B-73965, APRIL 2, 1948, 27 COMP. GEN. 578

B-73965: Apr 2, 1948

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IS NOT ENTITLED THEREUNDER TO PAYMENT OF ANY AMOUNT IN ADDITION TO THE CONTRACT PRICES BY REASON OF THE ENACTMENT OF THE TERRITORIAL GROSS INCOME TAX LAW BY THE LEGISLATURE OF THE TERRITORY OF HAWAII. 1948: REFERENCE IS MADE TO YOUR LETTER OF FEBRUARY 24. AS FOLLOWS: THERE ARE TRANSMITTED COPIES OF BIDS PLACED BY THE SHELL OIL COMPANY. NOTHING WAS ADDED ON THE REVERSE OF THE BIDS AND NO EXCEPTION WAS TAKEN TO ANY OF THE CONDITIONS. THESE BIDS WERE OPENED ON APRIL 24. AFTER ACCEPTANCE BY THIS DEPARTMENT WERE TRANSMITTED TO YOUR BUREAU OF ASHEVILLE. THAT HE HAS BEEN INFORMED THE COMPTROLLER GENERAL'S OFFICE HAS RULED THAT ALL PURCHASES MADE BY FEDERAL AGENCIES ARE SUBJECT TO THIS 2 1/2 PERCENT GROSS TAX.

B-73965, APRIL 2, 1948, 27 COMP. GEN. 578

TAXES - HAWAII GROSS INCOME TAX - CONTRACT PRICE ADJUSTMENT A CONTRACTOR FURNISHING LUBRICATING OIL TO THE POST OFFICE AT HONOLULU, TERRITORY OF HAWAII, UNDER CONTRACTS FOR PRICE ADJUSTMENT ON ACCOUNT OF TAXES IN THE EVENT THAT THE CONGRESS SUBSEQUENTLY CHANGES OR IMPOSES A TAX APPLICABLE DIRECTLY UPON THE PRODUCTION, MANUFACTURE OR SALE OF OIL, IS NOT ENTITLED THEREUNDER TO PAYMENT OF ANY AMOUNT IN ADDITION TO THE CONTRACT PRICES BY REASON OF THE ENACTMENT OF THE TERRITORIAL GROSS INCOME TAX LAW BY THE LEGISLATURE OF THE TERRITORY OF HAWAII.

COMPTROLLER GENERAL WARREN TO THE POSTMASTER GENERAL, APRIL 2, 1948:

REFERENCE IS MADE TO YOUR LETTER OF FEBRUARY 24, 1948, AS FOLLOWS:

THERE ARE TRANSMITTED COPIES OF BIDS PLACED BY THE SHELL OIL COMPANY, INC., DILLINGHAM BUILDING, HONOLULU, T.H., FOR FURNISHING SAE 40 AND SAE- 50 ENGINE LUBRICATING OIL TO THE POST OFFICE AT HONOLULU DURING THE FISCAL YEAR BEGINNING JULY 1, 1947. NOTHING WAS ADDED ON THE REVERSE OF THE BIDS AND NO EXCEPTION WAS TAKEN TO ANY OF THE CONDITIONS.

THESE BIDS WERE OPENED ON APRIL 24, 1947, AND AFTER ACCEPTANCE BY THIS DEPARTMENT WERE TRANSMITTED TO YOUR BUREAU OF ASHEVILLE, NORTH CAROLINA, WITH A LETTER SIGNED BY THE FOURTH ASSISTANT POSTMASTER GENERAL ON MAY 7, 1947.

IN A LETTER OF SEPTEMBER 11, 1947, HEREWITH, THE POSTMASTER STATES THAT AFTER THE SUBMISSION OF THESE BIDS, THE TERRITORIAL LEGISLATURE PASSED A BILL PROVIDING FOR A 2 1/2 PERCENT TERRITORIAL GROSS INCOME TAX EFFECTIVE JULY 1, 1947, AND THE SHELL OIL COMPANY ADDED THIS TAX TO ITS BILLS FOR OIL DELIVERED SUBSEQUENT TO JULY 1. THIS TAX HAS NOT BEEN PAID BY THE POSTMASTER BUT HE STATES IN A LETTER OF JANUARY 8, ATTACHED, THAT HE HAS BEEN INFORMED THE COMPTROLLER GENERAL'S OFFICE HAS RULED THAT ALL PURCHASES MADE BY FEDERAL AGENCIES ARE SUBJECT TO THIS 2 1/2 PERCENT GROSS TAX.

AS THE SHELL OIL COMPANY CONTINUES TO ADD THE TAX TO ITS INVOICES, A DECISION IS REQUESTED AS TO WHETHER UNDER OUR CONTRACT WITH THE SHELL OIL COMPANY THE POSTMASTER CAN BE AUTHORIZED TO MAKE PAYMENTS IN THE AMOUNT OF THE TAX IN ADDITION TO THE CONTRACT PRICE FOR THE OIL.

IT IS A UNIVERSALLY ACCEPTED RULE OF LAW THAT VALID CONTRACTS ARE TO BE ENFORCED AND PERFORMED AS WRITTEN AND THE FACT THAT SUPERVENING OR UNFORESEEN CAUSES RENDER PERFORMANCE MORE BURDENSOME OR LESS PROFITABLE, OR EVEN OCCASION A LOSS, IS NOT SUFFICIENT TO EXCUSE PERFORMANCE OR ENTITLE A CONTRACTOR TO ADDITIONAL COMPENSATION. SIMPSON V. UNITED STATES, 172 U.S. 372, 379; DAY V. UNITED STATES, 245 U.S. 159, 161; UNITED STATES V. SPEARIN, 248 U.S. 132, 136; COLUMBUS RAILWAY AND POWER COMPANY V. COLUMBUS, 249 U.S. 339, 412. HENCE, THERE CAN BE NO OBLIGATION ON THE PART OF THE UNITED STATES TO REIMBURSE A CONTRACTOR FOR THE AMOUNT OF A TAX OR OTHER CHARGE REQUIRED TO BE PAID BY HIM IN CONNECTION WITH THE PERFORMANCE OF HIS GOVERNMENT CONTRACT AND WHICH WAS NOT INCLUDED IN HIS QUOTED PRICES UNLESS THE CONTRACT EXPRESSLY SO PROVIDES.

IN THIS CONNECTION, PARAGRAPH 6 OF THE CONDITIONS OF THE BIDS IN THIS CASE PROVIDES:

6. 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 MAKE 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.

AS PROVIDED THEREIN, THE CONTRACT PRICES ARE SUBJECT TO ADJUSTMENT ON ACCOUNT OF THE PAYMENT OF TAXES ONLY WHERE THE CONGRESS OF THE UNITED STATES HAS SUBSEQUENTLY CHANGED OR IMPOSED A TAX WHICH IS APPLICABLE DIRECTLY UPON THE PRODUCTION, MANUFACTURE OR SALE OF THE OIL TO BE FURNISHED UNDER THE CONTRACTS. THE TAX HERE INVOLVED IS ON THE GROSS INCOME OF THE CONTRACTOR AND NOT DIRECTLY UPON THE PRODUCTION, MANUFACTURE OR SALE OF THE OIL. SEE JAMES V. DRAVO CONTRACTING CO., 302 U.S. 134, 149; AND ALABAMA V. KING AND BOOZER, 314 U.S. 1, 14. FURTHERMORE, THE TAX WAS LEVIED BY THE LEGISLATURE OF THE TERRITORY OF HAWAII AND NOT BY THE CONGRESS OF THE UNITED STATES. CONSEQUENTLY, IT MUST BE HELD THAT THE SAID TAX DOES NOT COME WITHIN THE SCOPE OF THE TAX CLAUSES OF THE CONTRACTS.

ACCORDINGLY, YOU ARE ADVISED THAT PAYMENT IS NOT AUTHORIZED OF ANY AMOUNT IN ADDITION TO THE CONTRACT PRICES ON ACCOUNT OF THE ENACTMENT OF THE TERRITORIAL GROSS INCOME TAX LAW.