B-126542, MAY 31, 1956

B-126542, MAY 31, 1956

TO STOKELY-VAN CAMP, INC.:

REFERENCE IS MADE TO A MEMORANDUM OF MARCH 21, 1956, WITH ENCLOSURES, SUBMITTED BY YOUR ATTORNEY, MR. WILLIAM E. WELCH, REGARDING OUR DECISION OF FEBRUARY 27, 1956, B-126542, WHICH SUSTAINED THE DISALLOWANCE OF YOUR CLAIM FOR $4,094.01 UNDER DEPARTMENT OF THE ARMY CONTRACT NO. DA-11-009-QM -20639.

THE FACTS AND CIRCUMSTANCES CONSIDERED IN THE DENIAL OF YOUR CLAIM FOR INTEREST PAID ON CERTAIN INDIANA GROSS INCOME AND VETERANS BONUS TAXES ASSESSED IN CONNECTION WITH THE CITED CONTRACT ARE SET FORTH IN THE DECISION AND NEED NOT BE REPEATED HERE, EXCEPT THOSE STATEMENTS AS TO WHICH YOUR ATTORNEY CURRENTLY CONTENDS ARE NOT SUPPORTED BY THE RECORD.

THE CONTENTIONS ARE DIRECTED PRIMARILY TO TWO STATEMENTS IN OUR DECISION. THE FIRST STATEMENT REFERS TO THE FACT THAT THE CONTRACTING OFFICER INDICATES THAT YOUR CLAIM FOR THE INTEREST COVERS THE PERIOD FROM JANUARY 1 TO MAY 31, 1954. THE SECOND STATEMENT REFERS TO THE FACT THAT 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 THE LETTER DATED NOVEMBER 13, 1953, FROM THE DEPARTMENT OF THE ARMY OUTLINING THE ACTION TO BE TAKEN BY YOUR FIRM.

WITH REGARD TO THE FIRST STATEMENT, YOUR ATTORNEY CONSIDERS THAT THE ASSUMPTION BY THE CONTRACTING OFFICER AS TO THE PERIOD COVERED BY THE INTEREST CHARGE IS ENTIRELY UNWARRANTED AND NOT SUPPORTED BY THE RECORD. HE STATES, IN SUBSTANCE, THAT THE TAXES IN QUESTION WERE DUE, IF AT ALL, ON THE LAST DAY OF EACH JANUARY FOLLOWING THE PARTICULAR CALENDAR YEAR FOR WHICH THE TAX IS ASSESSED, WITH INTEREST ACCRUING THEREAFTER COMPUTED AT THE PRESCRIBED PERCENTAGE RATE FOR ANY PERIOD OF NONPAYMENT. THE TAX HERE IN QUESTION INVOLVES THE CALENDAR YEARS 1951 AND 1952, AND ORDINARILY THE TAX FOR THE YEAR 1951 WOULD HAVE BEEN DUE JANUARY 31, 1952, WHILE THE TAX FOR 1952 WOULD HAVE BEEN DUE JANUARY 31, 1953. THE ASSUMPTION BY THE CONTRACTING OFFICER THAT THE INTEREST, WHICH IS 5 PERCENT OF THE TOTAL TAX FOR THE TWO YEARS, COVERS THE PERIOD FROM JANUARY 1954, TO MAY 31, 1954, DOES NOT APPEAR TO BE "ENTIRELY UNWARRANTED.' THIS IS SO BECAUSE THE MATTER OF ASSESSMENT OF THESE TAXES IN THE CASE OF PARTIES HAVING GOVERNMENT CONTRACTS WAS ONE WHICH THE STATE OF INDIANA HAD UNDER CONSIDERATION FOR SOME TIME. IT WOULD NOT HAVE BEEN UNREASONABLE FOR THE STATE OF INDIANA, UNDER SUCH CIRCUMSTANCES, TO HAVE SELECTED A DATE, FOR EXAMPLE, JANUARY 1, 1954, TO BE USED AS A DATE AFTER WHICH INTEREST WAS TO BE ASSESSED. FURTHER, THE INTEREST CHARGED IS THE EQUIVALENT OF INTEREST AT THE RATE OF 1 PERCENT A MONTH--- THE RATE FIXED BY THE STATE TAXING AUTHORITIES -- FOR FIVE MONTHS, A PERIOD CORRESPONDING TO THE FIRST FIVE CALENDAR MONTHS OF 1954 DURING WHICH THE TAX WAS UNPAID.

IF, AS CONTENDED IN THE MEMORANDUM, THE AMOUNT OF INTEREST CHARGED IS AN "ARBITRARY" ASSESSMENT FOR THE ENTIRE PERIOD FOR WHICH THE TAXES WERE DELINQUENT, THEN IT BECOMES UNNECESSARY TO CONSIDER THE SECOND STATEMENT REFERRED TO IN THE MEMORANDUM. OBVIOUSLY, THE ONLY PARTY THAT CAN SATISFACTORILY ANSWER THE QUESTION AS TO WHAT PERIOD IS COVERED BY THE INTEREST CHARGE IS THE GROSS INCOME TAX DIVISION, STATE OF INDIANA. THE PRESENT RECORD THE INTEREST WILL BE CONSIDERED AS COVERING THE PERIOD FROM JANUARY 1, 1954, TO MAY 31, 1954.

WITH REGARD TO THE CONTENTION THAT YOU SHOULD BE EXCUSED FOR THE DELAY IN PAYING THE TAXES INVOLVED, IT IS RECOGNIZED THAT THERE IS DOUBT AS TO WHETHER ALL OF THE DELAY BEYOND JANUARY 1, 1954, INCIDENT TO PAYMENT OF THE TAXES CAN BE ATTRIBUTED TO YOUR FIRM. WHEN YOUR APPLICATION FOR EXEMPTION WAS REJECTED ON FEBRUARY 18, 1954, IT WAS YOUR OBLIGATION UNDER THE CONTRACT TO NOTIFY THE CONTRACTING OFFICER OF SUCH REFUSAL AND TO PROCEED WITH PAYMENT OF THE TAX UNDER PROTEST. UNDER PARAGRAPH 10/D) OF GENERAL PROVISIONS OF THE CONTRACT NO FURTHER INSTRUCTIONS FROM THE CONTRACTING OFFICER TO PAY THE TAX APPEAR TO HAVE BEEN REQUIRED AND PAYMENT COULD HAVE BEEN ACCOMPLISHED BY THE END OF FEBRUARY 1954. IN ANY EVENT, IT IS ADMITTED BY YOUR ATTORNEYS IN THE MEMORANDUM OF MARCH 21, 1956, AND IN AN EARLIER MEMORANDUM OF DECEMBER 12, 1955--- AND SUBSTANTIATED BY THE RECORD BEFORE US--- THAT YOU RECEIVED A DIRECTIVE OF MARCH 22, 1954, FROM THE QUARTERMASTER MARKET CENTER SYSTEM, U.S. ARMY, AT CHICAGO, WHICH DIRECTED PAYMENT OF THE TAX SUCH AS HERE INVOLVED. IN VIEW OF THE FACT THAT PAYMENT COULD HAVE BEEN ACCOMPLISHED BY THE END OF MARCH 1954 AND IN VIEW OF THE FACT THAT YOU HAVE NOT FURNISHED ANY EVIDENCE TO SHOW THAT THE INTEREST CHARGES COVER A PERIOD OTHER THAN THAT FROM JANUARY 1, 1954, TO MAY 31, 1954, YOU ARE ENTITLED ON THE PRESENT RECORD FOR PAYMENT OF INTEREST CHARGES FOR THREE MONTHS OR THREE-FIFTHS OF THE AMOUNT CLAIMED. SETTLEMENT FOR THIS AMOUNT WILL ISSUE IN DUE COURSE.

OTHER THAN AS ABOVE INDICATED, THE DECISION OF FEBRUARY 27, 1956, IS AFFIRMED.