B-43208, JULY 25, 1944, 24 COMP. GEN. 50

B-43208, JULY 25, 1944, 24 COMP. GEN. 50

FEDERAL PROPERTY TRANSPORTATION TAX - GOVERNMENT LIABILITY THE TAX IMPOSED BY SECTION 620 OF THE REVENUE ACT OF 1942 ON AMOUNTS PAID FOR THE TRANSPORTATION OF PROPERTY--- THE LEGAL INCIDENCE OF WHICH IS ON THE SHIPPER AND FROM WHICH THE GOVERNMENT IS NO LONGER EXEMPT (SECTION 307 OF THE REVENUE ACT OF 1943/--- MAY BE PAID TO A CARRIER WITH RESPECT TO AMOUNTS PAID TO IT UNDER ITS CONTRACT WITH THE GOVERNMENT FOR THE CARTAGE OF MERCHANDISE, IN THE ABSENCE OF ANY EVIDENCE THAT THE CONTRACT RATES INCLUDE THE AMOUNT OF THE TAX, EVEN THOUGH NO PROVISION FOR PAYMENT OF THE TAX APPEARS IN THE CONTRACT.

COMPTROLLER GENERAL WARREN TO THE SECRETARY OF THE TREASURY, JULY 25, 1944:

I HAVE YOUR LETTER OF JULY 7, 1944, AS FOLLOWS:

REFERENCE IS MADE TO THE TAX ON TRANSPORTATION OF PROPERTY IMPOSED BY SECTION 3475 OF THE INTERNAL REVENUE CODE, AS AMENDED BY SECTION 307 OF THE REVENUE ACT OF 1943, EFFECTIVE JUNE 1, 1944.

NO MENTION IS MADE OF ANY TRANSPORTATION TAX IN CONTRACTS, CUSTOMS FORM 3083, FOR THE FISCAL YEARS 1944 AND 1945 COVERING THE CARTAGE OF IMPORTED MERCHANDISE FROM IMPORTING VESSELS OR OTHER CONVEYANCES TO THE APPRAISERS' STORES.

YOUR DECISION IS REQUESTED WHETHER A CLAUSE IS NECESSARY IN SUCH CONTRACTS STIPULATING THE PAYMENT OF THE THREE PERCENT INTERNAL REVENUE TAX OR WHETHER THE CONTRACTORS MAY BE PAID THE TRANSPORTATION TAX IN ADDITION TO THE SPECIFIED CONTRACT RATES WITHOUT SUCH A STIPULATION.

YOUR LETTER DOES NOT CITE ANY SPECIFIC CONTRACT SO AS TO PERMIT THE EXAMINATION THEREOF BY THIS OFFICE, BUT IT APPEARS FROM A BLANK COPY OF THE AGREEMENT TO WHICH YOUR REFER ( CUSTOMS FORM 3083), INFORMALLY OBTAINED FROM YOUR DEPARTMENT, THAT THE OBLIGATION OF CONTRACTOR THEREUNDER IS TO PERFORM, UNDER THE DIRECTION OF THE COLLECTOR OF CUSTOMS AT THE PORT INVOLVED, ALL CARTAGE OF MERCHANDISE DESIGNATED FOR EXAMINATION AT THE APPRAISER'S STORES, FOR THE PERIOD DESIGNATED THEREIN, IN ACCORDANCE WITH THE TERMS AND CONDITIONS SPECIFIED IN THE INVITATION, BID, AND AWARD. AS YOU STATE, NO PROVISION APPEARS IN SAID CONTRACT CONCERNING THE PAYMENT OF THE TRANSPORTATION TAX BY THE GOVERNMENT.

THE TAXING STATUTE HERE INVOLVED--- SECTION 3475 OF THE INTERNAL REVENUE CODE, ENTITLED " TRANSPORTATION OF PROPERTY," ENACTED BY SECTION 620 OF THE REVENUE ACT OF 1942, APPROVED OCTOBER 21, 1942, 56 STAT. 979--- PROVIDES, IN PERTINENT PART:

(A) TAX.--- THERE SHALL BE IMPOSED UPON THE AMOUNT PAID WITHIN THE UNITED STATES AFTER THE EFFECTIVE DATE OF THIS SECTION ( DECEMBER 1, 1942) FOR THE TRANSPORTATION, ON OR AFTER SUCH EFFECTIVE DATE, OF PROPERTY BY RAIL, MOTOR VEHICLE, WATER, OR AIR FROM ONE POINT IN THE UNITED STATES TO ANOTHER, A TAX EQUAL TO 3 PERCENTUM OF THE AMOUNT SO PAID, EXCEPT THAT, IN THE CASE OF COAL, THE RATE OF TAX SHALL BE 4 CENTS PER TON. * * *

(B) EXEMPTION OF GOVERNMENT TRANSPORTATION.--- THE TAX IMPOSED UNDER THIS SECTION SHALL NOT APPLY TO AMOUNTS PAID BY OR TO THE UNITED STATES OR ANY AGENCY OR INSTRUMENTALITY OF THE UNITED STATES FOR THE TRANSPORTATION OF PROPERTY.

(C) RETURNS AND PAYMENT.--- THE TAX IMPOSED BY THIS SECTION SHALL BE PAID BY THE PERSON MAKING THE PAYMENT SUBJECT TO THE TAX. EACH PERSON RECEIVING ANY PAYMENT SPECIFIED IN SUBSECTION (A) SHALL COLLECT THE AMOUNT OF THE TAX IMPOSED FROM THE PERSON MAKING SUCH PAYMENT, AND SHALL * * * MAKE A RETURN * * * AND PAY THE TAXES * * *.

THE ABOVE QUOTED SUBECTION "B" WAS AMENDED BY THE ACT OF NOVEMBER 4, 1943, 57 STAT. 585, TO READ AS FOLLOWS:

(B) GOVERNMENT TRANSPORTATION.--- THE TAX IMPOSED UNDER THIS SECTION SHALL NOT APPLY TO AMOUNTS PAID FOR THE TRANSPORTATION OF PROPERTY TO OR FROM THE GOVERNMENT OF THE UNITED STATES, OR ANY STATE, TERRITORY, OR POLITICAL SUBDIVISION THEREOF, OR THE DISTRICT OF COLUMBIA, OR TO AMOUNTS PAID TO THE POST OFFICE DEPARTMENT FOR THE TRANSPORTATION OF PROPERTY.

BY SECTION 307 OF THE REVENUE ACT OF 1943, PUBLIC LAW 235, 78TH CONGRESS, THE FOREGOING SUBSECTION (B) WAS FURTHER AMENDED, EFFECTIVE JUNE 1, 1944, TO READ AS FOLLOWS:

(B) EXEMPTION OF GOVERNMENT TRANSPORTATION.--- THE TAX IMPOSED UNDER THIS SECTION SHALL NOT APPLY TO (1) AMOUNTS PAID FOR THE TRANSPORTATION OF PROPERTY TO OR FROM THE GOVERNMENT OF A STATE, TERRITORY OF THE UNITED STATES, OR POLITICAL SUBDIVISION THEREOF, OR THE DISTRICT OF COLUMBIA, OR ANY CORPORATION CREATED BY ACT OF CONGRESS TO ACT IN MATTERS OF RELIEF UNDER THE TREATY OF GENEVA OF AUGUST 22, 1864, (2) AMOUNTS PAID TO THE POST OFFICE DEPARTMENT FOR THE TRANSPORTATION OF PROPERTY, OR (3) AMOUNTS PAID BY OR TO THE WAR SHIPPING ADMINISTRATION FOR THE TRANSPORTATION OF PROPERTY BY WATER FROM ONE POINT IN THE UNITED STATES TO ANOTHER, EXCEPT BETWEEN POINTS ON THE GREAT LAKES.

THUS, THE EXEMPTION FROM PAYMENT OF THE TAX UPON THE AMOUNTS PAID FOR THE TRANSPORTATION OF PROPERTY BY THE UNITED STATES NOW HAS BEEN REMOVED.

SINCE BY THE TERMS OF SECTION 3475 (C) OF THE INTERNAL REVENUE CODE, SUPRA, THE TAX IMPOSED IS REQUIRED TO BE PAID BY THE PERSON MAKING THE PAYMENT SUBJECT TO THE TAX, IT IS EVIDENT THAT THE LEGAL INCIDENCE THEREOF MUST BE REGARDED AS UPON THE SHIPPER--- IN THIS INSTANCE, THE UNITED STATES. COMPARE 22 COMP. GEN. 583. WHILE THE ESTABLISHED RULE OF STATUTORY INTERPRETATION IS THAT THE SOVEREIGN, AS THE LAW MAKER, IS NOT BOUND BY THE TERMS OF STATUTES UNLESS THE LAW EXPRESSLY SO PROVIDES, YET, HAVING REGARD FOR THE ELIMINATION OF THE EXEMPTION OF THE UNITED STATES FROM PAYMENT OF THE TRANSPORTATION TAX BY THE REVENUE ACT OF 1943, AND IN VIEW OF THE PROVISIONS OF SECTION 307 (C) OF SAID ACT, 58 STAT. 66, UNDER WHICH THE SECRETARY OF THE TREASURY MAY, UNDER CERTAIN CIRCUMSTANCES, EXEMPT FROM TAXATION THE AMOUNTS PAID BY THE UNITED STATES FOR CERTAIN ARTICLES AND SERVICES, INCLUDING THE TRANSPORTATION OF PROPERTY, IT WOULD SEEM CLEAR THAT THE CONGRESS INTENDED THAT THE UNITED STATES GENERALLY SHOULD BEAR THE TAX IN MAKING PAYMENT FOR THE TRANSPORTATION OF PROPERTY. SUCH BEING THE CASE, AND SINCE THE CARRIER DOES NOT RETAIN THE AMOUNTS PAID AS TAXES, BUT MERELY ACTS IN THE CAPACITY OF AN AGENT OR TRUSTEE IN COLLECTING THE TAX, SUCH PAYMENT, IF MADE TO A CONTRACTOR UNDER AN AGREEMENT OF THE NATURE INVOLVED IN THE PRESENT MATTER, WOULD NOT REPRESENT AN INCREASE IN THE RATE SPECIFIED IN SUCH AGREEMENT.

ACCORDINGLY, IN THE ABSENCE OF ANY EVIDENCE THAT THE CONTRACT RATES WERE INTENDED, OR UNDERSTOOD, TO INCLUDE THE AMOUNT OF THE TAX, IT MAY BE HELD THAT THE TAX UPON THE TRANSPORTATION OF PROPERTY IMPOSED BY THE REVENUE ACT OF 1943 MAY BE PAID TO THE CARRIERS UNDER THE CONTRACTS TO WHICH YOU REFER WITH RESPECT TO AMOUNTS PAID ON AND AFTER JUNE 1, 1944, EVEN THOUGH NO PROVISION FOR SUCH PAYMENT APPEARS IN THE CONTRACTS.