B-215543, SEP 11, 1984, OFFICE OF GENERAL COUNSEL.

B-215543, SEP 11, 1984, OFFICE OF GENERAL COUNSEL.

GENERAL ACCOUNTING OFFICE - DECISIONS - ABEYANCE - PENDING COURT, QUASI- JUDICIAL, APPELLATE BOARD, ETC. ACTION DIGEST: THE QUESTION RAISED BY THE VETERANS DEPARTMENT AS TO ITS AUTHORITY UNDER A THEORY OF MUTUAL MISTAKE TO REIMBURSE FEDERAL CONTRACTORS FOR CERTAIN TAXES THAT THE STATE OF WASHINGTON IS IMPOSING UPON THEM AS A CONSEQUENCE OF THE SUPREME COURT DECISION IN WASHINGTON V. UNITED STATES, 103 S.CT. 1344 (1983), IS CURRENTLY BEFORE THE U.S. DISTRICT IN WASHINGTON STATE WHICH IS CONSIDERING THE CASE ON REMAND. THE SUPREME COURT'S DECISION IN THE CASE REVERSED THE DISTRICT COURT'S DETERMINATION THAT THE WASHINGTON STATE SALES AND USE TAX STATUTE WHICH TAXES FEDERAL CONTRACTORS WAS UNCONSTITUTIONAL. HOWEVER, SINCE THE ISSUE RAISED HERE APPEARS TO BE ONE OF THE ISSUES PENDING BEFORE THE DISTRICT COURT, OUR OFFICE, IN ACCORDANCE WITH ITS CONSISTENT POSITION IN SUCH SITUATIONS, WILL NOT RENDER OUR OPINION ON THE MATTER.

JOHN P. MURPHY, ESQ. GENERAL COUNSEL VETERANS ADMINISTRATION

DEAR MR. MURPHY:

THIS IS IN RESPONSE TO YOUR REQUEST FOR OUR ADVICE AS TO WHETHER THE VETERANS ADMINISTRATION (VA) MAY REIMBURSE ITS CONTRACTORS FOR CERTAIN TAXES THAT THE STATE OF WASHINGTON IS IMPOSING ON THEM AS A CONSEQUENCE OF A DECISION OF THE SUPREME COURT IN WASHINGTON V. UNITED STATES, 103 S.CT. 1344 (1983).

PRIOR TO THE SUPREME COURT'S DECISION IN THAT CASE, THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF WASHINGTON STATE HAD HELD THAT WASHINGTON STATE'S SALES AND USE STATUTES, WHICH IMPOSE TAXES UPON FEDERAL CONTRACTORS BUT NOT UPON NON-FEDERAL CONTRACTORS, UNLAWFULLY DISCRIMINATE AGAINST THOSE WHO DEAL WITH THE UNITED STATES IN VIOLATION OF THE SUPREMACY CLAUSE. THE DISTRICT COURT ENJOINED THE FUTURE ASSESSMENT AND COLLECTION OF THE SALES TAX FROM FEDERAL CONTRACTORS, AND ORDERED THE REFUND OF SALES TAXES THAT HAD ALREADY BEEN COLLECTED BY THE STATE OF WASHINGTON. THE COURT OF APPEALS FOR THE NINTH CIRCUIT AFFIRMED THE DISTRICT COURT'S OPINION. SEE UNITED STATES V. STATE OF WASHINGTON, 654 F.2D 570 (9TH CIR. 1981). HOWEVER, LAST TERM THE SUPREME COURT HELD THAT APPLICATION OF THE STATE OF WASHINGTON SALES AND USE TAX TO FEDERAL CONTRACTORS DID NOT VIOLATE THE SUPREMACY CLAUSE. THE EFFECT OF THAT DECISION WAS TO REVERSE THE PERMANENT INJUNCTION ISSUED BY THE DISTRICT COURT ON NOVEMBER 3, 1977.

APPARENTLY, WASHINGTON STATE IS NOW IN THE PROCESS OF ASSESSING THE TAX UPON FEDERAL CONTRACTORS FOR THE PERIOD DURING WHICH THE INJUNCTION WAS IN EFFECT. YOUR QUESTION IS WHETHER VA HAS THE AUTHORITY TO REIMBURSE VA CONTRACTORS FOR ANY SUCH TAX ASSESSMENTS THE CONTRACTORS ARE COMPELLED TO PAY TO THE STATE OF WASHINGTON. YOU SUGGEST THAT IN ACCORDANCE WITH A LEGAL OPINION YOU RECEIVED FROM THE DEPARTMENT OF JUSTICE, REIMBURSEMENT MIGHT BE POSSIBLE UNDER A THEORY OF MUTUAL MISTAKE. THAT IS, BASED ON THE "REASONABLE" BELIEF OF BOTH VA AND THE CONTRACTORS THAT UNDER THE INJUNCTION ISSUED BY THE DISTRICT COURT, THE TAX IN QUESTION WAS NOT VALID AND COULD NOT BE COLLECTED BY THE STATE OF WASHINGTON, THE CONTRACTORS, WITH THE APPROVAL OF VA, IF NOT AT VA'S REQUEST, MISTAKENLY FAILED TO INCLUDE THE TAX IN THEIR BIDS AS THEY OTHERWISE WOULD HAVE DONE.

BY ORDER, DATED MAY 17, 1984, THE DISTRICT COURT, CONSIDERING THE CASE ON REMAND, INDICATED THAT WHILE THE CONTROVERSY BETWEEN THE PLAINTIFF, UNITED STATES, AND THE DEFENDANT, WASHINGTON STATE, HAD BEEN RESOLVED BY THE DECISION OF THE SUPREME COURT, THE COURT WOULD RETAIN JURISDICTION, AT LEAST TEMPORARILY, TO CONSIDER ISSUES RAISED BY CERTAIN PLAINTIFF- INTERVENORS THAT HAD BEEN FEDERAL CONTRACTORS IN THE STATE OF WASHINGTON DURING THE PERIOD THE INJUNCTION HAD BEEN IN EFFECT. THE PLAINTIFF- INTERVENORS APPARENTLY DO NOT INCLUDE THOSE CONTRACTORS WHO HAD CONTRACTS WITH VA DURING THE PERIOD IN QUESTION. THE PLAINTIFF-INTERVENORS HAD FILED A MOTION WITH THE COURT THAT THEY BE ALLOWED TO ASSERT CROSS-CLAIMS AGAINST THE UNITED STATES FOR PAYMENT OF ANY SALES TAXES DETERMINED TO BE OWED TO THE STATE OF WASHINGTON. IN ITS ORDER, THE DISTRICT COURT RECOMMENDED THAT THE UNITED STATES SETTLE THE OUTSTANDING CLAIMS ASSERTED BY THESE PLAINTIFF-INTERVENORS. THE ORDER FURTHER STATED THAT IF THE SETTLEMENT OF ALL CLAIMS HAD NOT BEEN AFFECTED BY SEPTEMBER 15, 1984, THE COURT, WOULD RULE ON THE PLAINTIFF-INTERVENORS PENDING MOTION ON SEPTEMBER 21, 1984, AND MIGHT AT THAT TIME SET A TRIAL DATE TO HEAR ANY UNRESOLVED CLAIMS. WE UNDERSTAND THAT AT LEAST SOME OF THE PLAINTIFF-INTERVENORS HAD CONTRACTS SIMILAR TO THOSE WITH VA'S CONTRACTORS IN THAT THEY DID NOT PROVIDE FOR CONTRACTOR REIMBURSEMENT OF THE SUBJECT TAXES IN THE EVENT THEY WERE JUDICIALLY DETERMINED TO BE VALID.

THUS, IT APPEARS THAT THE QUESTION YOU HAVE RAISED WITH US AS TO THE AUTHORITY OR OBLIGATION OF THE UNITED STATES TO REIMBURSE THE CONTRACTORS UNDER A THEORY OF MUTUAL MISTAKE IS ONE OF THE ISSUES CURRENTLY BEFORE THE COURT WITH RESPECT TO THE CONTRACTS OF THE PLAINTIFF INTERVENORS. IT IS THE CONSISTENT POSITION OF OUR OFFICE NOT TO EXPRESS OUR VIEWS WITH RESPECT TO MATTERS WHICH ARE THE SUBJECT OF PENDING LITIGATION. SEE B-196981, JANUARY 16, 1981, (COPY ENCLOSED) AND CASES CITED THEREIN.

ACCORDINGLY, WE ARE UNABLE AT THE PRESENT TIME TO ANSWER THE QUESTION POSED IN YOUR SUBMISSION. WE RECOGNIZE, HOWEVER, THAT THE DISTRICT COURT MAY NOT CONSIDER THE APPLICABILITY OF THE MUTUAL MISTAKE THEORY ON THE MERITS OR, IF IT DOES, MAY NOT, BECAUSE OF FACTUAL DISSIMILARITIES OR FOR OTHER REASONS, RESOLVE THE ISSUE TO YOUR SATISFACTION. IN EITHER EVENT, WE WOULD BE WILLING TO CONSIDER THE MATTER FURTHER SHOULD YOUR OFFICE THEN REQUEST US TO DO SO.