B-99452, JANUARY 8, 1951, 30 COMP. GEN. 275

B-99452: Jan 8, 1951

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1951: REFERENCE IS MADE TO A LETTER DATED OCTOBER 16. THERE WAS ALLOWED THE CONTRACTOR THE SUM OF $6. 618.78 AND $134.91 WERE DISALLOWED. WAS DISALLOWED FOR THE REASON THAT "THE TERMS OF THE TAX CLAUSE DO NOT REFER TO STATE OR LOCAL TAXES AND DO NOT PROVIDE FOR REIMBURSING THE CONTRACTOR FOR ANY SUCH TAXES IMPOSED AFTER THE DATE OF AWARD.'. IT IS CONTENDED IN THE LETTER OF OCTOBER 16. IS NOT LIMITED TO TAXES IMPOSED BY ANY TAXING AUTHORITY AND PAID BY THE CONTRACTOR TO ANY PERSON. IT IS STATED IN THE SAID LETTER THAT THE TAX CLAUSE HERE INVOLVED WAS THE IDENTICAL TAX CLAUSE CONSIDERED IN 27 COMP. THERE WAS ALLOWED THE CONTRACTOR THERE INVOLVED THE AMOUNT OF THE TAX APPLICABLE TO THE CONTRACT WORK AND PAID TO THE ARIZONA STATE TAX COMMISSION AS GROSS PROCEEDS TAX.

B-99452, JANUARY 8, 1951, 30 COMP. GEN. 275

TAXES - STATE - GOVERNMENT LIABILITY FOR REIMBURSEMENT UNDER CONSTRUCTION CONTRACT A TAX CLAUSE IN A CONSTRUCTION CONTRACT WHICH PROVIDES FOR THE REIMBURSEMENT OF TAXES PAID BY THE CONTRACTOR "TO THE FEDERAL GOVERNMENT, OR ANY PERSON," REFERS TO FEDERAL TAXES ONLY, THE WORDS ,ANY PERSON" HAVING REFERENCE ONLY TO PERSONS ACTING FOR OR ON BEHALF OF THE FEDERAL GOVERNMENT, AND NOT TO STATE OR LOCAL OFFICIALS, THEREFORE, THE CONTRACTOR MAY NOT BE REIMBURSED AN AMOUNT REPRESENTING AN ARIZONA STATE EXCISE TAX PAID IN CONNECTION WITH THE CONTRACT WORK. 27 COMP. GEN. 767, DISTINGUISHED.

COMPTROLLER GENERAL WARREN TO E. W. DUHAME CONSTRUCTION COMPANY, JANUARY 8, 1951:

REFERENCE IS MADE TO A LETTER DATED OCTOBER 16, 1950, FROM STEWART, SHAW AND MURPHEY, REQUESTING, IN YOUR BEHALF, REVIEW OF THAT PART OF SETTLEMENT DATED SEPTEMBER 28, 1950, WHICH DISALLOWED $3,618.78 OF THE SUM CLAIMED, REPRESENTING ARIZONA STATE EXCISE TAX PAID BY YOU IN CONNECTION WITH CONTRACT NO. W911-ENG-966, DATED MAY 28, 1942, COVERING THE CONSTRUCTION OF BUILDINGS AND STRUCTURES AT THE NAVAJO ORDNANCE DEPOT, FLAGSTAFF, ARIZONA.

THE RECORD SHOWS THAT BY LETTER DATED MARCH 18, 1950, YOU FILED CLAIM IN THE CLAIMS DIVISION, GENERAL ACCOUNTING OFFICE, IN THE AMOUNT OF $9,906.54 REPRESENTING AN AMOUNT PAID BY YOU TO THE ARIZONA STATE TAX COMMISSION AS GROSS PROCEEDS TAX UNDER CERTAIN CONSTRUCTION CONTRACTS WITH THE DEPARTMENT OF THE ARMY. BY SETTLEMENT OF SEPTEMBER 28, 1950, THERE WAS ALLOWED THE CONTRACTOR THE SUM OF $6,152.85; THE SUMS OF $3,618.78 AND $134.91 WERE DISALLOWED. THE SUM HERE INVOLVED, $3,618.78, WAS DISALLOWED FOR THE REASON THAT "THE TERMS OF THE TAX CLAUSE DO NOT REFER TO STATE OR LOCAL TAXES AND DO NOT PROVIDE FOR REIMBURSING THE CONTRACTOR FOR ANY SUCH TAXES IMPOSED AFTER THE DATE OF AWARD.'

IT IS CONTENDED IN THE LETTER OF OCTOBER 16, 1950, THAT THE BROAD LANGUAGE CONTAINED IN THE TAX CLAUSE OF CONTRACT NO. W911-ENG-966, PARAGRAPH NO. 1-39, IS NOT LIMITED TO TAXES IMPOSED BY ANY TAXING AUTHORITY AND PAID BY THE CONTRACTOR TO ANY PERSON. ALSO, IT IS STATED IN THE SAID LETTER THAT THE TAX CLAUSE HERE INVOLVED WAS THE IDENTICAL TAX CLAUSE CONSIDERED IN 27 COMP. GEN. 767, BY VIRTUE OF WHICH, THERE WAS ALLOWED THE CONTRACTOR THERE INVOLVED THE AMOUNT OF THE TAX APPLICABLE TO THE CONTRACT WORK AND PAID TO THE ARIZONA STATE TAX COMMISSION AS GROSS PROCEEDS TAX.

PARAGRAPH 1-39 OF THE CONTRACT HERE UNDER CONSIDERATION PROVIDES AS FOLLOWS:

1-39. ADJUSTMENT OF CONTRACT PRICE BY REASON OF CHANGE IN FEDERAL TAXES: UNLESS OTHERWISE INDICATED, THE PRICES HEREIN INCLUDE ANY FEDERAL TAX OR CHARGE HERETOFORE IMPOSED WHICH IS APPLICABLE TO THE SUPPLIES OR WORK COVERED HEREBY. IF AFTER THE DATE OF A WRITTEN BID, THE FEDERAL GOVERNMENT SHALL IMPOSE, REMOVE, OR CHANGE ANY DUTY, SALES, USE OR EXCISE TAX OR ANY OTHER TAX OR CHARGE DIRECTLY APPLICABLE TO THE SUPPLIES OR WORK COVERED HEREBY OR THE MATERIALS USED IN THE MANUFACTURE, CONSTRUCTION OR SALE OF SUCH SUPPLIES, WORK, OR MATERIALS, WHICH TAX OR CHARGE MUST BE BORNE BY THE CONTRACTOR BECAUSE OF A SPECIFIC CONTRACTUAL OBLIGATION OR BY OPERATION OF LAW, OR, IN CASE OF A DECREASE OR ELIMINATION OF A TAX, WHERE THE CONTRACTOR IS RELIEVED TO THAT EXTENT, AND IF IN CASE OF AN INCREASE IN AN EXISTING TAX OR THE IMPOSITION OF A NEW TAX THE CONTRACTOR HAS PAID SUCH TAX OR CHARGE TO THE FEDERAL GOVERNMENT, OR ANY PERSON, THEN THE PRICES NAMED HEREIN WILL BE INCREASED OR DECREASED ACCORDINGLY AND ANY AMOUNT DUE TO THE CONTRACTOR AS A RESULT OF SUCH CHANGE WILL BE CHARGED TO THE GOVERNMENT AND ENTERED ON VOUCHERS (OR INVOICES) AS A SEPARATE ITEM: PROVIDED, HOWEVER, THAT THE GOVERNMENT RESERVES THE RIGHT TO ISSUE TO THE CONTRACTOR IN LIEU OF SUCH PAYMENT A TAX EXEMPTION CERTIFICATE ACCEPTABLE TO THE FEDERAL GOVERNMENT, AND PROVIDED FURTHER, THAT NOTHING CONTAINED HEREIN SHALL BE CONSTRUED AS REQUIRING THE GOVERNMENT TO REIMBURSE THE CONTRACTOR FOR ANY FEDERAL INCOME TAXES, INCOME SURTAXES OR EXCESS PROFITS TAXES.

IT IS QUITE APPARENT FROM A READING OF THE ABOVE-QUOTED PARAGRAPH THAT IT HAS REFERENCE TO FEDERAL TAXES ONLY. THERE IS NO REFERENCE BY IMPLICATION OR OTHERWISE TO STATE OR LOCAL TAXES. THUS, THERE APPEARS TO BE NO CREDIT IN THE CONTENTION THAT THE SAID CLAUSE HAS REFERENCE TO STATE OR LOCAL TAXES BY THE USE OF THE WORDS "HAS PAID SUCH TAX OR CHARGE TO THE FEDERAL GOVERNMENT, OR ANY PERSON.' (ITALICS SUPPLIED.) BY A READING OF THE TAX CLAUSE AS A WHOLE, IT IS CLEAR THAT THE WORDS "ANY PERSON" HAVE REFERENCE TO ANY PERSON ACTING FOR OR ON BEHALF OF THE FEDERAL GOVERNMENT AND HAVE NO REFERENCE WHATSOEVER TO STATE OR LOCAL OFFICIALS. IT IS A RULE OF CONTRACT CONSTRUCTION THAT THE INTENT AND MEANING OF A CONTRACT ARE NOT TO BE DETERMINED BY THE CONSIDERATION OF AN ISOLATED SECTION OR PROVISIONS THEREOF, BUT THAT THE CONTRACT IS TO BE CONSIDERED IN ITS ENTIRETY AND EACH PROVISION IS TO BE CONSTRUED IN ITS RELATION TO OTHER PROVISIONS AND IN THE LIGHT OF THE GENERAL PURPOSES INTENDED TO BE ACCOMPLISHED BY THE CONTRACTING PARTIES. 13 C.J. 525, 17 C.J.S. 707, AND CASES CITED THEREIN.

THE TAX CLAUSE HERE UNDER CONSIDERATION IS READILY DISTINGUISHABLE FROM THE ONE CONSIDERED AND QUOTED IN 27 COMP. GEN. 767, IN THAT THE TAX CLAUSE THERE INVOLVED HAD REFERENCE TO " ADJUSTMENT OF CONTRACTS BY REASON OF CHANGE IN FEDERAL, STATE OR LOCAL TAXES.' (ITALICS SUPPLIED.) AS STATED ABOVE, THE TAX CLAUSE HERE UNDER CONSIDERATION MAKES NO MENTION OF STATE OR LOCAL TAXES.