Propriety of Certifying Corporation Invoices Reflecting Sales and Use Taxes on Leases

B-194982: Published: Jul 21, 1980. Publicly Released: Jul 21, 1980.

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A certifying officer requested the Comptroller General's opinion on the propriety of certifying a company's invoices reflecting California State sales and use taxes on leases. GAO advised him, at the time, that the Department of Justice was considering bringing suit to determine whether the tax collected is constitutionally applicable to federal leases of tangible personal property in California. That litigation concluded recently the with enforcement of a permanent injunction restraining the assessment and collection of the tax on federal leases. Therefore, the tax is unconstitutional and the ban on taxing federal leases will remain in effect throughout any appeals of this decision. Accordingly, unless the Supreme Court reverses the District Court's decision or the California legislature again amends the sales tax collection statute, it is improper for the certifying officer to certify any amount on an invoice for the rental of tangible personal property which separately states or otherwise reflects the addition of California sales tax imposed on the United States. It would also be improper, at this time, for the certifying officer to pay amounts designated as sales tax on the company invoices. No authority exists for such payment. Justice is currently asking all federal entities that paid tax to determine the amount of the sales tax paid, including taxes paid by contractors which have not been reimbursed by the government. This is in preparation for a refund suit against the state. GAO suggested that the certifying officer include the amounts on these and any other invoices on which tax was withheld on his declaration to Justice, along with an explanation.

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