B-144504, JAN. 27, 1961

B-144504, JAN. 27, 1961

TO MR. G. W. SCHAEFER, AUTHORIZED CERTIFYING OFFICER, SOIL CONSERVATION SERVICE:

THIS REFERS TO YOUR LETTER OF NOVEMBER 15, 1960, AS SUPPLEMENTED BY INFORMATION FURNISHED IN YOUR LETTER OF JANUARY 11, 1961, REQUESTING OUR DECISION CONCERNING THE PROPRIETY OF CERTIFYING FOR PAYMENT THE INVOICE TRANSMITTED THEREWITH IN FAVOR OF THE AMERICAN PHOTOCOPY EQUIPMENT COMPANY FOR $149.24. THE INVOICE INCLUDES A SEPARATE ITEM OF $4.34 FOR KENTUCKY SALES TAX, AND YOU REQUEST A DECISION AS TO WHETHER YOU MAY CERTIFY THE TOTAL AMOUNT, INCLUDING SALES TAX, FOR PAYMENT.

YOU CITE OUR DECISION 21 COMP. GEN. 843, AND STATE THAT YOUR OFFICE IS AWARE THAT WHEN THE LEGAL INCIDENCE OF A STATE SALES TAX IS IMPOSED UPON THE VENDOR, THE FEDERAL GOVERNMENT IS NOT EXEMPT. HOWEVER, YOUR QUESTION IS WHETHER THE KENTUCKY TAX IS UPON THE VENDOR OR THE VENDEE.

CONCERNING THE PAYMENT OF STATE AND MUNICIPAL TAXES GENERALLY, WE HAVE HELD THAT THE QUESTION OF WHETHER THE UNITED STATES IS REQUIRED TO PAY FOR SUPPLIES PROCURED IN A STATE OR MUNICIPALITY AT A PRICE INCLUSIVE OF A TAX IMPOSED BY THAT STATE OR MUNICIPALITY RESTS UPON A DETERMINATION OF WHETHER THE INCIDENCE OF TAX IS ON THE VENDOR OR THE VENDEE. WHERE THE INCIDENCE OF THE TAX IS ON THE VENDEE, THE UNITED STATES IN PURCHASING SUPPLIES FOR OFFICIAL USE IS ENTITLED UNDER ITS CONSTITUTIONAL PEROGATIVE TO MAKE PURCHASES FREE FROM STATE AND MUNICIPAL TAXES AND TO RECOVER ANY SUCH TAXES AS IT MAY HAVE PAID. ON THE OTHER HAND, WHERE THE INCIDENCE OF THE TAX IS ON THE VENDOR, THE UNITED STATES HAS NO RIGHT, APART FROM STATE STATUTES OR MUNICIPAL ORDINANCES OR REGULATIONS PROMULGATED THEREUNDER, TO PURCHASE SUPPLIES WITHIN THE TERRITORIAL JURISDICTION OF THE STATE OR MUNICIPALITY ON A TAX FREE BASIS. SEE ALABAMA V. KING AND BOOZER, 314 U.S. 1; 33 COMP. GEN. 5434; 32 ID. 423; ID. 577.

THE KENTUCKY SALES TAX IS IMPOSED BY ARTICLE I OF HOUSE BILL NO. 75, ENACTED BY THE GENERAL ASSEMBLY OF THE COMMONWEALTH OF KENTUCKY ON JANUARY 29, 1960, AND KNOWN AS THE "VETERANS' BONUS SALES AND USE TAX LAW.' ARTICLE I PROVIDES IN PART, AS FOLLOWS:

"SECTION 20. (1) FOR THE PRIVILEGE OF MAKING "RETAIL SALES" OR "SALES AT RETAIL," A TAX IS HEREBY IMPOSED UPON ALL RETAILERS AT THE RATE OF THREE PERCENT OF THE GROSS RECEIPTS OF ANY RETAILER DERIVED FROM "RETAIL SALES" OR "SALES AT RETAIL" MADE WITHIN THIS STATE AFTER JUNE 30, 1960.

"SECTION 21. THE TAXES HEREIN IMPOSED MAY BE COLLECTED BY THE RETAILER FROM THE CONSUMER.'

IT IS OBVIOUS FROM THE ABOVE-QUOTED PROVISIONS OF KENTUCKY LAW THAT THE TAX IN QUESTION IS A TAX ON THE VENDOR. ALTHOUGH UNDER SECTION 21 THE VENDOR MAY PASS ON THE TAX TO THE VENDEE, THIS IS NOT MANDATORY AND THE VENDOR'S FAILURE TO DO SO DOES NOT AFFECT HIS LIABILITY FOR THE TAX. THUS, IT IS CLEAR THAT THE LEGAL INCIDENCE OF THE TAX IS ON THE VENDOR RATHER THAN THE PURCHASER AND, CONSEQUENTLY, THE CONSTITUTIONAL PRINCIPLE UNDER WHICH THE FEDERAL GOVERNMENT IS IMMUNE TO STATE TAXATION IS NOT FOR APPLICATION HERE. SEE ESSO STANDARD OIL CO. V. EVANS, 345 U.S. 495, AND 24 COMP. GEN. 150.

THE SUPPLIES COVERED BY THE SUBMITTED INVOICE WERE PURCHASED UNDER CONTRACT GS-00S-30619 ENTERED INTO ON FEBRUARY 26, 1960, IN WASHINGTON, D.C. BY THE NATIONAL BUYING DIVISION, FEDERAL SUPPLY SERVICE, GENERAL SERVICES ADMINISTRATION, AND THE AMERICAN PHOTOCOPY EQUIPMENT COMPANY. CONTRACT GS-00S-30619 INCORPORATED BY REFERENCE ARTICLE 19 OF THE GENERAL PROVISIONS OF FEDERAL SUPPLY SCHEDULE CONTRACTS, WHICH PROVIDES, IN EFFECT, THAT THE CONTRACT PRICE WILL BE INCREASED BY THE AMOUNT OF ANY DIRECT TAX THE CONTRACTOR IS "OBLIGED TO AND DOES PAY.' THE SUPPLIES WERE ORDERED FROM AND SHIPPED BY ONE OF THE SUPPLIER'S RETAIL OUTLETS LOCATED IN KENTUCKY. SINCE THE KENTUCKY SALES TAX IS ONE WHICH THE VENDOR, UNDER THE CIRCUMSTANCES HERE INVOLVED, IS LEGALLY OBLIGED TO PAY, THE INVOICE IS RETURNED AND MAY BE CERTIFIED FOR PAYMENT.