B-144621, DEC. 12, 1961

B-144621, DEC. 12, 1961

TO MR. JOHN J. SULLIVAN, JR.:

REFERENCE IS MADE TO YOUR LETTER DATED DECEMBER 5, 1961, IN REGARD TO A QUESTION SUBMITTED FOR OUR DECISION BY THE DEPARTMENT OF THE ARMY. THE QUESTION INVOLVES THE PROPRIETY OF DEDUCTING FROM THE BID OF YOUR CLIENT, E. D. ETNYRE AND COMPANY, THE 3 1/2 PERCENT ILLINOIS RETAILERS' OCCUPATION TAX WHICH YOUR CLIENT INCLUDED IN ITS BID IN RESPONSE TO INVITATION FOR BIDS NO. DA-ENG-11-184-61-B-20-JD WHICH CALLED FOR FURNISHING 50 BITUMINOUS MATERIAL DISTRIBUTORS. THIS PROCUREMENT, AS YOU KNOW, HAS BEEN THE SUBJECT OF TWO PREVIOUS DECISIONS BY OUR OFFICE, B-144621 DATED AUGUST 1 AND SEPTEMBER 27, 1961.

YOU MAKE THE FOLLOWING CONTENTIONS IN YOUR LETTER:

"* * * WE ARE INFORMED, HOWEVER, AND IT APPEARS TO BE THE CASE, THAT IN FEBRUARY OF 1961, THE UNITED STATES DISTRICT COURT IN ILLINOIS STRUCK DOWN THE APPLICABLE SECTION OF THE ILLINOIS OCCUPATIONAL USE TAX AS UNCONSTITUTIONAL SINCE NO EXEMPTION WAS AFFORDED THE UNITED STATES. THIS JUDGMENT OF THE DISTRICT COURT STANDS UNREVERSED, ALTHOUGH THE CASE HAS BEEN REMANDED FOR FURTHER PROCEEDINGS AND THE JUDGMENT VACATED. THE REMAND WAS STATED TO BE "WITHOUT PREJUDICE TO CONSIDERATION BY THAT COURT OF ANY APPLICATION BY APPELLEES FOR SUCH TEMPORARY EQUITABLE RELIEF AS THEY MAY REQUEST PENDING THE FURTHER PROCEEDINGS HEREBY ORDERED.'

"IT ALSO APPEARS FROM AVAILABLE INFORMATION THAT THE SUPREME COURT OF ILLINOIS, IN PEOPLE EX REL HOLLAND COAL COMPANY V. ISAACS, DIRECTOR OF REVENUE, REPORTED IN 176 N.E. 2D 889, ALSO STRUCK DOWN THE APPLICABLE SECTION OF THE OCCUPATIONAL USE TAX STATUTE AS BEING UNCONSTITUTIONAL FOR THE SAME OR SIMILAR REASONS AS DID THE DISTRICT COURT.

"IT ALSO APPEARS FROM THE RECORD, AND WE UNDERSTAND THAT THE COMPTROLLER HAS BEEN SO ADVISED BY THE DEPARTMENT OF JUSTICE, THAT THE DEPARTMENT OF JUSTICE WILL CONTINUE TO PRESS ITS POSITION BEFORE THE DISTRICT COURT IN THE MATHIESON CASE.

"IN VIEW OF THE FOREGOING, ETNYRE'S POSITION IS NOW THAT THERE IS NO APPLICABLE STATE USE TAX WITHIN THE MEANING OF PARAGRAPH 8, PAGE NO. 14 OF THE INVITATION, AND SUBMITS THAT ITS BID SHOULD BE EVALUATED AS BEFORE, IN THE LIGHT OF THE HOLLAND CASE AND THE UNREVERSED JUDGMENT OF THE DISTRICT COURT IN THE MATHIESON CASE.

"ETNYRE WILL, OF COURSE, ASSUME RESPONSIBILITY FOR THE PAYMENT OF ANY TAX WHICH MAY ULTIMATELY BE ASSESSED, BUT DOES NOT NOW INCLUDE THIS AMOUNT IN ITS BID. WE FEEL THAT THE REPRESENTATION IS NECESSARY IN VIEW OF THE FACT THAT THE ILLINOIS LEGISLATURE IS SAID TO HAVE ENACTED A NEW OCCUPATIONAL USE TAX WHICH DOES NOT INCLUDE CERTAIN OF THE EXEMPTIONS, SAID TO HAVE OFFENDED CONSTITUTIONAL REQUIREMENTS IN BOTH THE HOLLAND AND THE MATHIESON CASES. IN VIEW OF THE POSTURE OF THE MATHIESON CASE, IN VIEW OF THE LANGUAGE IN THE DISTRICT COURT OPINION, AND IN VIEW OF OUR OWN APPRAISAL OF ITS CONSTITUTIONAL VALIDITY, WE DO NOT FEEL THAT THIS PROVISION IS IMMUNE FROM THE CONSTITUTIONAL ATTACK WHICH IS BEING MADE UPON IT BY THE MATHIESON COMPANY AND BY THE DEPARTMENT OF JUSTICE, AND WE THEREFORE RESPECTFULLY SUBMIT THAT THE AMOUNT OF ANY SUCH TAX OUGHT NOT TO BE ENGRAFTED ON THE ETNYRE BID IN CONNECTION WITH THE SUBJECT PROCUREMENT.'

UNDER THE COMPETITIVE BIDDING STATUTES AWARDEES OF CONTRACTS FOR SUPPLIES AND SERVICES MUST BE MADE TO THE LOWEST RESPONSIVE AND RESPONSIBLE BIDDERS. GENERALLY THE POINT IN TIME WHICH GOVERNS DETERMINATION OF THE RELATIVE RANK OF BIDDERS AS TO PRICES SUBMITTED IS THE TIME OF CONTRACT AWARD. WE SEE NO JUSTIFIABLE BASIS FOR MAKING ANY EXCEPTION UNDER THE FACTS OF THIS CASE.

AS WE NOTE IN OUR DECISION OF TODAY TO THE SECRETARY OF THE ARMY, COPY ENCLOSED, BECAUSE OF THE ACTION OF THE UNITED STATES SUPREME COURT IN VACATING THE JUDGMENT OF THE DISTRICT COURT IN UNITED STATES ET AL. V. DEPARTMENT OF REVENUE ET AL., 191 F.SUPP. 723, AND REMANDING THE CASE FOR FURTHER CONSIDERATION, THE QUESTION CONCERNING THE CONSTITUTIONALITY OF THE ILLINOIS RETAILERS' OCCUPATION TAX IS, AT BEST, UNSETTLED. THE DISTRICT COURT UPON FURTHER CONSIDERATION MAY, OR MAY NOT, STRIKE DOWN THE TAX. AT THE PRESENT TIME WHEN THE BIDS ARE BEING ACTIVELY EVALUATED TO DETERMINE THE LOW BIDDER, IT CANNOT BE SAID THAT THE TAX STATUTE IS UNCONSTITUTIONAL AND, THUS, NOT APPLICABLE TO ETNYRE'S BID. IN THE ABSENCE OF A DEFINITIVE RESOLUTION OF THE CONSTITUTIONAL QUESTION BY THE FEDERAL COURTS, WE MUST, OF NECESSITY, ASSUME THAT THE TAX STATUTE IS VALID. TO HOLD OTHERWISE AND TO PERMIT A REDUCTION IN ETNYRE'S BID BY ELIMINATION OF THE TAX WOULD BE TO ENGAGE IN UNWARRANTED SPECULATION ON FUTURE ACTION TO BE TAKEN BY A COURT ON A QUESTION IMMERSED IN UNCERTAINTY.

IT SHOULD ALSO BE NOTED THAT ALTHOUGH THE DISTRICT COURT MAY, UPON REMAND OF THE CASE, GRANT TEMPORARY EQUITABLE RELIEF IN THE FORM OF A PRELIMINARY INJUNCTION RESTRAINING THE STATE OF ILLINOIS FROM COLLECTING THE TAX, SUCH ACTION WOULD NOT BE DETERMINATIVE OF THE VALIDITY OF THE TAX SINCE A PRELIMINARY INJUNCTION IS MERELY PROVISIONAL IN NATURE AND ITS PURPOSE IS TO PRESERVE THE SUBJECT IN CONTROVERSY IN ITS THEN EXISTING CONDITION UNTIL TRIAL ON THE MERITS. SEE 43 C.J.S. INJUNCTIONS SEC. 2 AND AUTHORITIES THERE CITED.

IN VIEW OF THE PRESENT STATUS OF THE TAX QUESTION WE MUST CONCLUDE, THEREFORE, THAT ETNYRE'S BID SHOULD BE EVALUATED ON THE BASIS THAT THE TAX IS APPLICABLE AND NOT DEDUCTIBLE.