A-33463, OCTOBER 7, 1930, 10 COMP. GEN. 157

A-33463, OCTOBER 7, 1930, 10 COMP. GEN. 157

PHILLIPINE ISLANDS - PERCENTAGE TAX ON BUILDING CONSTRUCTION THE PERCENTAGE TAX ON CONSTRUCTION WORK IMPOSED BY THE PHILIPPINE GOVERNMENT IS AGAINST THE CONTRACTOR, AND WHEN THE AMOUNT THEREOF IS INCLUDED IN A LUMP-SUM PRICE FOR THE CONSTRUCTION OF A BUILDING FOR THE UNITED STATES GOVERNMENT, THE CONTRACT MAKING NO PARTICULAR MENTION THEREOF, THE UNITED STATES IS REQUIRED TO PAY THE FULL CONTRACT PRICE AGREED UPON. 9 COMP. GEN 180 DISTINGUISHED.

DECISION BY COMPTROLLER GENERAL MCCARL, OCTOBER 7, 1930:

JOHN GORDON HAS REQUESTED REVIEW OF THE ACTION OF THIS OFFICE IN DISALLOWING, JUNE 13, 1930, HIS CLAIM 0297904 FOR THE AMOUNT OF $417.37 AND $239.56 REPRESENTING THE AMOUNT OF TAX OF 1 PERCENT IMPOSED BY THE PHILIPPINE GOVERNMENT ON CONSTRUCTION WORK FOR THE UNITED STATES GOVERNMENT UNDER CONTRACTS NOS. W-671-QM-6869 AND W-671-QM-6870, BOTH DATED JUNE 24, 1929, WHICH AMOUNT WAS WITHHELD BY THE WAR DEPARTMENT FROM THE PRICE FIXED UNDER THE CONTRACTS.

THE BASIS FOR THE ADMINISTRATIVE ACTION IS STATED TO HAVE BEEN AS FOLLOWS:

3. SECTION 1462 OF THE ADMINISTRATIVE CODE OF THE PHILIPPINE ISLANDS, AS AMENDED, PROVIDES, IN PART, FOR A TAX OF ONE PER CENT ON THE GROSS RECEIPTS OF CONSTRUCTION WORK CONTRACTORS TO BE PAID TO THE PHILIPPINE GOVERNMENT.

4. THE JUDGE ADVOCATE GENERAL OF THE ARMY IN OPINION RENDERED NOVEMBER 9, 1929 (AS PUBLISHED IN BULLETIN NO. 2, HEADQUARTERS PHILIPPINE DEPARTMENT, NOV. 12, 1929), HELD THAT SALES TO THE U.S. GOVERNMENT OR TO ANY OF ITS INSTRUMENTALITIES ARE NOT WITHIN THE SCOPE OF THE PHILIPPINE SALES TAX STATUTES.

THE COMPTROLLER GENERAL OF THE UNITED STATES SIMILARLY HELD, DECISION A- 28860, NOVEMBER 2, 1929, THAT:

"THE PAST PRACTICE OF THE ACCOUNTING OFFICERS OF THE GOVERNMENT IN ALLOWING CLAIMS FOR THE AMOUNT OF CUSTOMS DUTIES IMPOSED BY THE PHILIPPINE GOVERNMENT ON GOODS OR MERCHANDISE IMPORTED INTO THE PHILIPPINE ISLANDS BY THE UNITED STATES GOVERNMENT FOR ITS OWN USE OR ANY OF ITS INSTRUMENTALITIES, INCLUDING GOODS AND MERCHANDISE FOR SALE IN GOVERNMENT COMMISSARIES, MUST BE DISCONTINUED PENDING A DECISION BY THE SUPREME COURT OF THE UNITED STATES SUSTAINING THE LEGALITY OF SUCH CHARGES OR FURTHER LEGISLATION BY THE CONGRESS WITH RESPECT THERETO.'

THE WITHHOLDING OF ONE PER CENT ON THE CONTRACT IN QUESTION WAS BASED UPON A DOUBT OF THIS OFFICE AS TO THE EXTENT OF APPLICATION OF THE PRINCIPLES SO PROMULGATED.

THE PERCENTAGE TAX ON CONSTRUCTION WORK IMPOSED BY THE PHILIPPINE GOVERNMENT IN THIS INSTANCE IS AGAINST THE CONTRACTOR BASED ON THE AMOUNT OF CONSTRUCTION PERFORMED, WHETHER PRIVATE OR PUBLIC. THE CONTRACTOR PRESENTED HIS BID TO PERFORM THE CONSTRUCTION WORK FOR THE UNITED STATES GOVERNMENT AT A FIXED PRICE WHICH WAS ACCEPTED BY THE GOVERNMENT. THERE WAS NO MENTION MADE BY EITHER PARTY AS TO THE ELEMENTS OR FACTORS INCLUDED IN FIXING SUCH PRICE AND THE CONTRACT MAKES NO MENTION, WHATEVER, OF THE PAYMENT OF ANY TAX, EITHER BY THE CONTRACTOR OR THE GOVERNMENT. THE PRINCIPLE HERE INVOLVED IS SOMEWHAT ANALOGOUS TO THAT INVOLVED IN THE CASE OF LASH'S PRODUCTS COMPANY V. UNITED STATES, 278, U.S. 175, 176, CONCERNING AN INTERNAL REVENUE SALES TAX IMPOSED ON THE MANUFACTURER, WHICH WAS ADDED TO THE PURCHASE PRICE, WHEREIN THE COURT HELD AS FOLLOWS:

* * * THE PRICE IS THE TOTAL SUM PAID FOR THE GOODS. THE AMOUNT ADDED BECAUSE OF THE TAX IS PAID TO GET THE GOODS AND FOR NOTHING ELSE. THEREFORE IT IS PART OF THE PRICE, AND IF THE STATUTE WERE TAKEN LITERALLY, AS THERE WOULD BE NO REASON FOR NOT TAKING IT IF IT WERE NOW PASSED FOR THE FIRST TIME, THERE MIGHT BE DIFFICULTY IN ACCEPTING THE COMMISSIONER'S DISTINCTION EVEN IF THE TAX WERE MADE A SEPARATE ITEM OF THE BILL. * * *

EVEN IF THE CONTRACTOR DID NOT TAKE INTO CONSIDERATION THE TAX IMPOSED ON CONSTRUCTION WORK BY THE PHILIPPINE GOVERNMENT IN MAKING HIS BID, EVIDENCE OF WHICH IS IN THE RECORD OTHER THAN IN THE CONTRACT ITSELF, THE CONTRACTOR LATER HAVING PAID THE TAX WHICH THE PHILIPPINE GOVERNMENT REFUSES TO REFUND, THE UNITED STATES GOVERNMENT IS NOT RELIEVED FROM PAYING THE FULL CONTRACT PRICE AGREED UPON. SEE THE DECISION OF THIS OFFICE DATED NOVEMBER 28, 1927, 7 COMP. GEN. 360, INVOLVING A STATE GASOLINE TAX IMPOSED ON THE DEALER, WHEREIN IT WAS HELD:

* * * WHILE THE FEDERAL GOVERNMENT IS NOT LIABLE FOR STATE TAXES AS SUCH, THE FACT THAT THE AMOUNT OF A STATE TAX WAS TAKEN INTO CONSIDERATION BY THE DEALER IN ARRIVING AT THE PRICE STIPULATED IN ITS BID DOES NOT PREVENT OR RELIEVE THE GOVERNMENT FROM PAYING THE FULL CONTRACT PRICE AGREED UPON. 1 COMP. GEN. 229, 584; 2 ID. 81; 3 ID. 348; 4 ID. 1041; 5 ID. 1022.

THEREFORE, IN THIS CASE, EVEN IF THE PERCENTAGE TAX ON CONSTRUCTION FOR THE UNITED STATES GOVERNMENT COULD BE CONSIDERED UNLAWFUL AS CONSTITUTING THE IMPOSITION OF A TAX BY THE DERIVATIVE GOVERNMENT OF THE PHILIPPINE ISLANDS AGAINST THE SOVEREIGN GOVERNMENT OF THE UNITED STATES, THE UNITED STATES GOVERNMENT WOULD, NEVERTHELESS, BE LIABLE TO THIS CONTRACTOR FOR THE FULL PRICE FIXED IN THE CONTRACT FOR THE CONSTRUCTION WORK, AND ANY CLAIM BY THE UNITED STATES FOR THE AMOUNT OF THE TAX WOULD BE REQUIRED TO BE FILED WITH THE PHILIPPINE GOVERNMENT.

THIS CASE IS DISTINGUISHABLE FROM THAT CONSIDERED IN THE DECISION OF NOVEMBER 2, 1929, 9 COMP. GEN. 180, ON THE BASIS OF WHICH THE ADMINISTRATIVE OFFICE WITHHELD THE AMOUNT OF THE PERCENTAGE TAX ON CONSTRUCTION IN THIS CASE, FOR THE REASON THAT THERE THE CUSTOMS DUTY, OR TAX, WAS IMPOSED DIRECTLY AGAINST THE UNITED STATES ON SHIPMENTS OF GOODS CONSIGNED TO IT, AND VOUCHERS WERE PRESENTED TO THIS OFFICE BY THE PHILIPPINE GOVERNMENT FOR PAYMENT, THE AMOUNTS OF WHICH WERE DISALLOWED.

ACCORDINGLY, UPON REVIEW THERE IS CERTIFIED DUE CLAIMANT THE SUM OF $417.37 PLUS $239.56, OR A TOTAL OF $656.93, PREVIOUSLY DISALLOWED BY THIS OFFICE.