B-22885, JANUARY 30, 1942, 21 COMP. GEN. 719

B-22885: Jan 30, 1942

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THE LEGAL INCIDENCE OF WHICH IS UPON THE VENDEE. IS NOT APPLICABLE TO A TRANSACTION BY WHICH THE UNITED STATES PROCURES SUPPLIES FOR ITS GOVERNMENTAL PURPOSES. WHERE A BID FOR FURNISHING SUPPLIES TO THE UNITED STATES IS ACCEPTED AND A CONTRACT AWARDED ON THE BASIS THAT THE PURCHASE PRICE INCLUDES ALL STATE AND LOCAL SALES TAXES IMPOSED DIRECTLY ON THE SALE AND THAT THE CONTRACTOR WILL NOT ACCEPT A TAX-EXEMPTION CERTIFICATE IN LIEU OF THE PAYMENT OF THE AMOUNT OF SUCH TAXES. WHERE A CONTRACT FOR SUPPLIES IS AWARDED ON THE BASIS OF INCLUDING STATE AND LOCAL SALES TAXES IN THE PURCHASE PRICE WITHOUT THE DEDUCTION OF AN AMOUNT REPRESENTING SUCH TAXES. THAT STATE OR LOCAL SALES TAXES ARE NOT INCLUDED IN THE AMOUNTS BILLED.

B-22885, JANUARY 30, 1942, 21 COMP. GEN. 719

STATE AND LOCAL SALES TAXES - INCLUSION IN PURCHASE PRICE; VOUCHER AND INVOICE CERTIFICATIONS WHILE A STATE OR LOCAL SALES TAX, THE LEGAL INCIDENCE OF WHICH IS UPON THE VENDEE, IS NOT APPLICABLE TO A TRANSACTION BY WHICH THE UNITED STATES PROCURES SUPPLIES FOR ITS GOVERNMENTAL PURPOSES, WHERE A BID FOR FURNISHING SUPPLIES TO THE UNITED STATES IS ACCEPTED AND A CONTRACT AWARDED ON THE BASIS THAT THE PURCHASE PRICE INCLUDES ALL STATE AND LOCAL SALES TAXES IMPOSED DIRECTLY ON THE SALE AND THAT THE CONTRACTOR WILL NOT ACCEPT A TAX-EXEMPTION CERTIFICATE IN LIEU OF THE PAYMENT OF THE AMOUNT OF SUCH TAXES, PAYMENT MUST BE MADE IN ACCORDANCE WITH THE TERMS OF THE CONTRACT WITHOUT THE DEDUCTION OF ANY AMOUNTS REPRESENTING THE TAXES. WHERE A CONTRACT FOR SUPPLIES IS AWARDED ON THE BASIS OF INCLUDING STATE AND LOCAL SALES TAXES IN THE PURCHASE PRICE WITHOUT THE DEDUCTION OF AN AMOUNT REPRESENTING SUCH TAXES, THE GENERAL CERTIFICATE FOR VOUCHERS AND INVOICES PRESCRIBED BY CIRCULAR LETTER OF THIS OFFICE A 51607, A-49009, AUGUST 15, 1941. 21 COMP. GEN. 1160, MAY BE MODIFIED BY ELIMINATING THEREFROM THE PHRASE ,AND THAT STATE OR LOCAL SALES TAXES ARE NOT INCLUDED IN THE AMOUNTS BILLED," PROVIDED THAT, IN ALL CASES WHERE THE LEGAL INCIDENCE OF SUCH TAXES IS UPON THE VENDEE, APPROPRIATE STEPS BE TAKEN TO OBTAIN APPROPRIATE CERTIFICATES FROM THE DEALERS IN ACCORDANCE WITH GENERAL REGULATIONS NO. 86--- REVISED.

COMPTROLLER GENERAL WARREN TO THE SECRETARY OF WAR, JANUARY 30, 1942:

I HAVE YOUR LETTER OF DECEMBER 31, 1941, AS FOLLOWS:

REFERENCE IS MADE TO OPINIONS A-51607 AAND A-49009 OF THE COMPTROLLER GENERAL'S OFFICE UNDER DATE OF AUGUST 15, 1941. IT IS NOTED THAT THE ABOVE OPINIONS REQUIRE VOUCHERS AND INVOICES TO BEAR THE FOLLOWING CERTIFICATE:

" I CERTIFY THAT THE ABOVE BILL IS CORRECT AND JUST; THAT PAYMENT THEREFOR HAS NOT BEEN RECEIVED; THAT ALL STATUTORY REQUIREMENTS AS TO AMERICAN PRODUCTION AND LABOR STANDARDS, AND ALL CONDITIONS OF PURCHASE APPLICABLE TO THE TRANSACTIONS HAVE BEEN COMPLIED WITH; AND THAT STATE OR LOCAL SALES TAXES ARE NOT INCLUDED IN THE AMOUNTS BILLED.' ( ITALICS SUPPLIED.)

IN DECISION A-91844, 17 COMPTROLLER GENERAL 615, THE COMPTROLLER GENERAL RULED THAT THERE APPEARS NO LEGAL AUTHORITY TO REQUIRE BIDDERS TO LIST ITEMS IN THEIR BIDS, BY ITEM NUMBER OR OTHERWISE, WHICH ARE SUBJECT TO FEDERAL, STATE, OR LOCAL TAX. IT HAS BEEN FURTHER HELD THAT THE STATUTE AND THE REGULATIONS RELATING TO EXCISE TAXES LEAVE A BIDDER FREE TO SUBMIT PRICES EITHER INCLUSIVE OR EXCLUSIVE OF THE TAXES, AND IF INCLUSIVE, TO CONSENT OR NOT CONSENT TO ITS DEDUCTION FROM THE AMOUNT OF THE BID (15 COMP. GEN. 588).

WHEN A SIMILAR QUESTION TO THAT STATED ABOVE AROSE AGAIN, THE COMPTROLLER GENERAL, IN A LETTER TO THE SECRETARY OF INTERIOR (17 COMP. GEN. 992), REAFFIRMED HIS EARLIER DECISIONS AND STATED THAT INVITATIONS FOR BIDS MAY NOT REQUIRE BIDDERS TO SUBMIT TAX-FREE PRICES BUT SHOULD LEAVE THEM FREE TO SUBMIT PRICES EITHER INCLUSIVE OR EXCLUSIVE OF ALL TAXES.

BASED UPON THE ABOVE RULINGS OF THE COMPTROLLER GENERAL, INVITATIONS FOR BIDS ISSUED BY PURCHASING OFFICES OF THIS DEPARTMENT CONTAIN THE FOLLOWING PROVISIONS:

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

"/1) PRICES HEREIN DO NOT INCLUDE ANY STATE OR LOCAL TAXES IMPOSED DIRECTLY ON THE SALE OF THE SUPPLIES.

"/2) 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.

"/3) 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.'

DECISION IS REQUESTED AS TO WHETHER THE PRESCRIBED VOUCHER CERTIFICATE MAY BE MODIFIED BY ELIMINATING THE PHRASE "AND THAT STATE OR LOCAL SALES TAXES ARE NOT INCLUDED IN THE AMOUNTS ILLED" IN THOSE CASES WHERE THE BIDDER HAS BID ON A TAX-INCLUSIVE BASIS AND HAS NOT CONSENTED TO THE DEDUCTION OF SAID TAXES.

THE ASSURANCE THAT THE NONINCLUSION PHRASE MAY BE OMITTED AND THAT THE AMOUNT OF INCLUDED TAX MAY BE REQUIRED TO BE SET FORTH IN CASES WHERE SUCH STEPS ARE DEEMED DESIRABLE BY THE WAR DEPARTMENT, WILL BE A CONSIDERABLE CONVENIENCE TO THE ADMINISTRATION OF THE PROCUREMENT PROGRAM.

IN VIEW OF THE WELL-ESTABLISHED CONSTITUTIONAL PRINCIPLE THAT A STATE, OR A POLITICAL SUBDIVISION THEREOF, MAY NOT INTERFERE WITH THE POWERS GRANTED TO THE FEDERAL GOVERNMENT OR, IN THE ABSENCE OF SPECIFIC STATUTORY AUTHORITY THEREFOR, IMPOSE BY TAXATION A DIRECT BURDEN UPON THE FEDERAL GOVERNMENT IN THE EXERCISE OF SUCH POWERS, THERE CAN BE NO ROOM FOR DOUBT THAT A STATE OR LOCAL SALES TAX, THE LEGAL INCIDENCE OF WHICH IS UPON THE VENDEE, IS NOT APPLICABLE TO A TRANSACTION BY WHICH THE UNITED STATES PROCURES THE SUPPLIES "DESIRED FOR ITS GOVERNMENTAL POSES.'

HOWEVER, IT IS REALIZED THAT INASMUCH AS A DEALER IN SUCH SUPPLIES CANNOT BE COMPELLED TO SELL THE SAME TO THE UNITED STATES EXCEPT UPON SUCH TERMS AND CONDITIONS AS HE MAY SEE FIT TO PRESCRIBE, CASES HAVE ARISEN AND MAY CONTINUE TO ARISE WHERE THE LOWEST OR ONLY BID OBTAINABLE FOR THE FURNISHING OF NECESSARY SUPPLIES IS SUBMITTED UPON A TAX INCLUSIVE BASIS, AND IT IS APPARENT THAT IN A SITUATION, SUCH AS REFERRED TO BY YOU, WHERE A BID FOR THE FURNISHING OF SUPPLIES TO THE UNITED STATES IS ACCEPTED AND A CONTRACT AWARDED UPON THE BASIS THAT THE QUOTED PRICES INCLUDE ALL STATE AND LOCAL SALES TAXES IMPOSED DIRECTLY ON THE SALES AND THAT THE DEALER WILL NOT ACCEPT A TAX EXEMPTION CERTIFICATE IN LIEU OF THE PAYMENT OF THE AMOUNT OF SUCH TAXES, PAYMENT MUST BE MADE BY THE GOVERNMENT TO THE DEALER IN ACCORDANCE WITH THE TERMS OF THE CONTRACT FOR THE SUPPLIES FURNISHED THEREUNDER WITHOUT THE DEDUCTION OF ANY AMOUNTS REPRESENTING THE TAXES. HENCE, SINCE A CLAIM PRESENTED BY A DEALER FOR THE PURCHASE PRICE OF THE SUPPLIES FURNISHED UNDER A CONTRACT OF THE TYPE HERE INVOLVED MUST NECESSARILY INCLUDE A CHARGE FOR THE AMOUNT OF ANY STATE OR LOCAL SALES TAX APPEARING IN THE PRICES QUOTED BY HIM, IF HE IS TO BE PAID THE FULL AMOUNT TO WHICH HE IS ENTITLED, THERE CAN BE NO REASONABLE BASIS FOR REQUIRING A DEALER TO SUPPORT HIS CLAIM BY A CERTIFICATE TO THE EFFECT THAT NO STATE OR LOCAL SALES TAXES ARE INCLUDED THEREIN.

ACCORDINGLY, IN VIEW OF THE FOREGOING, YOU ARE ADVISED THAT, AS PRESCRIBED BY THE PROVISIONS CONTAINED IN THE INVITATION TO BIDDERS, WHICH YOU STATE NOW ARE IN USE BY YOUR DEPARTMENT, A BIDDER SHOULD BE REQUIRED TO SPECIFY IN DETAIL IN HIS BID FOR FURNISHING SUPPLIES TO THE GOVERNMENT THE AMOUNT OF ALL STATE AND LOCAL TAXES IMPOSED DIRECTLY ON THE SALES, REGARDLESS OF WHETHER THE BID IS SUBMITTED ON A TAX INCLUSIVE OR TAX- EXCLUSIVE BASIS, AND THAT IN A CASE WHERE AN INVITATION TO BIDDERS CONTAINS PROVISIONS RELATIVE TO STATE AND LOCAL SALES TAXES SIMILAR TO THOSE APPEARING IN YOUR SUBMISSION AND IT IS STIPULATED IN THE BID UPON WHICH THE CONTRACT IS BASED THAT THE PRICES QUOTED ARE TAX INCLUSIVE AND THAT THE BIDDER WILL NOT CONSENT TO THE DEDUCTION OF AN AMOUNT REPRESENTING SUCH TAXES, THERE IS NO OBJECTION TO THE MODIFICATION OF THE GENERAL CERTIFICATE PRESCRIBED BY THE TERMS OF THE CIRCULAR LETTER DATED AUGUST 15, 1941, 21 COMP. GEN. 1160, OF THIS OFFICE (REFERRED TO IN THE FIRST PARAGRAPH OF YOUR LETTER AS " OPINIONS A-51607 AND A-49009,") WHICH IS REQUIRED ON THE VOUCHERS AND INVOICES COVERING THE PURCHASE PRICES OF THE SUPPLIES FURNISHED UNDER THE CONTRACT, BY ELIMINATING THEREFROM THE PHRASE "AND THAT STATE OR LOCAL SALES TAXES ARE NOT INCLUDED IN THE AMOUNTS BILLED.' HOWEVER, IT IS, OF COURSE, CONTEMPLATED THAT IN ALL CASES WHERE THE LEGAL INCIDENCE OF A STATE OR LOCAL SALES TAX, WHICH IS INCLUDED IN THE PURCHASE PRICE PAID TO A DEALER, IS UPON THE VENDEE APPROPRIATE STEPS WILL BE TAKEN BY THE ADMINISTRATIVE AGENCY CONCERNED TO OBTAIN APPROPRIATE CERTIFICATES FROM THE DEALERS IN ACCORDANCE WITH THE PROCEDURE STATED IN GENERAL REGULATIONS NO. 86-REVISED, OF THIS OFFICE, FOR FOLLOWING IN A CASE WHERE THE PURCHASE PRICE REQUIRED TO BE PAID BY THE GOVERNMENT INCLUDES A STATE OR LOCAL SALES TAX NOT PROPERLY CHARGEABLE TO THE GOVERNMENT. SEE IN THIS CONNECTION, 19 COMP. GEN. 909; ID. 921, ID. 1002.