B-126542, FEB. 27, 1956

B-126542, FEB. 27, 1956

TO STOKELY-VAN CAMP, INC.:

REFERENCE IS MADE TO LETTER OF DECEMBER 13, 1955, WITH ENCLOSURES, FROM YOUR ATTORNEY, MR. WILLIAM F. WELCH, REQUESTING REVIEW OF THAT PART OF SETTLEMENT DATED NOVEMBER 3, 1955, WHICH DISALLOWED YOUR CLAIM FOR $4,094.01, REPRESENTING INTEREST PAID ON CERTAIN INDIANA GROSS INCOME AND VETERANS BONUS TAXES ASSESSED IN CONNECTION WITH YOUR SEVERAL CONTRACTS, INCLUDING CONTRACT NO. DA 11-009-QM-20639,ENTERED INTO WITH THE DEPARTMENT OF THE ARMY.

YOUR CLAIM FOR THE INTEREST--- APPARENTLY FOR THE PERIOD FROM JANUARY 1 TO MAY 31, 1954, AS INDICATED BY THE SUCCESSOR CONTRACTING OFFICER--- CHARGED IN CONNECTION WITH THE TAX PAYMENT WAS DENIED BY OUR OFFICE PRIMARILY ON THE BASIS THAT ANY ACTION INSTITUTED BY YOU WHICH DELAYED PAYMENT OF THE TAX WAS NOT AUTHORIZED BY THE CONTRACTING OFFICER. REFERENCE WAS MADE IN THE SETTLEMENT TO THE INSTRUCTIONS CONTAINED IN A LETTER DATED MAY 20, 1954, FROM THE DEPARTMENT OF THE ARMY TO YOU WHICH--- IN ADDITION TO CLARIFYING THE OBLIGATIONS OF THE GOVERNMENT UNDER THE APPLICABLE TAX ARTICLE OF THE CONTRACTS--- ADVISED YOU THAT THE GOVERNMENT WOULD NOT BE RESPONSIBLE FOR THE INTEREST CHARGES ASSESSED BECAUSE OF THE DELAYED PAYMENT OF THE TAXES.

IN THE REQUEST FOR REVIEW, AS IN PREVIOUS CORRESPONDENCE, IT IS CONTENDED THAT THE DELAY IN PAYMENT WAS OCCASIONED BY DIRECTIONS YOU RECEIVED FROM STATE AUTHORITIES THAT PAYMENT OF THE TAX WAS NOT TO BE MADE UNTIL RECEIPT OF FORMAL DEMAND. YOU HAVE NOT FURNISHED OUR OFFICE WITH A COPY OF THE NOTICE AND DEMAND RECEIVED BY YOU. IF, AS INDICATED ABOVE, THE INTEREST COVERED THE PERIOD JANUARY 1 TO MAY 31, 1954, IT IS NOT UNDERSTOOD WHY THE STATE OF INDIANA CHARGED YOU INTEREST ON THE PROPOSED ASSESSMENT WHEN THE STATE OFFICIALS NOTIFIED YOU NOT TO PAY THE AMOUNT OF THE TAX ASSESSMENT UNTIL DEMAND WAS MADE. PAYMENT OF THE TAX APPEARS TO HAVE ACTUALLY BEEN MADE BY YOU ON JUNE 9, 1954, AND INSOFAR AS THE RECORD SHOWS, NO DEMAND FOR PAYMENT OF THE TAX HAD BEEN MADE AT THAT TIME. THE RECORD INDICATES THAT THE DELAY AT THE OUTSET IN MAKING THE TAX PAYMENT UNDER PROTEST NOT ONLY RESULTED IN THE ACCRUAL OF THE INTEREST CHARGED BUT OTHERWISE REFLECTED A LACK OF ADHERENCE BY YOU TO THE PROCEDURE SET FORTH IN THE LAST PARAGRAPH AT PAGE 2 OF LETTER DATED NOVEMBER 13, 1953, FROM THE DEPARTMENT OF THE ARMY OUTLINING THE ACTION TO BE TAKEN BY YOUR FIRM. THIS LETTER WAS A DIRECT REPLY TO YOUR LETTER OF OCTOBER 27, 1953, INDICATING YOUR ANTICIPATION THAT STATE AUTHORITIES WOULD MAKE A FORMAL DEMAND FOR TAXES FOR 1951, 1952 AND 1953 ON SHIPMENTS OF THE CLASS COVERED BY THE SUBJECT CONTRACTS. THEREAFTER BY LETTER DATED DECEMBER 2, 1953, YOUR FIRM ADVISED ADMINISTRATIVE OFFICIALS OF YOUR RECEIPT OF A PROPOSED TAX ASSESSMENT AND REQUESTED THE ISSUANCE OF A TAX EXEMPTION CERTIFICATE. FOLLOWING AN EXCHANGE OF CORRESPONDENCE AND TELEPHONE CALLS, DURING WHICH DISCREPANCIES AROSE BETWEEN YOU AND THE TAXING AUTHORITIES REGARDING THE FINAL ADJUSTMENT OF YOUR ACCOUNTS FOR THE PURPOSE OF COMPUTING THE AMOUNT OF APPLICABLE TAXES, A TAX EXEMPTION CERTIFICATE IN THE AMOUNT OF $81,880.91, WAS ISSUED TO YOU ON JANUARY 28, 1954. ON FEBRUARY 5, 1954, THE STATE AUTHORITIES REFUSED TO ACCEPT THE CERTIFICATE AND, IN REPLY TO YOUR REQUEST, ADVISED YOU IN LETTER DATED FEBRUARY 18, 1954, THAT A HEARING WOULD BE GRANTED YOU AS SOON AS THE CALENDAR PERMITTED. THERE WAS NO REQUIREMENT BY CONTRACT OR IN ANY INSTRUCTIONS ISSUED BY GOVERNMENT OFFICERS THAT YOU REQUEST A HEARING BEFORE THE STATE AUTHORITIES AFTER ITS REFUSAL TO ACCEPT THE CERTIFICATE. THE QUESTION AS TO THE APPLICABILITY OF THE DIRECT TAX APPEARS TO HAVE BEEN CLEARLY STATED IN THE LETTER OF NOVEMBER 13, 1953, TO YOU, AND WHILE CERTAIN LEGAL ASPECTS REGARDING REIMBURSEMENT OF SUCH TAXES WERE THEN PENDING, THE SUGGESTED PROCEDURE LOOKING TOWARD FINAL REIMBURSEMENT NEITHER SUGGESTED NOR JUSTIFIED THE REQUESTED HEARING BECAUSE OF THE REFUSAL OF THE TAX AUTHORITIES TO ACCEPT THE TAX EXEMPTION CERTIFICATE. HOWEVER, THE PROCEDURE DID DIRECT THE CONTRACTOR TO MAKE PAYMENT UNDER PROTEST OF THE TAXES IMMEDIATELY AFTER EXEMPTION WAS DENIED AND TO FURNISH THE CONTRACTING OFFICER WITH EVIDENCE OF PAYMENT AND AWAIT HIS FURTHER INSTRUCTION. THUS, IT FOLLOWS THAT THE ACCRUED INTEREST BECAUSE OF YOUR DELAY IN NOT MAKING PAYMENT OF THE TAX UNTIL JUNE 10, 1955, DUE TO INADVERTENCE OR LACK OF UNDERSTANDING, IS NOT SUCH AN ITEM OF REASONABLE EXPENSE AS WAS INCURRED AT THE DIRECTION OF THE CONTRACTING OFFICER, WITHIN THE MEANING OF THAT PHRASE AS CONTAINED IN PARAGRAPH 10 (D) OF GENERAL PROVISIONS OF THE SEVERAL CONTRACTS INVOLVED.

ACCORDINGLY, FOR THE REASONS STATED AND ON THE PRESENT RECORD, THE ACTION TAKEN IN THE SETTLEMENT OF NOVEMBER 3, 1955, IS SUSTAINED.