B-141087, DECEMBER 9, 1959, 39 COMP. GEN. 432

B-141087, DECEMBER 9, 1959, 39 COMP. GEN. 432

CONTRACTS - STATE TAX LIABILITY - GOVERNMENT AGENT'S AUTHORITY - TEXAS GROSS RECEIPTS TAX A GOVERNMENT REPRESENTATIVE WHO WAS NOT AUTHORIZED TO CONTRACT FOR THE GOVERNMENT BUT WHO, AT THE TIME OF INSPECTION OF THE CONTRACT WORK, SIGNED WORK ORDERS WHICH CONTAINED A STIPULATION THAT ANY TAX WOULD BE ADDED TO THE CONTRACT PRICE MAY NOT HAVE SUCH SIGNATURE REGARDED AS IMPOSING ON THE GOVERNMENT AN ADDITIONAL TAX LIABILITY NOT PROVIDED IN THE CONTRACT, AND, EVEN IF THE EMPLOYEE HAD BEEN AN AUTHORIZED CONTRACTING OFFICER, THE SIGNATURE ON THE WORK ORDERS COULD NOT BE REGARDED AS REQUIRING THE PAYMENT OF ADDITIONAL COMPENSATION IN THE ABSENCE OF SOME CONSIDERATION MOVING TO THE GOVERNMENT FOR SUCH PAYMENT. THE AMOUNT OF A STATE ( TEXAS) GROSS RECEIPTS TAX WHICH IS A DIRECT TAX WHICH WAS PAID BY A GOVERNMENT CONTRACTOR UNDER A CONTRACT WHICH PROVIDES THAT THE CONTRACT PRICE DOES NOT INCLUDE ANY STATE OR LOCAL DIRECT TAX AND STIPULATES THAT, IN THE EVENT ANY STATE GOVERNMENT REFUSES TO ACCEPT EVIDENCE OF TAX EXEMPTION AND THE CONTRACTOR BEARS THE BURDEN OF THE TAX, THE CONTRACT PRICE WILL BE ADJUSTED, MAY BE PAID BY THE GOVERNMENT TO THE CONTRACTOR, PROVIDED THAT THE CONTRACTOR TAKES ALL NECESSARY STEPS TO PRESERVE ALL RIGHTS TO REFUND OF THE TAX IN ACCORDANCE WITH THE TAX PROVISIONS OF THE CONTRACT.

TO DONALD J. CAMPBELL, DEPARTMENT OF THE INTERIOR, DECEMBER 9, 1959:

REFERENCE IS MADE TO YOUR LETTER OF OCTOBER 22, 1959, TRANSMITTING A VOUCHER, TOGETHER WITH RELATED PAPERS, STATED IN FAVOR OF PERFORATING GUNS ATLAS CORPORATION IN THE AMOUNT OF $151.03, AS REIMBURSEMENT FOR THAT AMOUNT PAID BY IT TO THE STATE OF TEXAS AS GROSS RECEIPTS TAX ON THE VALUE OF WORK ($6,241.07) PERFORMED IN LOGGING OF 12 NATURAL GAS WELLS UNDER CONTRACT NO. 14-09-060-1799, DATED JUNE 22, 1959.

THE TAX IN QUESTION IS IMPOSED BY ARTICLE 7060A, TITLE 122, VERNON'S CIVIL STATUTES OF TEXAS, ANNOTATED, AS FOLLOWS:

OCCUPATION TAX ON CERTAIN SERVICES IN CONNECTION WITH OIL WELLS.

SECTION 1. (A) THE TERM "PERSON" SHALL FOR THE PURPOSE OF THIS ARTICLE MEAN AND INCLUDE INDIVIDUALS, PARTNERSHIPS, FIRMS, JOINT STOCK COMPANIES, ASSOCIATIONS AND CORPORATIONS.

(B) AN OCCUPATION TAX AT THE RATE AND IN THE MANNER HEREINAFTER PROVIDED IS HEREBY IMPOSED UPON EVERY PERSON IN THIS STATE ENGAGED IN THE BUSINESS OF FURNISHING ANY SERVICE OR PERFORMING ANY DUTY FOR OTHERS FOR A CONSIDERATION OR COMPENSATION WITH THE USE OF ANY TOOLS, INSTRUMENTS OR EQUIPMENT, WHETHER ELECTRICAL OR MECHANICAL, OWNED, CONTROLLED, OR FURNISHED BY SUCH PERSON, OR BY MEANS OF ANY CHEMICAL, ELECTRICAL OR MECHANICAL PROCESSES WHEN SUCH SERVICE OR DUTY IS PERFORMED IN OR AT ANY OIL OR GAS WELL DURING AND IN CONNECTION WITH THE DRILLING AND COMPLETION, OR REWORKING OR RECONDITIONING OF ANY SUCH WELL, IN (1) CEMENTING THE CASING SEAT OF ANY OIL OR GAS WELL, OR (2) SHOOTING, FRACTURING OR ACIDIZING THE SANDS OR OTHER FORMATIONS OF THE EARTH IN ANY SUCH WELL, OR (3) SURVEYING OR TESTING SUCH FORMATIONS OR THE CONTENTS THEREOF, IN ANY SUCH WELL THROUGH THE USE OF INSTRUMENTS OR EQUIPMENT AT LEAST A PORTION OF WHICH INSTRUMENTS OR EQUIPMENT IS LOCATED WITHIN THE WELL BORE WHEN THE SURVEY OR TEST IS MADE; PROVIDED, HOWEVER, THAT NOTHING HEREIN CONTAINED SHALL BE CONSTRUED OR HELD TO IMPOSE A TAX UPON THE BUSINESS OF DRILLING OR REWORKING ANY OIL OR GAS WELL, OR UPON ANY SERVICE INCIDENTAL THERETO PERFORMED BY PERSONS ENGAGED IN SUCH DRILLING OR REWORKING BUSINESS.

THE TAX HEREBY IMPOSED SHALL BE AT THE RATE OF 2.42 PERCENT OF THE GROSS AMOUNT RECEIVED FROM THE SERVICES OR DUTY SPECIFIED ABOVE AFTER DEDUCTING FROM SUCH GROSS AMOUNT THE REASONABLE VALUE AT THE WELL OF ANY MATERIAL USED, CONSUMED, EXPENDED IN OR INCORPORATED INTO THE WELL. THE AMOUNT RECEIVED FROM SUCH TAXABLE SERVICES DURING THE CALENDAR MONTH NEXT PRECEDING SHALL BE REPORTED UNDER OATH BY THE PERSON SUBJECT TO THE TAX IMPOSED HEREBY ON A FORM PRESCRIBED AND FURNISHED BY THE COMPTROLLER AND THE TAX THEREON SHALL BE PAID TO THE COMPTROLLER AT HIS OFFICE IN AUSTIN, TEXAS, ON OR BEFORE THE 2OTH DAY OF EACH MONTH. AS AMENDED ACTS 1951, 52ND LEG., P. 695, CH. 402, SEC. XIV; ACTS 1954, 53RD LEG., ST C.S., P. 3, CH. 2, ART. V, SEC. 1.

THE TAX IS DESCRIBED AS AN "OCCUPATION TAX" ALTHOUGH, IN FACT, IT MIGHT BE DESCRIBED AS A GROSS RECEIPTS TAX.

THE TAX PROVISIONS OF THE INVOLVED CONTRACT ARE CONTAINED IN PARAGRAPH 28 OF GENERAL PROVISIONS, WHICH PARAGRAPH IS IN PART AS FOLLOWS:

28. FEDERAL, STATE, AND LOCAL TAXES

(A) DEFINITIONS--- AS USED THROUGHOUT THIS CLAUSE, THE FOLLOWING TERMS SHALL HAVE THE MEANINGS SET FORTH BELOW:

(I) THE TERM "DIRECT TAX" MEANS ANY TAX OR DUTY DIRECTLY APPLICABLE TO THE COMPLETED SUPPLIES OR SERVICES COVERED BY THIS CONTRACT, OR ANY OTHER TAX OR DUTY FROM WHICH THE CONTRACTOR OR THIS TRANSACTION IS EXEMPT. INCLUDES ANY TAX OR DUTY DIRECTLY APPLICABLE TO THE IMPORTATION, PRODUCTION, PROCESSING, MANUFACTURE, CONSTRUCTION, SALE, OR USE OF SUCH SUPPLIES OR SERVICES; IT ALSO INCLUDES ANY TAX LEVIED ON, WITH RESPECT TO, OR MEASURED BY SALES, RECEIPTS FROM SALES, OR USE OF THE SUPPLIES OR SERVICES COVERED BY THIS CONTRACT. THE TERM DOES NOT INCLUDE TRANSPORTATION TAXES, UNEMPLOYMENT COMPENSATION TAXES, SOCIAL SECURITY TAXES, INCOME TAXES, EXCESS-PROFITS TAXES, CAPITAL STOCK TAXES; PROPERTY TAXES, AND SUCH OTHER TAXES AS ARE NOT WITHIN THE DEFINITION OF THE TERM "DIRECT TAX" AS SET FORTH ABOVE IN THIS PARAGRAPH.

(C) STATE OR LOCAL TAXES--- EXCEPT AS MAY BE OTHERWISE PROVIDED IN THIS CONTRACT, THE CONTRACT PRICE DOES NOT INCLUDE ANY STATE OR LOCAL DIRECT TAX IN EFFECT ON THE CONTRACT DATE.

(D) EVIDENCE OF EXEMPTION--- THE GOVERNMENT AGREES, UPON REQUEST OF THE CONTRACTOR, TO FURNISH A TAX EXEMPTION CERTIFICATE OR OTHER SIMILAR EVIDENCE OF EXEMPTION WITH RESPECT TO ANY DIRECT TAX NOT INCLUDED IN THE CONTRACT PRICE PURSUANT TO THIS CLAUSE; AND THE CONTRACTOR AGREES, IN THE EVENT OF THE REFUSAL OF THE APPLICABLE TAXING AUTHORITY TO ACCEPT SUCH EVIDENCE OF EXEMPTION, (I) PROMPTLY TO NOTIFY THE CONTRACTING OFFICER OF SUCH REFUSAL, (II) TO CAUSE THE TAX IN QUESTION TO BE PAID IN SUCH MANNER AS TO PRESERVE ALL RIGHTS TO REFUND THEREOF, AND (III) IF SO DIRECTED BY THE CONTRACTING OFFICER, TO TAKE ALL NECESSARY ACTION, IN COOPERATION WITH AND FOR THE BENEFIT OF THE GOVERNMENT, TO SECURE A REFUND OF SUCH TAX (IN WHICH EVENT THE GOVERNMENT AGREES TO REIMBURSE THE CONTRACTOR FOR ANY AND ALL REASONABLE EXPENSES INCURRED AT ITS DIRECTION).

SUBPARAGRAPH (E) OF THAT PARAGRAPH PROVIDES THAT IF A STATE GOVERNMENT REFUSES TO ACCEPT EVIDENCE OF EXEMPTION FURNISHED UNDER SUBPARAGRAPH (D) WITH RESPECT TO ANY DIRECT TAX EXCLUDED FROM THE CONTRACT PRICE, AND IF THE CONTRACTOR IS OBLIGED TO, AND DOES PAY OR BEAR THE BURDEN OF ANY SUCH TAX (AND DOES NOT SECURE A REFUND THEREOF), THE CONTRACT PRICE SHALL BE CORRESPONDINGLY INCREASED.

THE AMOUNT OF $151.03, REPRESENTING THE INVOLVED TAX ON THE CONTRACTOR'S INVOICES WAS DEDUCTED IN MAKING PAYMENT. IN ITS LETTER OF SEPTEMBER 29, 1959, CLAIMING A REFUND OF THE DEDUCTION OF $151.03, THE CONTRACTOR ASSERTS THAT THE WORK ORDERS SIGNED BY A GOVERNMENT EMPLOYEE CLEARLY STATE THAT THE SIGNATURE OF THE CUSTOMER CONSTITUTES ACCEPTANCE OF ITS TERMS AND CONDITIONS GIVEN ON THE REVERSE SIDE OF THE WORK ORDERS. ONE CONDITION IS THAT ANY TAX BASED ON THE SALE OF TANGIBLE PERSONAL PROPERTY OR THE RENDERING OF SERVICES ORDERED SHALL BE ADDED TO THE STATED PRICE.

IT IS REPORTED IN YOUR LETTER THAT THE GOVERNMENT REPRESENTATIVE WHO SIGNED THE WORK ORDERS WAS PRESENT FOR THE SOLE PURPOSE OF INSPECTION, AND TO VERIFY THE WORK PERFORMED UNDER THE CONTRACT. ALSO, YOU STATE FURTHER THAT THE WORK ORDERS WERE CONSIDERED IN THE NATURE OF RECEIVING REPORTS TO SUPPORT BILLINGS SUBMITTED FOR PAYMENT BY THE CONTRACTOR.

THE GOVERNMENT EMPLOYEE SIGNING THE WORK ORDERS DOES NOT APPEAR TO HAVE BEEN AUTHORIZED TO CONTRACT ON BEHALF OF THE UNITED STATES AND, THEREFORE, HIS ACCEPTANCE OF THE WORK BY SIGNING THE WORK ORDERS WITH THE TAX PROVISION ON THE REVERSE THEREOF CANNOT BE REGARDED AS IMPOSING ANY OBLIGATIONS UPON THE GOVERNMENT IN ADDITION TO THOSE THERETOFORE IMPOSED BY THE CONTRACT. EVEN IF THAT EMPLOYEE HAD BEEN AN AUTHORIZED REPRESENTATIVE OF THE CONTRACTING OFFICER, THE SIGNING OF THE WORK ORDERS COULD NOT BE REGARDED AS REQUIRING THE GOVERNMENT TO PAY ADDITIONAL COMPENSATION TO THE CONTRACTOR UNLESS IT RECEIVED CONSIDERATION THEREFOR. IT WOULD APPEAR, HOWEVER, THAT THE GOVERNMENT MAY BE OBLIGATED TO PAY THE TAX UNDER THE TERMS OF THE CONTRACT FOR REASONS AS FOLLOWS.

UNDER THE PROVISIONS OF ARTICLE 7060A OF THE TAX STATUTE AND PARAGRAPH 28 OF GENERAL PROVISIONS OF THE CONTRACT, THE TAX IN QUESTION MUST BE REGARDED AS A DIRECT TAX. SUBPARAGRAPH (C) OF SAID PARAGRAPH 28 PROVIDES THAT EXCEPT AS OTHERWISE PROVIDED IN THE CONTRACT, THE CONTRACT PRICE DOES NOT INCLUDE ANY STATE OR LOCAL DIRECT TAX IN EFFECT ON THE CONTRACT DATE. NO MENTION OF THE INVOLVED TAX APPEARS TO HAVE BEEN MADE IN ANY PART OF THE CONTRACT AND, THEREFORE, THE CONTRACT PRICE MUST BE REGARDED AS NOT INCLUDING THE TAX. AS DISTINGUISHED FROM THE CONTRACT INVOLVED IN THE DECISION IN 20 COMP. GEN. 752, THE CONTRACT HERE INVOLVED SPECIFICALLY PROVIDES IN SUBPARAGRAPH 28 (E) OF GENERAL PROVISIONS THAT IF ANY STATE GOVERNMENT REFUSES TO ACCEPT THE EVIDENCE OF EXEMPTION FURNISHED UNDER SUBPARAGRAPH (D) AND THE CONTRACTOR HAS TO BEAR THE BURDEN OF ANY SUCH TAX, THEN THE CONTRACT PRICE SHALL BE CORRESPONDINGLY INCREASED. UNDER THE REFERRED-TO SUBPARAGRAPH (D) THE CONTRACTOR IS REQUIRED TO INITIATE ACTION TO REQUEST A TAX EXEMPTION CERTIFICATE FROM THE TAXING AUTHORITY AND, IN THE EVENT OF REFUSAL BY THE TAXING AUTHORITY, THE CONTRACTOR IS REQUIRED TO FOLLOW THE PROCEDURE OUTLINED THEREIN. THERE IS NO SHOWING THAT A TAX EXEMPTION WILL BE, OR WOULD HAVE BEEN, GRANTED HAD TIMELY APPLICATION BEEN MADE. NOR IS THERE ANY SHOWING--- IF APPLICATION FOR A TAX EXEMPTION CERTIFICATE HAS NOT BEEN MADE--- THAT THE FAILURE TO MAKE TIMELY APPLICATION HAS IN ANY WAY PREJUDICED THE GRANTING OF AN EXEMPTION CERTIFICATE.

IN THE CIRCUMSTANCES, THE VOUCHER MAY BE CERTIFIED FOR PAYMENT, PROVIDED, OF COURSE, THAT THE CONTRACTOR HAS TAKEN SUCH STEPS AS DIRECTED BY THE CONTRACTING OFFICER TO PRESERVE ALL RIGHTS TO REFUND OF THE TAX PAID BY IT, IN ACCORDANCE WITH SUBPARAGRAPH (D) OF THE TAX ARTICLE OF THE CONTRACT. SEE 33 COMP. GEN. 74.

WITH REFERENCE TO THE TAX IN THE AMOUNT OF $32.69 DEDUCTED IN REIMBURSING THE CONTRACTOR FOR SERVICES RENDERED BY A SUBCONTRACTOR, IT IS STATED IN YOUR LETTER THAT THE CONTRACTOR HAS NOT FILED A CLAIM FOR THIS AMOUNT BUT THAT YOU DESIRE AN OPINION AS TO WHETHER THIS AMOUNT COULD BE PAID. THE RECORD DOES NOT SHOW WHAT AGREEMENT, IF ANY, WAS HAD IN THE MATTER EXCEPT THAT THE CONTRACTOR WAS TO BE REIMBURSED FOR EXPENSES INCURRED IN SECURING THE SERVICES OF THE SUBCONTRACTOR, SCHLUMBERGER WELL SURVEYING CORPORATION. IF, AS INDICATED BY THE COPIES OF THE INVOICES BILLING FOR THE SERVICES IN QUESTION, THE TAX WAS PAID AS SUCH BY THE CONTRACTOR, PAYMENT TO THE CONTRACTOR OF THE TAX WOULD BE AUTHORIZED, SUBJECT TO THE SAME LIMITATION AS STATED IN CONNECTION WITH THE VOUCHER FOR $151.03.