B-223084, Jul 28, 1987, Office of General Counsel

B-223084: Jul 28, 1987

Additional Materials:

Contact:

Shirley Jones
(202) 512-8156
jonessa@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

Navy is advised to obtain an official opinion from the Florida Department of Revenue. 2. Unless and until the Florida Department of Revenue rules that the Navy Public Works Center is a "reseller" of telecommunication services and therefore its purchases from Southern Bell Co. are exempt from the Florida Gross Receipts tax. Southern Bell is entitled to pass on the amount of the tax to the Center in its billings as a legitimate business cost. The Center is advised to pay all previous and current billings in order to avoid the accrual of late payment charges. Campbell: This is in response to your request for an advance decision on whether the Navy Public Works Center (Center) in Pensacola. The Center is an industrial fund activity which supplies the Navy and other Department of Defense (DOD) entities.

B-223084, Jul 28, 1987, Office of General Counsel

PROCUREMENT - Payment/Discharge - State/local taxes - Government exemptions - Applicability DIGEST: 1. GAO has no authority to interpret a provision of state law and therefore cannot rule on the applicability of an exemption from the Florida Gross Receipts tax to purchases made by the Navy Public Works Center in Pensacola, Florida. Navy is advised to obtain an official opinion from the Florida Department of Revenue. 2. Unless and until the Florida Department of Revenue rules that the Navy Public Works Center is a "reseller" of telecommunication services and therefore its purchases from Southern Bell Co. are exempt from the Florida Gross Receipts tax, Southern Bell is entitled to pass on the amount of the tax to the Center in its billings as a legitimate business cost. The Center is advised to pay all previous and current billings in order to avoid the accrual of late payment charges.

Mr. Donald B. Campbell:

This is in response to your request for an advance decision on whether the Navy Public Works Center (Center) in Pensacola, Florida should pay a Florida Gross Receipts Tax, separately stated on the Center's billings from the Southern Bell Telephone Company. As of March 1, 1986, the Center has withheld from payment nearly $4,000 in Gross Receipts Taxes that has appeared on its bills. Your inquiry stems from the fact that Florida's statute allows an exemption from the Gross Receipts Tax on telecommunication services destined for resale. The Center is an industrial fund activity which supplies the Navy and other Department of Defense (DOD) entities, on a reimbursable basis, with the telephone services it has purchased from Southern Bell. You therefore believe the Center is entitled to the benefit /1/ of the resale exemption.

You ask two specific questions:

"a. Is the Florida Gross Receipts Tax a charge that can be properly passed on to a Federal Government customer of Southern Bell?

"b. If the tax is properly passed through to a Federal Government customer, does the Public Works Center's role as a reseller of services to other agencies entitle it to the exemption of paragraph 4 of section 166.203.01, Florida statutes?"

The answer to the first question depends on the answer to the second. Southern Bell is permitted to exclude the revenues derived from its sales to the Center from its gross receipts because the Center qualifies as an exempt purchaser under the reseller exception, the charge should be deleted from the Center's bills. (Southern Bell has already agreed to do this if or when the Center obtains a definitive ruling on the exemption from the Florida Department of Revenue.) If the exemption is not applicable, the tax billed to the Center is a legitimate cost element of the services provided to the Center. Southern Bell is entitled to pass on the costs it was required to pay to the state to all its nonexempt vendees.

The General Accounting has no authority to interpret a Florida statute in order to provide the Center with a definitive opinion. In an attempt to assist you, we wrote to the Florida Department of Revenue for its views on whether Southern Bell's billings to the Center fall under the resale exclusion. The Department replied with a non-binding unofficial "assistance" letter, advising that in the view of the writer, the Center is not entitled to an exemption. We have enclosed a copy of this letter for your information. The penultimate paragraph of the letter explains the forms and materials you must submit if you wish to obtain an official binding ruling on your eligibility for an exemption.

Please note that until or unless the Department of Revenue or a court of competent jurisdiction resolves this matter in favor of the Center, the tax billed to the Center continues to constitute a legitimate cost element of the services provided to the Center by Southern Bell. We advise the Center to promptly pay the current and previously billed taxes to Southern Bell in order to stop the accrual of interest or late payment charges. Comp.Gen. 835 (1986).

/1/ Technically, if the resale exemption were allowed, Southern Bell Telephone Company, which supplies the Center with equipment and services, would be permitted to exclude the revenue derived from sales to the Center from its gross receipts, and accordingly, the Center would receive the economic benefit of the exemption in the form of lower cost.

Oct 20, 2020

Oct 16, 2020

Oct 15, 2020

Oct 14, 2020

Oct 9, 2020

Oct 8, 2020

Looking for more? Browse all our products here