSFER OF TITLE TO TANGIBLE PERSONAL PROPERTY BY THE SELLER TO THE PURCHASER FOR VALUABLE CONSIDERATION. THE RETAILERS OCCUPATION TAX ACT IN THE DEFINITION OF "SALE AT RETAIL," IN SECTION 1, CONTAINS ITS OWN DEFINITION OF "SALE.' AND QUESTIONS OF TIME AND PLACE OF SALE ARE NOT TO BE DETERMINED WITHIN THE MEANING OF THE UNIFORM SALES ACT BUT WITHIN THE MEANING OF THE RETAILERS' OCCUPATION TAX ACT * * *"

ARTICLE 5 OF THE REGULATIONS ISSUED BY THE DEPARTMENT OF FINANCE (EFFECTIVE APRIL 1, 1940) PROVIDES:

"* * * WHEN TANGIBLE PERSONAL PROPERTY IS LOCATED WITHIN THE STATE AT THE TIME OF SALE AND PURSUANT TO AND AS A PART OF THE SALE DOES NOT LEAVE THE STATE, THE SALE IS WITHIN THE RETAILERS' OCCUPATION TAX ACT, IRRESPECTIVE OF WHERE THE PARTIES TO THE CONTRACT TO SELL ARE LOCATED OR THE PLACE WHERE THE CONTRACT WAS MADE OR ACCEPTED OR THE PURCHASE PRICE PAID. IT IS IMMATERIAL THAT THE PURCHASER MAY, PURSUANT TO THE SALE, TRANSPORT THE PROPERTY OUT OF THE STATE OR USE IT IN THE CONDUCT OF INTERSTATE COMMERCE

RULE 40A RECENTLY ISSUED BY THE DEPARTMENT OF FINANCE STATES THAT SELLERS HAVING PLACES OF BUSINESS ON FEDERAL AREAS IN THE STATE OF ILLINOIS, OR WHO NOT HAVING PLACES OF BUSINESS ON SUCH FEDERAL AREAS DELIVER AT POINTS ON SUCH FEDERAL AREAS PROPERTY SOLD TO PURCHASERS, INCUR TAX LIABILITY UNDER THE RETAILERS' OCCUPATION TAX ACT.

IN VIEW OF THE ATTITUDE OF THE DEPARTMENT OF FINANCE OF THE STATE OF ILLINOIS IT IS IMPRACTICABLE TO OBTAIN BIDS FOR SUPPLIES IN ILLINOIS WHICH ARE EXCLUSIVE OF TAXES, OR TO GET BIDDERS WHO BID TAX INCLUSIVE TO CONSENT UNCONDITIONALLY TO A REDUCTION OF THE AMOUNT OF THE TAXES FROM THE CONTRACT PRICE AND THE ACCEPTANCE OF A TAX EXEMPTION CERTIFICATE. AT THE PRESENT TIME THIS DEPARTMENT IS ACCEPTING BIDS WHICH ARE TAX INCLUSIVE WHERE THEY ARE OTHERWISE ACCEPTABLE. IN SOME CASES THE FOLLOWING PROVISION HAS BEEN INCLUDED IN THE CONTRACT:

" THE PRICES QUOTED HEREIN INCLUDE 3 PERCENT FOR SALES, OCCUPATIONAL, OR USE TAXES. BIDDER AGREES TO A DEDUCTION OF THIS AMOUNT AND WILL ACCEPT A TAX EXEMPTION CERTIFICATE ON ALL SHIPMENTS THAT ARE NOT ACTUALLY SUBJECT TO STATE OR LOCAL SALES, OCCUPATIONAL, OR USE TAXES.'

WHERE CONTRACTS CONTAIN THIS STIPULATION IT IS CONTEMPLATED THAT WHERE THE CONTRACTOR IS UNWILLING TO ACCEPT A TAX EXEMPTION CERTIFICATE IN LIEU OF THAT PART OF THE PRICE REPRESENTED BY THE TAX, THE CONTRACTOR WILL BE PAID THE FULL CONTRACT PRICE, INCLUDING TAX, AND THE GOVERNMENT WILL ASSUME THE BURDEN OF OBTAINING A REFUND OF THE TAX FROM THE STATE. IN ALL CASES WHERE THE GOVERNMENT PAYS THE TAX, IT WILL BE SHOWN AS A SEPARATE ITEM IN THE INVOICE.

THE GOVERNMENT MAY EXPERIENCE DIFFICULTY IN OBTAINING A VOLUNTARY REFUND OF THE ILLINOIS TAX. THE STATE MAY TAKE THE POSITION THAT THE TAX WAS NOT ASSESSED AGAINST THE PURCHASER, WAS NOT OWED BY THE PURCHASER, WAS NOT PAID BY THE PURCHASER AND, HENCE, THAT THE GOVERNMENT AS PURCHASER IS NOT ENTITLED TO A REFUND. HOWEVER, THE GOVERNMENT WOULD NOT HAVE TO RELY UPON THE PROVISIONS OF THE STATE LAW PERTAINING TO TAX REFUNDS, AS IT WOULD HAVE A PRACTICAL MEANS OF ENFORCING PAYMENT OF THE REFUND BY THE STATE THROUGH THE DEDUCTION OF THE AMOUNT OF THE CLAIM FROM ANY FEDERAL GRANTS OR OTHER PAYMENTS DUE THE STATE.

PROCUREMENT CIRCULAR NO. 29, WAR DEPARTMENT 1940, PROVIDES:

" STATE OR LOCAL TAXES.--- FOR THE FURNISHING OF ALL SUPPLIES, BIDDER WILL INDICATE WHICH ONE OF THE FOLLOWING STATEMENTS IS APPLICABLE TO HIS BID:

"/A) PRICES HEREIN DO NOT INCLUDE ANY STATE OR LOCAL TAXES IMPOSED DIRECTLY ON THE SALE OF THE SUPPLIES.

"/B) PRICES HEREIN INCLUDE ALL STATE AND LOCAL TAXES IMPOSED DIRECTLY ON THE SALE OF THE SUPPLIES, BUT CONSENT IS HEREBY GIVEN TO THE DEDUCTION OF SAID TAXES AND THE ACCEPTANCE OF A TAX EXEMPTION CERTIFICATE IN LIEU THEREOF.

"/C) PRICES HEREIN INCLUDE ALL STATE AND LOCAL TAXES IMPOSED DIRECTLY ON THE SALE OF THE SUPPLIES, BUT NO DEDUCTION OF SAID TAXES WILL BE PERMITTED NOR WILL A TAX EXEMPTION CERTIFICATE BE ACCEPTED IN LIEU THEREOF.

" WHETHER STATE OR LOCAL TAXES CHARGED DIRECTLY ON THE SALE OF GOODS ARE INCLUDED OR ARE NOT INCLUDED, THE AMOUNT OF SUCH TAXES SHOULD BE SHOWN IN DETAIL.'

THE QUESTION ARISES WHETHER AS A MATTER OF POLICY THE GOVERNMENT SHOULD PLACE A BIDDER IN A POSITION WHERE HE IS REQUIRED TO ASSUME THE BURDEN OF CONTESTING THE QUESTION OF TAX LIABILITY WITH STATE TAXING OFFICIALS OR SHOULD ITSELF ASSUME THE BURDEN OF DETERMINING WHETHER THE SALE IS SUBJECT TO A STATE TAX.

IF A BIDDER WHO DOES NOT CONSENT UNCONDITIONALLY TO THE ACCEPTANCE OF A TAX EXEMPTION CERTIFICATE HAS HIS BID CONSIDERED LESS FAVORABLY THAN A BIDDER WHO DOES SO CONSENT, THE INEVITABLE RESULT WILL BE THAT SOME BIDDERS WILL BID TAX EXCLUSIVE OR AGREE UNCONDITIONALLY TO THE ACCEPTANCE OF A TAX EXEMPTION CERTIFICATE BUT WILL INCREASE THEIR BID PRICE TO COVER AT LEAST A PART OF THE RISK OF TAX LIABILITY ASSUMED BY THEM. FOR EXAMPLE, ASSUME THAT IN THE ABSENCE OF A SALES TAX IN A PARTICULAR STATE THE FAIR MARKET PRICE OF AN ARTICLE IS $1.00, BUT THAT THERE IS A 3 PERCENT SALES TAX IN THAT STATE. IF A BIDDER WHO BIDS $1.03, TAX INCLUSIVE, BUT DOES NOT AGREE UNCONDITIONALLY TO ACCEPT A TAX-EXEMPTION CERTIFICATE HAS HIS BID CONSIDERED LESS FAVORABLY THAN THAT OF A BIDDER WHO BIDS $1.00 TAX EXCLUSIVE, OR A BIDDER WHO BIDS $1.03 BUT AGREES UNCONDITIONALLY TO ACCEPT A TAX-EXEMPTION CERTIFICATE, THE RESULT WILL BE THAT SOME BIDDERS WILL BID $1.02 TAX EXCLUSIVE. IF THE BIDDER IS PENALIZED BY REASON OF THE FACT THAT HE DOES NOT ASSUME THE RISK OF BEING SUBJECTED TO THE TAX, THE INEVITABLE RESULT WILL BE THAT THE GOVERNMENT WILL HAVE TO PAY A HIGHER PRICE FOR ARTICLES PURCHASED.

ANSWERS TO THE FOLLOWING QUESTIONS ARE REQUESTED:

A. IS THE ILLINOIS RETAILERS' OCCUPATION TAX LEGALLY APPLICABLE TO PURCHASES MADE BY THE GOVERNMENT FROM ILLINOIS RETAILERS FOR DELIVERY WITHIN THAT STATE?

B. IF THE ANSWER TO THE FIRST QUESTION IS IN THE AFFIRMATIVE, HOW IS THE ILLINOIS TAX DISTINGUISHED FROM STATE SALES TAXES WHICH ARE HELD NOT TO BE LEGALLY APPLICABLE TO GOVERNMENT PURCHASES?

C. IS THERE ANY LEGAL OBJECTION TO THE INCLUSION IN A SUPPLY CONTRACT OF A PROVISION TO THE EFFECT THAT THE BIDDER CONSENTS TO A REDUCTION IN THE CONTRACT PRICE IN THE AMOUNT OF ANY STATE OR LOCAL SALES, OCCUPATIONAL OR USE TAXES INCLUDED IN THE PRICE, BUT ONLY IF IT IS DETERMINED THAT SUCH TAXES ARE NOT LEGALLY APPLICABLE TO THE SALE?

D. WHERE BIDS ARE RECEIVED IN RESPONSE TO AN INVITATION FOR BIDS FOR SUPPLIES, SOME BIDS BEING TAX EXCLUSIVE, SOME BEING TAX INCLUSIVE WITH A CONSENT TO A DEDUCTION OF THE AMOUNT OF THE TAX AND THE ACCEPTANCE OF A TAX EXEMPTION CERTIFICATE IN LIEU THEREOF, SOME BEING TAX INCLUSIVE WITH A CONSENT TO A DEDUCTION OF THE AMOUNT OF SUCH TAXES AND THE ACCEPTANCE OF A TAX EXEMPTION CERTIFICATE IN LIEU THEREOF ONLY IN CASE IT IS DETERMINED THAT THE TAXES ARE NOT LEGALLY APPLICABLE, AND SOME BEING TAX INCLUSIVE WITH A STIPULATION THAT A TAX EXEMPTION CERTIFICATE WILL NOT BE ACCEPTED IN LIEU OF THE AMOUNT OF TAXES INCLUDED IN THE PRICE, WHAT IS THE PROPER METHOD OF EVALUATING SUCH BIDS?

IT IS UNDERSTOOD FROM YOUR ABOVE-QUOTED LETTER THAT YOU DESIRE THAT FURTHER CONSIDERATION BE GIVEN TO THE DECISION OF APRIL 22, 1938, 17 COMP. GEN. 863, IN WHICH THIS OFFICE ADVISED THE ADMINISTRATOR OF VETERANS' AFFAIRS THAT SINCE THE TAX IMPOSED BY THE RETAILERS' OCCUPATION TAX ACT OF ILLINOIS WAS NOT "ON THE SALES BUT A PERSONAL TAX ON THE PRIVILEGE OF DOING BUSINESS WITHIN THE STATE MEASURED BY THE GROSS RECEIPTS FROM SALES FOR DELIVERY WITHIN THE STATE," THERE WAS NOT OBJECTION TO THE ACCEPTANCE OF A BID FOR THE FURNISHING OF SUPPLIES TO THE FEDERAL GOVERNMENT IN THAT STATE, WHICH INCLUDED A CHARGE EQUAL TO THE AMOUNT OF SUCH TAX.

IN THE DECISION OF MAY 9, 1939, TO THE SECRETARY OF AGRICULTURE, 18 COMP. GEN. 832, THE ILLINOIS RETAILERS' OCCUPATION TAX WAS DISTINGUISHED FROM THE CALIFORNIA TAX STATUTE THEN UNDER CONSIDERATION, AS WELL AS THE MISSISSIPPI STATUTE INVOLVED IN PANHANDLE OIL COMPANY V. MISSISSIPPI EX REL. KNOX, 277 U.S. 218, AND IN THE DECISION OF JULY 1, 1939, 19 COMP. GEN. 1, 9, IT WAS SAID THAT---

THERE APPEARS TO BE NO REASON FOR ANY MISUNDERSTANDING CONCERNING THE APPLICABILITY OF THE PROVISIONS OF THE ILLINOIS RETAILERS' OCCUPATIONAL TAX ACT IN VIEW OF THE DECISION 17 COMP. GEN. 863, AND THE DECISION OF MAY 9, 1939, ABOVE REFERRED TO, AND THERE IS NO OBJECTION TO THE PAYMENT OF VOUCHERS WHICH INCLUDE AMOUNTS EQUAL TO THE TAX PRESCRIBED BY THAT LAW, IF OTHERWISE CORRECT AND INCLUDED IN AND AS A PART OF THE BID PRICE.

HENCE SINCE THE ILLINOIS STATUTE HAS NEVER BEEN REGARDED BY THIS OFFICE AS IMPOSING A STATE TAX ,DIRECTLY ON THE SALE OR USE OF SUPPLIES OR EQUIPMENT PURCHASED BY OR FOR THE USE OF THE FEDERAL GOVERNMENT," THE DECISION IN 19 COMP. GEN. 921, TO WHICH YOU REFER, MAY NOT BE CONSIDERED AS INDICATING ANY CHANGE IN THE VIEWS OF THIS OFFICE WITH RESPECT TO THAT ACT.

IT IS ASSUMED THAT YOUR ALLUSION TO RECENT DECISIONS OF THE SUPREME COURT OF THE UNITED STATES WHICH HAVE AFFECTED INTERGOVERNMENTAL IMMUNITY FROM TAXATION HAS REFERENCE MORE SPECIFICALLY TO SUCH DECISIONS AS JAMES V. DRAVO CONTRACTING CO., 302 U.S. 134, AND SILAS MASON CO. V. TAX COMMISSION OF THE STATE OF WASHINGTON, 302 U.S. 186, WHICH SUSTAINED STATE TAXES ON THE GROSS INCOME OF FEDERAL CONTRACTORS, INCLUDING SUCH INCOME DERIVED WITHIN THE STATE FROM THE GOVERNMENT CONTRACTS; HELVERING V. GERHARDT, 304 U.S. 405, WHICH SUSTAINED A FEDERAL INCOME TAX ON THE SALARIES OF EMPLOYEES OF THE PORT OF NEW YORK AUTHORITY, AND GRAVES V. NEW YORK EX REL O-KEEFE, 306 U.S. 466, SUSTAINING A STATE INCOME TAX ON THE SALARY OF AN EMPLOYEE OF THE HOME OWNERS' LOAN CORPORATION. SEE, ALSO, HELVERING V. MOUNTAIN PRODUCERS OIL COMPANY, 303 U.S. 376; STATE TAX COMMISSION V. VAN COTT, 306 U.S. 511. IT WOULD APPEAR THAT THE COURT, IN UPHOLDING THE APPLICATION OF THOSE TAXES, IN THE CIRCUMSTANCES UNDER CONSIDERATION, REGARDED THE TAX AS BEING ON THE FUNDS OR PROPERTY OF THE CONTRACTOR OR EMPLOYEE--- THE PROCEEDS OF THIS CONTRACT OR EMPLOYMENT--- RATHER THAN ON THE TRANSACTION OR CONTRACT IN WHICH THE STATE OR FEDERAL GOVERNMENT WAS A PARTICIPANT.

THE TAX IMPOSED BY THE ILLINOIS RETAILERS' OCCUPATION TAX ACT IS APPLIED TO THE VENDOR'S GROSS RECEIPTS FROM RETAIL SALES, AND THE LIABILITY FOR THE TAX DOES NOT ACCRUE BY REASON OF THE CONSUMMATION OF A RETAIL SALE, BUT IS BASED ON RECEIPTS THEREFROM, IN THE HANDS OF THE VENDOR. REIF V. BARRETT, 355 ILL. 104, 188 N.E. 889. CONSEQUENTLY SUCH TAX WOULD APPEAR TO BE INDISTINGUISHABLE IN ANY MATERIAL RESPECT FROM THE ONE WHICH WAS SUSTAINED BY THE SUPREME COURT OF THE UNITED STATES IN THE DRAVO CASE, SUPRA; AND NO REASONABLE BASIS IS PERCEIVED FOR ANY MODIFICATION OF THE DECISIONS OF THIS OFFICE WITH RESPECT TO THE SAID STATUTE.

WITH REFERENCE TO QUESTION (C) SUBMITTED BY YOU, A SOMEWHAT SIMILAR PROVISION IN RESPECT TO THE CALIFORNIA LAW WAS CONSIDERED IN 19 COMP. GEN. 1. THE ADVANTAGES TO BE GAINED FROM THE USE OF A PROVISION CONSENTING TO THE REDUCTION OF THE CONTRACT PRICE BY THE AMOUNT OF ANY SALES, OCCUPATIONAL, OR USE TAX NOT ACTUALLY APPLICABLE TO THE PURCHASE, ARE VAGUE, UNCERTAIN, AND DIFFICULT OF EVALUATION. MOREOVER, IT WOULD APPEAR IMMATERIAL, SO FAR AS THE ILLINOIS RETAILERS' OCCUPATION TAX IS CONCERNED, WHETHER THE BIDDER INDICATES HIS BID AS A TAX INCLUSIVE OR TAX EXCLUSIVE IN RESPECT TO DELIVERIES IN THAT STATE SO LONG AS HE QUOTES A FIXED TOTAL PRICE, THE TAX BEING UPON THE VENDOR'S RECEIPTS, AND NOT UPON THE TRANSACTION, AND THEREFORE, NO MORE A MATTER OF CONCERN THAN ANY OTHER ITEM INCLUDED IN THE BID AS AN ELEMENT OF COST OR PROFIT.

HOWEVER, THERE IS NO OBJECTION TO THE CONSIDERATION OF BIDS OF ILLINOIS RETAILERS FOR DELIVERIES IN THAT STATE WHETHER SUBMITTED ON (A) A TAX EXCLUDED BASIS, (B) TAX INCLUSIVE, WITH DEDUCTION THEREOF UPON RECEIPT OF AN EXEMPTION CERTIFICATE, (C) TAX INCLUSIVE, WITH CONSENT TO A REDUCTION IN PRICE IF THE TAX BE DETERMINED TO BE INAPPLICABLE, OR (D) TAX INCLUSIVE WITHOUT DEDUCTION IN ANY EVENT; BUT IN VIEW OF THE ABSENCE OF ANY SUBSTANTIAL BASIS FOR THE BELIEF THAT VENDORS OF GOODS TO THE GOVERNMENT FOR DELIVERY IN ILLINOIS LEGALLY MAY BE EXEMPTED FROM SUCH TAX, IT WOULD APPEAR THAT SUCH BIDS SHOULD BE EVALUATED ON THE BASIS OF THE TOTAL POSSIBLE COST TO THE GOVERNMENT, AS SHOWN BY EACH BID. THAT IS TO SAY, IF A BID BE SUBMITTED ON A TAX EXCLUDED BASIS, IT MAY BE ASSUMED NO FURTHER CHARGE TO THE GOVERNMENT WILL RESULT, AND THAT THE TAX, IF ANY, WILL BE ABSORBED BY THE BIDDER; ALSO, IF A BIDDER CONSENTS TO THE DEDUCTION FROM HIS BID PRICE OF THE AMOUNT OF THE TAX UPON RECEIPT OF A TAX EXEMPTION CERTIFICATE, THE NET AMOUNT MAY BE ACCEPTED AS THE BID PRICE, ON THE ASSUMPTION THAT THE BIDDER TAKES THE RISK OF ITS INCIDENCE; BUT IF BIDS ARE SUBMITTED ON A TAX INCLUSIVE BASIS, EITHER CONDITIONAL OR ABSOLUTE, AS INDICATED IN (C) AND (D) ABOVE, THE TOTAL AMOUNT THEREOF SHOULD BE CONSIDERED AS THE BID PRICE.