B-162452, OCT. 6, 1967

B-162452, OCT. 6, 1967

CONTRACTS - TAX INCLUSION V EXCLUSION - SALES TAXES DECISION TO CERTIFYING OFFICER, POSTAL DATA CENTER, CONCERNING CLAIM OF MAREMONT CORPORATION (SUCCESSOR OF TEMME SPRING) FOR REFUND OF ILLINOIS RETAILERS' OCCUPATION TAX PAID ON AUTO PARTS PURCHASED BY P.O. DEPT. CONTRACTOR WHO CLAIMS REFUND OF ILLINOIS RETAILERS' OCCUPATION TAX ON SALES TO FEDERAL GOVT. DURING THE PERIOD JANUARY 1, 1958 TO JANUARY 1, 1961, WHEN PURSUANT TO THE MATHIESON CASE (191 F.SUPP. 723, AFFIRMED 371 U.S. 21) THE TAX WAS HELD TO BE UNCONSTITUTIONAL FROM AUGUST 1, 1953 TO AUGUST 1, 1961 MAY NOT ON BASIS OF PRESENT INFORMATION BE PAID AMOUNT OF TAX. ALTHOUGH CONTRACTOR STATES THAT HE PAID TAX RECORD DOES NOT INDICATE WHEN TAX WAS PAID, WHETHER CLAIM FOR REFUND HAS BEEN FILED OR CONTRACTOR HAS TAKEN ANY ACTION TO PROTECT HIS RIGHTS.

TO MR. C. W. LAMAR:

YOUR LETTER OF SEPTEMBER 8, 1967 (YOUR REFERENCE 9121-WH:SN) CONCERNS THE PROPRIETY OF CERTIFYING FOR PAYMENT A VOUCHER IN FAVOR OF THE MAREMONT CORPORATION FOR $430.16 COVERING A REFUND OF THE ILLINOIS RETAILERS' OCCUPATION TAX.

YOU STATE THAT THE TEMME SPRING CORPORATION (TEMME SPRING), MERGED INTO THE MAREMONT CORPORATION (MAREMONT) EFFECTIVE DECEMBER 31, 1964, AND THAT MAREMONT ASSUMED ALL THE ASSETS AND LIABILITIES OF TEMME SPRING. THUS, IT APPEARS THAT MAREMONT IS, IN EFFECT AND AS FAR AS PERTINENT HERE, THE SUCCESSOR OF TEMME SPRING. ACCORDINGLY, FOR CONVENIENCE WE WILL REFER HEREIN ONLY TO THE MAREMONT CORPORATION.

THE PERTINENT FACTS AND CIRCUMSTANCES AS DISCLOSED BY YOUR LETTER ARE SET FORTH BELOW.

THE POSTAL DATA CENTER (CENTER) IS THE OFFICIAL DISBURSING OFFICE FOR ALL POST OFFICES LOCATED IN THE STATES OF ILLINOIS, MICHIGAN, WISCONSIN, MINNESOTA, NORTH DAKOTA, AND SOUTH DAKOTA, AND ONE OF ITS RESPONSIBILITIES IS THE ISSUANCE OF CHECKS FOR THE PURCHASE OF VEHICLE PARTS BY THE POST OFFICES. IN THIS INSTANCE, POST OFFICE GARAGES IN CHICAGO, ILLINOIS, PURCHASED PARTS FROM THE MAREMONT CORPORATION AND THE CORPORATION PREPARED INVOICES APPLICABLE TO THESE PURCHASES, INCLUDING THE SALES TAX, AND SENT THEM TO THE CHICAGO POST OFFICE FOR CERTIFICATION. THE POST OFFICE IN TURN FORWARDED THEM TO THE CENTER FOR PAYMENT. PAYMENT OF THESE INVOICES INCLUDED THE SALES TAX IN THE AMOUNT OF $430.16.

YOU ADVISE THAT UNDER DATE OF JULY 6, 1961, THE MAREMONT CORPORATION SENT THE CENTER A CHECK IN THE AMOUNT OF $430.16 COVERING REFUND OF THE ILLINOIS RETAILERS' OCCUPATION TAX (SALES TAX) PAID BY THE CENTER FROM JANUARY 1, 1958, TO JANUARY 1, 1961, WITH THE UNDERSTANDING THAT THE UNITED STATES GOVERNMENT WAS NOT SUBJECT TO THE STATE OF ILLINOIS SALES TAX. MAREMONT LATER RECEIVED NOTIFICATION FROM THE STATE OF ILLINOIS THAT ITS (OR ITS PREDECESSOR-S) SALES TO THE FEDERAL GOVERNMENT WERE SUBJECT TO SALES TAX DURING THE PERIOD JANUARY 1, 1958, THROUGH JANUARY 1961, AND REQUESTED A REFUND OF $430.16, WITH REFERENCE TO THE MATHIESON CASE (202 F.SUPP. 757, AFFIRMED 371 U.S. 21), WHICH, YOU STATE, HELD THAT CONTRACTORS REQUIRED TO PAY THE ILLINOIS RETAILERS' OCCUPATIONAL TAX ON SALES TO THE UNITED STATES, IF REQUIRED TO DO SO, MAY NOT BE DENIED REIMBURSEMENT ON THE BASIS OF A SUBSEQUENT JUDICIAL DETERMINATION THAT THE TAXING STATUTE WAS INVALID.

IN LIGHT OF THE COURT DECISION AND IN VIEW OF THE CORPORATION'S SWORN DECLARATION THAT IT (OR ITS PREDECESSOR) HAD PAID SAID AMOUNT TO THE STATE OF ILLINOIS AND FURTHER, THAT THE STATE HAD NOT AT ANY TIME REFUNDED THIS AMOUNT TO THE MAREMONT CORPORATION (OR ITS PREDECESSOR), YOU INQUIRE WHETHER THE VOUCHER IN FAVOR OF MAREMONT CORPORATION FOR $430.16 MAY BE CERTIFIED FOR PAYMENT.

IN SEPTEMBER OF 1960, THE UNITED STATES OBTAINED A TEMPORARY INJUNCTION AGAINST THE STATE OF ILLINOIS WITH RESPECT TO THE COLLECTION OF THE ILLINOIS RETAILERS' OCCUPATION TAX FROM GOVERNMENT CONTRACTORS. FEBRUARY 24, 1961, THE TAX, AS APPLIED TO SALES TO THE FEDERAL GOVERNMENT WAS HELD UNCONSTITUTIONAL AND THE STATE WAS PERMANENTLY ENJOINED FROM COLLECTING THE TAX ON SUCH SALES BY THE UNITED STATES DISTRICT COURT, N.D. ILLINOIS, E.D. UNITED STATES AND OLIN MATHIESON V. DEPARTMENT OF REVENUE OF THE STATE OF ILLINOIS, 191 F.SUPP. 723. HOWEVER, ON NOVEMBER 6, 1961, THE UNITED STATES SUPREME COURT VACATED THE JUDGMENT OF THE DISTRICT COURT AND REMANDED THE CASE TO THAT COURT FOR FURTHER CONSIDERATION. 368 U.S. 30. SEE 41 COMP. GEN. 395. ON MARCH 7, 1962, THE DISTRICT COURT HELD, IN EFFECT (AS FAR AS PERTINENT HERE), THAT THE TAX, AS APPLIED TO SALES TO THE UNITED STATES, WAS UNCONSTITUTIONAL FROM AUGUST 1, 1953, TO AUGUST 1, 1961, DURING WHICH PERIOD SALES TO THE STATE OF ILLINOIS WERE EXEMPT FROM THE TAX BUT NO SUCH EXEMPTION WAS APPLICABLE TO SALES TO THE FEDERAL GOVERNMENT. ON OCTOBER 15, 1962, THE SUPREME COURT AFFIRMED WITHOUT OPINION THE JUDGMENT OF THE DISTRICT COURT (371 U.S. 21).

FROM THE FOREGOING IT IS CLEAR THAT THE TAX IN QUESTION WAS NOT APPLICABLE TO SALES TO THE FEDERAL GOVERNMENT DURING THE PERIOD MENTIONED IN YOUR LETTER, I.E., FROM JANUARY 1, 1958, TO JANUARY 1, 1961. MOREOVER, IT WAS NOT HELD IN THE MATHIESON CASE--REFERRED TO IN YOUR LETTER--THAT CONTRACTORS WHO PAID THE ILLINOIS RETAILERS' OCCUPATIONAL TAX ON SALES TO THE UNITED STATES, IF REQUIRED TO DO SO, MAY NOT BE DENIED REIMBURSEMENT ON THE BASIS OF A SUBSEQUENT JUDICIAL DETERMINATION THAT THE TAXING STATUTE WAS INVALID. IN ANY EVENT, IN VIEW OF THE COURT DECISIONS CITED ABOVE, THERE APPEARS TO BE NO BASIS FOR THE POSITION YOU INDICATE WAS TAKEN BY THE STATE OF ILLINOIS THAT THE CORPORATION'S SALES TO THE FEDERAL GOVERNMENT DURING THE PERIOD JANUARY 1, 1958, THROUGH JANUARY 1961, WERE SUBJECT TO THE TAX.

IN 43 COMP. GEN. 721 WE HELD THAT A CONTRACTOR WHO IS OTHERWISE ENTITLED UNDER HIS CONTRACT TO BE REIMBURSED FOR PAYING STATE SALES TAXES MAY NOT BE DENIED REIMBURSEMENT SOLELY ON THE BASIS OF SUBSEQUENT DETERMINATION THAT THE TAXING STATUTE WAS INVALID. THE FACTS IN THAT CASE DISCLOSED THAT THE CONTRACTOR PAID THE TAX TO THE STATE OF ILLINOIS PRIOR TO THE DATE OF ANY OF THE COURT DECISIONS CITED ABOVE; AND THAT SUBSEQUENTLY, PURSUANT TO INSTRUCTIONS OF THE CONTRACTING OFFICER, THE CONTRACTOR FILED CLAIMS WITH THE STATE FOR CREDIT FOR THE TAX.

IN THE INSTANT CASE WHILE THE CONTRACTOR STATES HE PAID THE TAX TO THE STATE THERE IS NOTHING IN THE RECORD TO INDICATE WHEN THE TAX WAS PAID. FURTHER, WHILE THE CONTRACTOR STATES HE HAS NOT RECEIVED A REFUND OF THE TAX FROM THE STATE, IT IS NOT CLEAR FROM THE RECORD WHETHER A CLAIM FOR A REFUND OR CREDIT FOR THE TAX WAS FILED BY THE CONTRACTOR WITH THE STATE OR WHETHER OTHER APPROPRIATE ACTION WAS TAKEN BY THE CONTRACTOR TO SAVE OR PROTECT HIS RIGHTS (AND THEREBY THE GOVERNMENT-S) IN CONNECTION WITH THE TAX. IT ALSO APPEARS FROM THE RECORD THAT A SUBSTANTIAL PERIOD OF TIME ELAPSED BETWEEN THE DATE THE CORPORATION (OR ITS PREDECESSOR) REFUNDED THE AMOUNT OF THE TAX TO THE GOVERNMENT AND THE DATE THE PRESENT CLAIM FOR REPAYMENT OF THE TAX WAS FILED.

ON THE BASIS OF THE PRESENT RECORD, PAYMENT ON THE VOUCHER IS NOT AUTHORIZED AND SUCH VOUCHER WILL BE RETAINED HERE. IF FURTHER CONSIDERATION OF THE MATTER IS DESIRED IT WOULD BE NECESSARY THAT ADDITIONAL INFORMATION BE FURNISHED. WE SHOULD BE ADVISED WHETHER YOU (OR YOUR DEPARTMENT) HAD SATISFACTORILY ESTABLISHED THAT THE TAXES IN QUESTION WERE PAID TO THE STATE (AND THE DATE OR DATES OF SUCH PAYMENTS) AND THAT THE STATE HAD MADE NO REFUND THEREOF TO THE CORPORATION. WE WOULD ALSO NEED INFORMATION CONCERNING THE ACTION TAKEN BY THE CORPORATION (OR ITS PREDECESSOR), IF ANY, TO OBTAIN REFUND OR CREDIT (FROM THE STATE) FOR THE TAXES PAID AND THE DATE OR DATES SUCH ACTION WAS TAKEN, AS WELL AS A COPY OF THE NOTIFICATION THE CORPORATION (OR ITS PREDECESSOR) RECEIVED FROM THE STATE OF ILLINOIS TO THE EFFECT THAT SALES TO THE UNITED STATES WERE SUBJECT TO THE TAX DURING THE PERIOD INVOLVED. ALSO, INFORMATION SHOULD BE FURNISHED INDICATING WHETHER THE CONTRACT OR CONTRACTS INVOLVED REQUIRED THE GOVERNMENT TO REIMBURSE THE CONTRACTOR THE TAX.