B-135533, APR. 9, 1958

B-135533, APR. 9, 1958

TO CAPTAIN F. C. DUSENBERRY, FINANCE OFFICER, DEPARTMENT OF THE AIR FORCE:

YOUR LETTER OF OCTOBER 15, 1957, REQUESTS AN ADVANCE DECISION AS TO WHETHER PAYMENT IS AUTHORIZED ON A VOUCHER TRANSMITTED THEREWITH IN FAVOR OF ROYAL MCBEE CORPORATION. YOUR LETTER WAS FORWARDED TO US BY THE DIRECTORATE OF ACCOUNTING AND FINANCE, DEPARTMENT OF THE AIR FORCE.

THE VOUCHER IN THE AMOUNT OF $1.59 REPRESENTS THE SOUTH CAROLINA 3 PERCENT SALES TAX ON THE FEDERAL EXCISE TAX PORTION ($52.95) INVOLVED IN THE PURCHASE OF EITHER ADDING MACHINES OR TYPEWRITERSBY DONALDSON AIR FORCE BASE, SOUTH CAROLINA. THE INVOICE LISTS AS SEPARATE ITEMS THE MANUFACTURER'S PRICE, THE FEDERAL EXCISE TAX AND THE SOUTH CAROLINA SALES TAX. THE LATTER TAX OF 3 PERCENT IS COMPUTED UPON THE TOTAL SELLING PRICE WHICH INCLUDES AS A PART THEREOF THE FEDERAL EXCISE TAX. YOUR REQUEST FOR ADVANCE DECISION QUESTIONS THE PROPRIETY OF PAYING THAT PORTION OF THE SOUTH CAROLINA SALES TAX COMPUTED ON THE FEDERAL EXCISE TAX.

CONCERNING THE PAYMENT OF STATE TAXES GENERALLY, OUR OFFICE HAS HELD THAT THE QUESTION OF WHETHER THE UNITED STATES IS REQUIRED TO PAY FOR SUPPLIES PROCURED IN A STATE AT A PRICE INCLUSIVE OF THE SALES TAX IMPOSED BY THAT STATE RESTS UPON A DETERMINATION OF WHETHER THE INCIDENCE OF THE TAX IS ON THE VENDOR OR ON THE VENDEE. WHERE THE INCIDENCE OF THE TAX IS ON THE VENDOR, THE UNITED STATES HAS NO RIGHT- - APART FROM STATE STATUTES OR REGULATIONS PROMULGATED THEREUNDER BY STATE AUTHORITIES--- TO PURCHASE SUPPLIES WITHIN THE TERRITORIAL JURISDICTION OF THE STATE ON A TAX FREE BASIS. SEE ALABAMA V. KING AND BOOZER, 314 U.S. 1. ON THE OTHER HAND, WHERE THE INCIDENCE OF THE TAX IS ON THE VENDEE, THE UNITED STATES IN PURCHASING SUPPLIES FOR OFFICIAL USE IS ENTITLED UNDER ITS CONSTITUTIONAL PREROGATIVES TO MAKE PURCHASES FREE FROM STATE TAXES AND TO RECOVER ANY AMOUNT OF SUCH TAXES WHICH MAY HAVE BEEN PAID BY IT. SEE 33 COMP. GEN. 453. IN THIS REGARD SECTION 65-1407 OF THE CODE OF LAWS OF SOUTH CAROLINA WAS AMENDED IN 1954 TO MAKE THE ADDITION OF THE SALES TAX TO THE SALES PRICE PERMISSIVE,RATHER THAN MANDATORY AS HAD FORMERLY BEEN THE CASE. THEREFORE, THE LEGAL INCIDENCE OF THE TAX IS IMPOSED ON THE VENDOR RATHER THAN THE VENDEE AND, CONSEQUENTLY, THE CONSTITUTIONAL PRINCIPLE UNDER WHICH THE FEDERAL GOVERNMENT IS IMMUNE TO STATE TAXATION IS NOT APPLICABLE HERE. SEE ESSO STANDARD OIL CO. V. EVANS, 345 U.S. 95; B 120992, NOVEMBER 5, 1954; B-128720, AUGUST 7, 1956.

THE SOUTH CAROLINA SALES TAX LAW APPEARS IN SECTIONS 65-1401 TO 65 1411 OF THE 1952 CODE OF THAT STATE, AS AMENDED. SECTION 65-1401 IMPOSES "* * * UPON EVERY PERSON ENGAGED OR CONTINUING WITHIN THIS STATE IN THE BUSINESS OF SELLING AT RETAIL ANY TANGIBLE PERSONAL PROPERTY WHATSOEVER, * * * AN AMOUNT EQUAL TO THREE PERCENT OF THE GROSS PROCEEDS OF SALES OF THE BUSINESS; * * *.' THE LAST PARAGRAPH OF SECTION 65-1353 WHICH DEFINES THE TERM "GROSS PROCEEDS OF SALES" PROVIDES THAT "THE TERM SHALL NOT INCLUDE THE AMOUNT OF ANY TAX IMPOSED BY THE UNITED STATES UPON OR WITH RESPECT TO RETAIL SALES WHETHER IMPOSED UPON THE RETAILER OR CONSUMER EXCEPT THAT ANY MANUFACTURER'S OR IMPORTER'S EXCISE TAX SHALL BE INCLUDED IN THE TERM.'

THE MANUFACTURER'S EXCISE TAX OF 10 PERCENT IMPOSED ON BUSINESS MACHINES BY 26 U.S.C. 4191 IS A TAX "IMPOSED UPON THE SALE BY THE MANUFACTURER, PRODUCER, OR IMPORTER" AND THEREFORE THE AMOUNT OF SUCH EXCISE TAX IS TO BE INCLUDED IN COMPUTING THE SOUTH CAROLINA SALES TAX UNDER SECTIONS 65- 1401 AND 65-1353 OF THE SOUTH CAROLINA CODE.

ACCORDINGLY, CERTIFICATION OF THE VOUCHER FOR PAYMENT IS AUTHORIZED, IF OTHERWISE PROPER.