B-214089, JULY 5, 1984, 63 COMP.GEN. 474

B-214089: Jul 5, 1984

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EVEN THOUGH SELLERS ARE NOT REQUIRED UNDER STATE LAW TO SHIFT THE TAX TO PURCHASERS BY COLLECTING IT FROM THEM. OFFICERS AND EMPLOYEES - TRANSFERS - REAL ESTATE EXPENSES - BROKER'S FEES - LEGAL OBLIGATION TO PAY REQUIREMENT AN EMPLOYEE MAY NOT BE REIMBURSED A FEE OR COMMISSION PAID IN CONNECTION WITH THE SALE OF HIS HOME AT HIS OLD DUTY STATION TO AN AGENT WHO WAS NOT A LICENSED REALTOR AND ACTED AS A CARETAKER. FEES FOR CARETAKER SERVICES ARE NOT REIMBURSABLE NOR ARE FEES PAID TO INDIVIDUALS WHO ARE NOT LICENSED AND UNDER STATE LAW CANNOT LEGALLY RECEIVE A REALTY COMMISSION OR FEE. ALTHOUGH UNDER STATE LAW SELLERS ARE NOT REQUIRED TO COLLECT THE TAX FROM PURCHASERS. THE TAX MAY BE REIMBURSED IF IT IS CUSTOMARILY COLLECTED FROM PURCHASERS IN THE LOCALITY OF THE SALE.

B-214089, JULY 5, 1984, 63 COMP.GEN. 474

OFFICERS AND EMPLOYEES - TRANSFERS - REAL ESTATE EXPENSES - TAXES - SALES TAX ON MOBILE HOME, ETC. IF SELLERS OF MOBILE HOMES CUSTOMARILY COLLECT FROM PURCHASERS A STATE SALES OR "GROSS RECEIPTS" TAX, THE EMPLOYEE MAY BE REIMBURSED THE TAX HE PAID FOR A MOBILE HOME AT HIS NEW DUTY STATION, EVEN THOUGH SELLERS ARE NOT REQUIRED UNDER STATE LAW TO SHIFT THE TAX TO PURCHASERS BY COLLECTING IT FROM THEM. OVERRULES 54 COMP.GEN. 93 (1974). OFFICERS AND EMPLOYEES - TRANSFERS - REAL ESTATE EXPENSES - BROKER'S FEES - LEGAL OBLIGATION TO PAY REQUIREMENT AN EMPLOYEE MAY NOT BE REIMBURSED A FEE OR COMMISSION PAID IN CONNECTION WITH THE SALE OF HIS HOME AT HIS OLD DUTY STATION TO AN AGENT WHO WAS NOT A LICENSED REALTOR AND ACTED AS A CARETAKER. FEES FOR CARETAKER SERVICES ARE NOT REIMBURSABLE NOR ARE FEES PAID TO INDIVIDUALS WHO ARE NOT LICENSED AND UNDER STATE LAW CANNOT LEGALLY RECEIVE A REALTY COMMISSION OR FEE.

MATTER OF: IRVIN W. WEFENSTETTE, JULY 5, 1984:

MR. IRVIN W. WEFENSTETTE, AN EMPLOYEE OF THE DEPARTMENT OF LABOR, INCURRED A STATE SALES OR "GROSS RECEIPTS" TAX WHEN HE PURCHASED A MOBILE HOME AT HIS NEW DUTY STATION. ALTHOUGH UNDER STATE LAW SELLERS ARE NOT REQUIRED TO COLLECT THE TAX FROM PURCHASERS, THE TAX MAY BE REIMBURSED IF IT IS CUSTOMARILY COLLECTED FROM PURCHASERS IN THE LOCALITY OF THE SALE. HOWEVER, MR. WEFENSTETTE MAY NOT BE REIMBURSED THE AMOUNT HE PAID TO AN INDIVIDUAL WHO WAS NOT A LICENSED REALTOR IN CONNECTION WITH THE SALE OF HIS HOME AT HIS OLD DUTY STATION. /1/

MR. WEFENSTETTE INCURRED THE EXPENSES IN CONNECTION WITH HIS TRANSFER FROM VENITA, OKLAHOMA, TO PAINTSVILLE, KENTUCKY, IN NOVEMBER 1982. THE GOVERNMENT REIMBURSES THE EMPLOYEE RELOCATION EXPENSES ONLY IF THE ENTITLEMENT PROVISIONS OF THE APPLICABLE LAW, 5 U.S.C. 5724A, AND REGULATIONS, FEDERAL TRAVEL REGULATIONS, CHAPTER 2 (SEPTEMBER 1981 AS AMENDED), INCORP. BY REF., 41 CFR 101-7.003 ARE SATISFIED.

TAX ON MOBILE HOME

MR. WEFENSTETTE PURCHASED HIS MOBILE HOME AT PAINTSVILLE, KENTUCKY HIS NEW DUTY STATION. THE CLAIM FILE INCLUDES A COPY OF A BILL FOR ITS PURCHASE AT A PRICE OF $22,510 TO WHICH WAS ADDED A "SALES TAX" OF $1,125. HE MADE A DEPOSIT OF $2,000 AND PAID THE BALANCE UPON DELIVERY ON DECEMBER 17, 1982.

THE EMPLOYING OFFICE DECLINES TO REIMBURSE THE TAX ON THE MOBILE HOME BECAUSE MR. WEFENSTETTE HAD NOT SUBMITTED A COPY OF THE STATE TAX CODE THE SALES RECEIPT SHOWING THE AMOUNT OF TAX PAID, AND A CLAIM FORM PRESCRIBED BY THE AGENCY. ALTHOUGH THE AGENCY REASONS FOR DISALLOWING PAYMENT APPEAR TECHNICAL, STATE TAX CODE AND OTHER INFORMATION REGARDING THIS CLAIM AND THE AMOUNT PAID ARE RELEVANT, SINCE TO BE REIMBURSABLE, THE TAX MUST BE PAID BY THE EMPLOYEE AS A "MORTGAGE OR TRANSFER TAX." SEE FTR, PARAGRAPH 2-6.2D. HOWARD B. G. KITTREDGE, B-190484, FEBRUARY 14, 1978.

IN THE CITED CASE WE HELD THAT A GENERAL SALES TAX ON THE PURCHASE OF A MOBILE HOME WAS A REIMBURSABLE TRANSFER TAX SINCE UNDER THE STATE TAX CODE INVOLVED, AS CONSTRUED BY STATE COURTS, THE ULTIMATE BURDEN OF THE TAX FELL ON THE PURCHASER. THE TAX APPLIED TO THE SALES TRANSACTION RATHER THAN THE PROPERTY ITSELF AND WAS THEREFORE AN EXCISE TAX ON THE SALES TRANSACTION AND NOT A PROPERTY TAX. FURTHER, IN ORDER FOR THE PURCHASER TO RECEIVE LEGAL TITLE THE TAX HAD TO BE PAID. WE HAVE REACHED THE SAME RESULT WHEN THE STATE TAX CODE EXPRESSLY REQUIRED THE SELLER TO COLLECT THE TAX FROM THE PURCHASER. GERALD M. HOUTS, B-189377, FEBRUARY 13, 1978. CLYDE W. MYERS, B-187056, NOVEMBER 24, 1976.

BUT IN SOME STATES THE TAX IS NOT ALWAYS COLLECTED FROM BUYERS. RETAILERS MUST PAY A TAX MEASURED BY A PERCENTAGE OF GROSS RECEIPTS FROM THEIR BUSINESS RATHER THAN RECEIPTS FROM EACH SEPARATE SALES TRANSACTION. THEY MAY, BUT ARE NOT REQUIRED TO, ADD THE TAX AMOUNT AS A SEPARATE ITEM ON THEIR CUSTOMER BILLINGS, THEREBY SHIFTING THE TAX TO THE CUSTOMER. HELD THAT UNDER SUCH A PROVISION IN THE NEW MEXICO TAX CODE, APPLICABLE TO THE SALE OF REAL ESTATE, THE REIMBURSEMENT COULD NOT BE ALLOWED, BECAUSE THE TAX WAS IMPOSED ON THE SELLER NOT ON THE EMPLOYEE WHO WAS THE BUYER. 54 COMP.GEN. 93 (1974).

THE DECISION IN THAT CASE WAS PREDICATED UPON A RULE THAT WE WOULD LOOK TO THE STATE TAX LAWS AS INTERPRETED BY THE COURTS AND NOT TO THE IMPACT OF THE TAX ON THE EMPLOYEE. THUS, WE HELD THAT A TAX WHICH WAS IMPOSED UPON THE SELLER OF A MOBILE HOME AND NOT ON THE EMPLOYEE WHO, AS THE BUYER, COULD NOT BE REIMBURSED UNDER THE APPLICABLE LAW AND REGULATION EVEN THOUGH THE TAX UNDER LOCAL LAW COULD BE PASSED ON TO THE BUYER AND IN FACT WAS PASSED ON TO THE BUYER UNDER LOCAL PRACTICE. UPON REEVALUATION OF THE CASES INVOLVING REIMBURSEMENT OF "SALES TAXES" WE FIND THAT THE RULE ADOPTED IN 54 COMP.GEN. 93, SUPRA, IS UNNECESSARILY RESTRICTIVE IN THAT IT WOULD DENY REIMBURSEMENT OF A TAX BECAUSE OF THE TECHNICAL WORDING OF STATE LAW, EVEN THOUGH THE ULTIMATE BURDEN OF THE TAX MAY BE, AND BY LOCAL CUSTOM, IS PASSED ON SPECIFICALLY TO THE EMPLOYEE WHO IS THE BUYER OF THE RESIDENCE OR MOBILE HOME.

THEREFORE, EVEN THOUGH A LOCAL SALES TAX IS BY LAW IMPOSED UPON THE SELLER AS A "GROSS RECEIPT" OR SIMILAR TAX, IF THIS TAX MAY BE PASSED ON TO THE BUYER AS A SPECIFIC ITEM FOR PAYMENT, THE EMPLOYEE MAY BE REIMBURSED THE TAX PAID IF IT IS THE CUSTOM IN THE AREA IN WHICH THE PURCHASE WAS MADE TO ADD THE TAX AS A SPECIFIC ITEM TO THE PURCHASE PRICE. THE DECISION AT 54 COMP.GEN. 93, SUPRA, IS OVERRULED.

REGARDING "SALES TAX" IN KENTUCKY, A TAX IS IMPOSED ON RETAILERS BASED UPON THEIR GROSS RECEIPTS. KY. REV. STAT. ANN. SEC. 139.200 (BALDWIN 1983). HOWEVER, THE CODE SPECIFICALLY PROVIDES THAT THE TAX MAY BE COLLECTED FROM THE CONSUMER. KY. REV. STAT. ANN. SEC. 139.210 (BALDWIN 1983). FURTHER, IN ORDER TO REGISTER A MOBILE HOME THE OWNER MUST DEMONSTRATE THAT THE STATE TAX HAS BEEN PAID. KY. REV. STAT. ANN. SEC. 186.65(5) (BALDWIN 1983). SINCE THE KENTUCKY SALES TAX IS IMPOSED ON THE RETAILER BUT MAY BE PASSED ON TO THE CONSUMER, UNDER THE RULE ADOPTED HEREIN, THE AGENCY MUST DETERMINE WHETHER THE TAX IS CUSTOMARILY PASSED ON TO THE CONSUMER IN THE LOCAL AREA IN WHICH THE SALE WAS MADE.

THE CUSTOM SHOULD BE DETERMINED BY THE EMPLOYING AGENCY AFTER CONSULTING WITH THE LOCAL OR AREA OFFICE OF THE DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT. SEE PARAGRAPH 2-6.3C OF THE FTR; MATTER OF REAL ESTATE EXPENSES, 54 COMP.GEN. 827 (1975).

IF THE EMPLOYING OFFICE DETERMINES THAT THE LOCAL CUSTOM IN THE VICINITY OF PAINTSVILLE IS FOR THE BUYER TO PAY THE KENTUCKY GROSS RECEIPTS TAX EQUAL TO 5 PERCENT OF THE PURCHASE PRICE, MR. WEFENSTETTE IS ENTITLED TO REIMBURSEMENT OF THE TAX PAYMENT. HE SHOULD, OF COURSE, PERFECT HIS CLAIM BY PREPARING AND SUBMITTING THE PROPER FORM TO HIS EMPLOYING OFFICE AND BY FURNISHING THE ORIGINAL SALES DOCUMENT OR OTHER APPROPRIATE EVIDENCE THAT HE HAS IN FACT PAID THE TAX IN QUESTION.

REAL ESTATE COMMISSION

MR. WEFENSTETTE PAID A FEE FOR THE SALE OF HIS HOME IN CHELSEA, OKLAHOMA, NEAR HIS OLD DUTY STATION AT VENITA. THE PERSON TO WHOM THE FEE WAS PAID WAS NOT A LICENSED REAL ESTATE BROKER. MR. WEFENSTETTE SUBMITTED A RECEIPT SHOWING HIS PAYMENT OF A $1,000 SELLING FEE, A $15 NEWSPAPER ADVERTISEMENT, AND A $10 TYPING EXPENSE FOR PREPARING THE SALES CONTRACT. THE AGENCY DISALLOWED THE SELLING FEE BUT ALLOWED REIMBURSEMENT OF THE ADVERTISING AND TYPING COSTS.

MR. WEFENSTETTE EXPLAINED THAT HE HAD OBTAINED THE SERVICES OF AN UNLICENSED PERSON BECAUSE EACH OF THE TWO LICENSED REALTORS IN CHELSEA OR THEIR HUSBANDS OPERATED COAL MINES HE HAD INSPECTED IN THE PERFORMANCE OF HIS OFFICIAL DUTIES. FURTHER, SINCE HE MADE THE FINAL ARRANGEMENTS FOR THE SALE, THE PERSON TO WHOM HE PAID THE FEE ACTED AS A CARETAKER OF THE RESIDENCE TO ANSWER PHONE CALLS AND OPEN THE HOME FOR INSPECTION. HE DOES NOT REGARD THE COMMISSION OR FEE TO HAVE BEEN FOR THE SERVICES OF A REAL ESTATE BROKER.

A BROKER'S FEE OR REAL ESTATE COMMISSION IS EXPRESSLY AUTHORIZED UNDER PARAGRAPH 2-6.2A OF THE FTR. HOWEVER, REIMBURSEMENT IS DENIED FOR AMOUNTS PAID TO AN INDIVIDUAL WHO IS NOT A LICENSED REALTOR IF THE ABSENCE OF A LICENSE MAKES THE FEE OR COMMISSION UNLAWFUL AND NOT A LEGALLY ENFORCEABLE DEBT. SEE W. JERRY GOUDELOCKE, B-189376, OCTOBER 12, 1977. MATHEW BIONDICH, B-197893, JUNE 4, 1980.

THE RESIDENCE SALE AT THE OLD DUTY STATION IN THIS CASE WAS SUBJECT TO REGULATION BY OKLAHOMA LAW. UNDER IT, NO PERSON EXCEPT A LICENSED "REAL ESTATE BROKER" OR "REAL ESTATE SALES ASSOCIATE" MAY IN EXCHANGE FOR A COMMISSION OR FEE SELL, OFFER TO SELL OR LIST REAL ESTATE OR NEGOTIATE SUCH ACTIVITY. A "REAL ESTATE SALES ASSOCIATE" IS A PERSON WHO PERFORMS SUCH ACTIVITY AS AN EMPLOYEE OR INDEPENDENT CONTRACTOR OF A "REAL ESTATE BROKER." 59 OKLAHOMA STATUTES ANNOTATED 858-102 AND 301. UNLESS LICENSED, A PARTY MAY NOT BRING A COURT ACTION TO OBTAIN COMPENSATION FOR ACTING AS A REAL ESTATE BROKER OR REAL ESTATE SALES ASSOCIATE. OKLAHOMA STATUTES, ANNOTATED 858-311. FURTHER, VIOLATION OF THESE PROVISIONS IS A MISDEMEANOR. 59 OKLAHOMA STATUTES ANNOTATED 858-401.

HOWEVER, MR. WEFENSTETTE SAYS THAT HE PAID FOR SERVICES OF A CARETAKER. HE INDICATES THAT HE HANDLED THE SALE HIMSELF AND EMPLOYED NO BROKER OR ASSOCIATE. THE FEE WAS PAID FOR SERVICES RENDERED BY THE INDIVIDUAL ACTING AS CARETAKER, ANSWERING THE TELEPHONE AND UNLOCKING THE HOUSE, FOR VIEWINGS BY INTERESTED PARTIES. EVEN IF THE FEES WERE PAID FOR CARETAKER TYPE SERVICES AND NOT FOR SELLING THE HOUSE, REIMBURSEMENT WOULD NOT BE ALLOWED SINCE SUCH A FEE IS CONSIDERED TO BE FOR MAINTENANCE OF THE PROPERTY WHICH IS SPECIFICALLY NOT A REIMBURSABLE ITEM. FTR PARA. 2-6.2D; LELAND D. PEMBERTON, B-200167, JULY 7, 1981.

CONSEQUENTLY, MR. WEFENSTETTE IS NOT ENTITLED TO REIMBURSEMENT OF THE $1,000 FEE HE PAID IN CONNECTION WITH THE SALE OF HIS RESIDENCE.

/1/ MR. BERT BERNARD, AUTHORIZED CERTIFYING OFFICER, DEPARTMENT OF LABOR, REQUESTED THIS DECISION.