B-5451, AUGUST 23, 1939, 19 COMP. GEN. 255

B-5451: Aug 23, 1939

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MUNICIPAL TAXES IN EFFECT WHEN THE OFFER WAS MADE. " THERE IS NO AUTHORITY FOR INCREASING THE CONTRACT PRICE TO INCLUDE SUBSEQUENTLY IMPOSED STATE TAXES. 1939: I HAVE YOUR LETTER OF AUGUST 7. AS FOLLOWS: THERE ARE PRESENTED FOR YOUR CONSIDERATION AND DECISION CERTAIN QUESTIONS WHICH HAVE BEEN RAISED AS TO THE PROPER CONSTRUCTION TO BE PLACED ON THE PROVISIONS OF TWO CONTRACTS WHICH INVOLVE THE FOLLOWING CIRCUMSTANCES AND PROVISIONS: ON MARCH 13. ALL ITEMS LISTED HEREIN ARE FOR THE USE OF INDIVIDUAL BENEFICIARIES AND NOT FOR THE EXCLUSIVE USE OF THE U.S. PRICES ARE THEREFORE NOT SUBJECT TO TAX EXEMPTIONS. "PRICES BID HEREIN INCLUDE ANY FEDERAL TAX HERETOFORE IMPOSED BY THE CONGRESS WHICH IS APPLICABLE TO THE MATERIAL ON THIS BID.

B-5451, AUGUST 23, 1939, 19 COMP. GEN. 255

CONTRACTS - PRICE - ADJUSTMENT - SUBSEQUENTLY IMPOSED STATE TAXES AS THE PRICE UNDER A CONTRACT NORMALLY BECOMES FIXED AS OF THE DATE OF AWARD THE PRICE MAY NOT BE ADJUSTED TO INCLUDE SUBSEQUENTLY LEVIED TAXES IN THE ABSENCE OF A SPECIFIC PROVISION THEREFOR, AND AS THE CONTRACTS ENTERED INTO BY THE GOVERNMENT FOR THE FURNISHING OF TOBACCO PRODUCTS TO PATIENTS AT VETERANS' ADMINISTRATION FACILITIES PROVIDED THAT THE CONTRACT PRICE SHOULD INCLUDE ALL FEDERAL, STATE, COUNTY, AND MUNICIPAL TAXES IN EFFECT WHEN THE OFFER WAS MADE, BUT THE PROVISION FOR INCREASE OR DECREASE IN CONTRACT PRICE DUE TO CHANGES IN TAX SPECIFIED ONLY " FEDERAL TAXES," THERE IS NO AUTHORITY FOR INCREASING THE CONTRACT PRICE TO INCLUDE SUBSEQUENTLY IMPOSED STATE TAXES.

COMPTROLLER GENERAL BROWN TO THE ADMINISTRATOR OF VETERANS' AFFAIRS, AUGUST 23, 1939:

I HAVE YOUR LETTER OF AUGUST 7, 1939, AS FOLLOWS:

THERE ARE PRESENTED FOR YOUR CONSIDERATION AND DECISION CERTAIN QUESTIONS WHICH HAVE BEEN RAISED AS TO THE PROPER CONSTRUCTION TO BE PLACED ON THE PROVISIONS OF TWO CONTRACTS WHICH INVOLVE THE FOLLOWING CIRCUMSTANCES AND PROVISIONS:

ON MARCH 13, 1939, THE VETERANS ADMINISTRATION, NORTHPORT, NEW YORK, ADVERTISED FOR BIDS FOR FURNISHING TOBACCO PRODUCTS, INCLUDING CIGARETTES, DURING THE PERIOD JULY 1, 1939, TO JUNE 30, 1940, TO PATIENTS AT THE FACILITY, PAYMENT THEREFOR TO BE MADE FROM THE PATIENTS' PERSONAL FUNDS.

THE PROPOSALS CONTAINED THE FOLLOWING PROVISIONS:

"PRICES QUOTED ON ITEMS LISTED IN THIS INVITATION MUST INCLUDE ALL APPLICABLE FEDERAL, STATE, COUNTY, AND MUNICIPAL TAXES. ALL ITEMS LISTED HEREIN ARE FOR THE USE OF INDIVIDUAL BENEFICIARIES AND NOT FOR THE EXCLUSIVE USE OF THE U.S. GOVERNMENT, AND PRICES ARE THEREFORE NOT SUBJECT TO TAX EXEMPTIONS.

"PRICES BID HEREIN INCLUDE ANY FEDERAL TAX HERETOFORE IMPOSED BY THE CONGRESS WHICH IS APPLICABLE TO THE MATERIAL ON THIS BID. IF ANY SALES TAX, PROCESSING TAX, ADJUSTMENT CHARGE, OR OTHER TAXES OR CHARGES ARE IMPOSED OR CHANGED BY THE CONGRESS AFTER THE DATE SET FOR THE OPENING OF THIS BID, AND MADE APPLICABLE DIRECTLY UPON THE PRODUCTION, MANUFACTURE, OR SALE OF THE SUPPLIES COVERED BY THIS BID AND ARE PAID BY THE CONTRACTOR ON THE ARTICLES OR SUPPLIES HEREIN CONTRACTED FOR, THEN THE PRICES NAMED IN THIS BID WILL BE INCREASED OR DECREASED ACCORDINGLY, AND ANY AMOUNT DUE THE CONTRACTOR AS A RESULT OF SUCH CHANGE WILL BE CHARGED TO THE GOVERNMENT AND ENTERED ON VOUCHERS (OR INVOICES) AS SEPARATE ITEMS.'

UNDER DATE OF MARCH 31, 1939, CONTRACT VA108H-1782 WAS AWARDED TO THE METROPOLITAN TOBACCO COMPANY AND CONTRACT VA108H-1783 WAS AWARDED TO T. MILLER AND SON. BOTH OF THESE AWARDS COVERED VARIOUS BRANDS OF CIGARETTES. THESE CONTRACTS ARE NOW ON FILE IN THE GENERAL ACCOUNTING OFFICE.

ON MAY 17, 1939, THE STATE OF NEW YORK ENACTED A CIGARETTE TAX LAW WHICH BECAME EFFECTIVE JULY 1, 1939, COINCIDENT WITH THE EFFECTIVE DATE OF THE ABOVE CONTRACTS. THE ACT READS IN PART AS FOLLOWS:

"IMPOSITION OF TAX.--- THERE IS HEREBY IMPOSED AND SHALL BE PAID A TAX ON ALL CIGARETTES POSSESSED IN THE STATE BY ANY PERSON FOR SALE ON AND AFTER JULY FIRST, NINETEEN HUNDRED THIRTY-NINE, AND UNTIL AND INCLUDING JUNE THIRTIETH, NINETEEN HUNDRED FORTY, EXCEPT THAT NO TAX SHALL BE IMPOSED ON CIGARETTES SOLD UNDER SUCH CIRCUMSTANCES THAT THIS STATE IS WITHOUT POWER TO IMPOSE SUCH TAX. SUCH TAX TO BE AT THE RATE OF ONE CENT FOR EACH TEN CIGARETTES OR FRACTION THEREOF. THIS TAX IS INTENDED TO BE IMPOSED UPON ONLY ONE SALE OF THE SAME PACKAGE OF CIGARETTES. IT SHALL BE PRESUMED THAT ALL SALES OF CIGARETTES ARE SUBJECT TO TAX UNTIL THE CONTRARY IS ESTABLISHED, AND THE BURDEN OF PROOF THAT A SALE IS NOT TAXABLE HEREUNDER SHALL BE UPON THE VENDER.'

UNDER DATE OF JULY 18, 1939, THE METROPOLITAN TOBACCO COMPANY ADVISED THE NORTHPORT FACILITY AS FOLLOWS:

"PLEASE NOTE N.Y. STATE TAX STAMP CHARGES HAVE BEEN ADDED TO RECAPITULATE SHEETS ONLY AT RATE OF 1 CENT FOR EVERY 10 CIGARETTES OR FRACTION THEREOF.

"FOR EXAMPLE 1 PACKAGE OF 20 CIGARETTES REQUIRE A 2 CENT STAMP.'

THE SPECIFIC QUESTIONS ARE:

(1) WHETHER THE PROVISIONS QUOTED ABOVE TO THE EFFECT THAT THE PRICES QUOTED INCLUDE ALL APPLICABLE TAXES SHALL BE CONSTRUED TO MEAN ALL TAXES APPLICABLE AT THE TIME THE CONTRACTS WERE EXECUTED, OR ALL TAXES WHICH MAY BECOME APPLICABLE DURING THE PERIODS COVERED BY THE CONTRACTS.

(2) IF SAID PROVISIONS BE CONSTRUED TO INCLUDE ONLY THE TAXES APPLICABLE AT THE TIME THE CONTRACTS WERE EXECUTED, WHETHER THE SECOND PROVISION, QUOTED ABOVE, FOR AN INCREASE IN PRICE TO COVER ANY SUBSEQUENTLY ENACTED FEDERAL TAX HAS THE LEGAL EFFECT OF PROHIBITING THE ALLOWANCE OF AN INCREASE TO COVER ANY STATE TAX LEVIED SUBSEQUENT TO THE DATES OF THE EXECUTION OF THE CONTRACTS, UNDER THE RULE THAT THE EXPRESSION IN A CONTRACT OF ONE OR MORE THINGS OF A CLASS IMPLIES THE EXCLUSION OF ALL NOT EXPRESSED, ALTHOUGH ALL WOULD HAVE BEEN IMPLIED HAD NONE BEEN EXPRESSED. (13 C.J., PAGE 537, SECTION 500).

A COPY OF THE ABOVE-CITED ACT OF THE NEW YORK LEGISLATURE IS ATTACHED FOR YOUR INFORMATION, WITH THE REQUEST THAT IT BE RETURNED TO THIS ADMINISTRATION WTH YOUR REPLY.

IT WILL BE APPRECIATED IF YOUR DECISION IS EXPEDITED AS MUCH AS POSSIBLE.

IN VIEW OF THE TAX PROVISIONS QUOTED IN YOUR LETTER, AND CONTAINED IN THE PROPOSALS, EACH BIDDER IS PRESUMED TO HAVE INCLUDED IN THE PRICE BID ALL APPLICABLE FEDERAL, STATE, COUNTY, AND MUNICIPAL TAXES WHICH WERE IN EFFECT AT THE TIME THE OFFER WAS MADE. SINCE THE PRICE UNDER A CONTRACT OF THIS CHARACTER NORMALLY BECOMES FIXED AS OF THE DATE OF THE AWARD IT FOLLOWS THAT IF ANY SUBSEQUENTLY LEVIED TAXES WERE TO BE INCLUDED IN THE CONTRACT PRICE A RESERVATION TO THAT EFFECT HAD TO BE SPECIFICALLY MADE. SUCH A RESERVATION WAS MADE, BUT BY ITS SPECIFIC TERMS IT ONLY COVERED ADJUSTMENTS IN THE CASE OF CERTAIN FUTURE TAX CHANGES OR IMPOSITIONS FEDERAL IN NATURE. NO PROVISION WHATEVER WAS MADE FOR ANY ADJUSTMENT IN CONTRACT PRICE TO COVER NEW OR ADDITIONAL STATE, COUNTY, OR MUNICIPAL TAXES IMPOSED AFTER THE CONTRACT WAS MADE. THUS THE INTENTION OF THE PARTIES, AS EXPRESSED IN THE CLEAR WORDS OF THE AGREEMENT, WAS THAT THE CONTRACT PRICE SHOULD INCLUDE ALL FEDERAL, STATE, COUNTY, AND MUNICIPAL TAXES IN EFFECT WHEN THE CONTRACT WAS MADE, AND THAT THE CONTRACT PRICE SHOULD BE THEREAFTER INCREASED ONLY TO TAKE CARE OF CHANGES IN " FEDERAL TAXES MADE APPLICABLE DIRECTLY UPON THE PRODUCTION, MANUFACTURE OR SALE" OF THE SUPPLIES COVERED BY THE CONTRACT AND PAID BY THE CONTRACTOR THEREON. CONSEQUENTLY, THERE IS NO AUTHORITY FOR INCREASING THE STIPULATED PRICE UNDER THE CONTRACTS CITED IN YOUR LETTER TO INCLUDE ADDITIONAL STATE TAXES ASSESSED PURSUANT TO THE NEW YORK CIGARETTE TAX LAW OF MAY 17, 1939.