B-185487, AUG 3, 1976

B-185487, AUG 3, 1976

PAYMENT BY EMPLOYEE OF SALES TAX ON SERVICE OF EXTENDING CREDIT, MEASURED AS A PERCENTAGE OF LOAN ORIGINATION FEE INCURRED IN CONNECTION WITH PURCHASE OF RESIDENCE INCIDENT TO OFFICIAL CHANGE OF STATION IS REIMBURSABLE. THE NATURE OF THE TAX IS A GENERAL SALES TAX IMPOSED ON ALL TYPES OF HOME LOAN TRANSACTIONS. AS SUCH IT IS A MORTGAGE TAX REIMBURSABLE UNDER FEDERAL TRAVEL REGULATIONS (FPMR 101-7, MAY 1973) PARA. 2-6.2D.

TERRY W.SCHNEIDER AND KERMIT G. THOMAS - RELOCATION EXPENSES, MORTAGE TAX:

THIS MATTER INVOLVES A REQUEST DATED DECEMBER 2, 1975, FROM MS. ORRIS C. HUET, AN AUTHORIZED CERTIFYING OFFICER FOR AN ADVANCE DECISION AS TO WHETHER MESSRS. TERRY W.SCHNEIDER AND KERMIT G. THOMAS, EMPLOYEES OF THE DEPARTMENT OF AGRICULTURE, FOREST SERVICE, CAN BE REIMBURSED FOR A LOCAL SALES TAX ASSESSED AS A PERCENTAGE OF THE LOAN ORIGINATION FEE AND PAID BY EACH INCIDENT TO HIS PURCHASE OF A RESIDENCE IN KETCHIKAN, ALASKA.

BY TRAVEL AUTHORIZATION, DATED MARCH 24, 1975, MR. SCHNEIDER WAS TRANSFERRED FROM MINTURN, COLORADO, TO KETCHIKAN, ALASKA, AND BY TRAVEL AUTHORIZATION, DATED JUNE 3, 1975, MR. THOMAS WAS TRANSFERRED FROM MEDFORD, OREGON, TO KETCHIKAN. INCIDENT TO THESE TRANSFERS BOTH EMPLOYEES PURCHASED RESIDENCES IN KETCHIKAN THROUGH LOANS FINANCED BY THE ALASKA FEDERAL SAVINGS AND LOAN ASSOCIATION IN KETCHIKAN. INCLUDED IN THE SETTLEMENT CHARGES ON THESE LOANS WAS A LOCAL SALES TAX ASSESSED ON THE BASIS OF THE LOAN ORIGINATION FEE CHARGED BY THE SAVINGS AND LOAN. MESSRS. SCHNEIDER'S AND KERMIT'S CLAIMS FOR $16.04 AND $26.88, RESPECTIVELY, WERE ADMINISTRATIVELY DISALLOWED IN VIEW OF THE FACT THAT THE LOAN ORIGINATION FEE, ON WHICH BASIS THE TAX WAS ASSESSED, IS ITSELF NOT REIMBURSABLE. BOTH EMPLOYEES HAVE SUBMITTED RECLAIM TRAVEL VOUCHERS FOR THE AMOUNT OF THIS TAX IN SUPPORT OF WHICH THEY EXPLAIN THAT THE SALES TAX IS IMPOSED BY THE LOCAL GOVERNMENTS AND NOT BY THE CREDITOR. THEY CLAIM THAT FOR THIS REASON THE TAX IS NOT A FINANCE CHARGE AS CONTEMPLATED UNDER THE TRUTH IN LENDING ACT AND HENCE ITS REIMBURSEMENT IS NOT PRECLUDED.

AT THE TIME OF MESSRS. SCHNEIDER'S AND KERMIT'S TRANSFERS, PAYMENT OF TRAVEL AND RELOCATION EXPENSES OF CIVILIAN GOVERNMENT EMPLOYEES WAS GOVERNED BY THE FEDERAL TRAVEL REGULATIONS (FTR) (FPMR 101-7, MAY 1973). SECTION 2-6.2D THEREOF PROVIDES IN PERTINENT PART:

"D. MISCELLANEOUS EXPENSES. THE FOLLOWING EXPENSES ARE REIMBURSABLE WITH RESPECT TO THE SALE AND PURCHASE OF RESIDENCES IF THEY ARE CUSTOMARILY PAID BY THE SELLER OF A RESIDENCE AT THE OLD OFFICIAL STATION OR IF THEY ARE CUSTOMARILY PAID BY THE PURCHASER OF A RESIDENCE AT THE NEW OFFICIAL STATION, TO THE EXTENT THEY DO NOT EXCEED AMOUNTS CUSTOMARILY PAID IN THE LOCALITY OF THE RESIDENCE: * * * MORTGAGE AND TRANSFER TAXES * * * INTEREST ON LOANS, POINTS AND MORTGAGE DISCOUNTS ARE NOT REIMBURSABLE. NOTWITHSTANDING THE ABOVE, NO FEE, COST, CHARGE, OR EXPENSE IS REIMBURSABLE WHICH IS DETERMINED TO BE A PART OF THE FINANCE CHARGE UNDER THE TRUTH IN LENDING ACT, TITLE I, PUBLIC LAW 90-321, AND REGULATION Z ISSUED PURSUANT THERETO BY THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM. PROPERTY TAXES AND OPERATING OR MAINTENANCE COSTS ALSO ARE NOT REIMBURSABLE."

IF THE TAX PAID BY MR. SCHNEIDER AND MR. THOMAS CAN BE CLASSIFIED AS A "MORTAGE OR TRANSFER TAX", IT IS REIMBURSABLE UNDER THIS REGULATION.

WE HAVE CONSISTENTLY HELD THAT A LOAN ORIGINATION FEE IS NOT REIMBURSABLE UNDER THE ABOVE-QUOTED REGULATION BECAUSE IT CONSTITUTES A CHARGE PAID BY THE PURCHASER AND IMPOSED BY THE CREDITOR AS AN INCIDENT TO, AND AS A CONDITION OF THE EXTENSION OF CREDIT AND, AS SUCH, CONSTITUTES A FINANCE CHARGE UNDER THE TRUTH IN LENDING ACT AS IMPLEMENTED BY REGULATIONS Z OF THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM (12 C.F.R. 226.4(A)(3) (1975)). 49 COMP.GEN. 483, 486 (1970); B-182835, FEBRUARY 7, 1975. AS CLAIMANTS HAVE POINT4D OUT THE TAX HERE IN QUESTION IS NOT IMPOSED BY THE CREDITOR AND DOES NOT ITSELF CONSTITUTE A NONREIMBURSABLE FINANCE CHARGE. HOWEVER, WE HAVE NEVER CONSIDERED WHETHER A SALES TAX, THE AMOUNT OF WHICH IS DETERMINED ON THE BASIS OF THE LOAN ORIGINATION FEE MAY BE REIMBURSED, AS A MORTGAGE OR TRANSFER TAX UNDER FTR, PARA. 2-6.2D (MAY 1973), QUOTED ABOVE.

IN THE SITUATIONS WHERE WE HAVE INTERPRETED OTHER STATE AND LOCAL TAXES TO DETERMINE WHETHER THEY WERE MORTGAGE OR TRANSFER TAXES WE HAVE ADHERED TO A BASIC GUIDELINE. THE ESSENTIAL NATURE OF THE TAX, AS CONSTRUED BY APPROPRIATE STATE OR LOCAL AUTHORITIES, MUST BE EXAMINED TO SEE IF IT IS, IN FACT, A TAX ON THE MORTGAGE OR TRANSFER. THIS STANDARD CALLS FOR AN EXAMINATION OF THE LOCAL PRACTICE AND CONSTRUCTION. 54 COMP.GEN. 93 (1974); B-181795, NOVEMBER 11, 1974; B-178943, SEPTEMBER 17, 1974.

IN 54 COMP.GEN. SUPRA, B-178943, SUPRA, AND B-181795, SUPRA, STATE SALES TAXES IMPOSED ON THE CONSTRUCTION OF NEW RESIDENCES WERE INCLUDED IN THE PURCHASE PRICE OF THE RESIDENCES AND PAID BY THE PURCHASERS. WE HELD THAT THE PURCHASERS COULD NOT BE REIMBURSED BECAUSE THE NATURE OF THE TAX WAS TO TAX THE CONTRACTOR FOR THE PRIVILEGE OF DOING BUSINESS IN THE STATE. THE TAX INVOLVED WAS FOUND NOT TO BE A TAX ON THE TRANSFER IN THAT IT WAS IMPOSED ONLY ON THE SALE OF NEW HOMES AND NOT ON THE SALE OF HOMES THAT HAVE BEEN PREVIOUSLY OCCUPIED. HOWEVER WHEN THE TAX IS A GENERAL SALES OR TAX IMPOSED ON THE PURCHASE OF A RESIDENCE OR A MORTGAGE TAX IMPOSED ON THE BORROWER IT IS REIMBURSABLE. B-175424, JUNE 8, 1972; B-183162, JANUARY 27, 1976.

IN THE INSTANT CASE THE SALES TAX COLLECTED BY THE SAVINGS AND LOAN ASSOCIATION AND REMITTED TO THE GATEWAY BOROUGH IN FACT REPRESENTS TWO TAXES, A BOROUGH SALES TAX OF 2 1/2% AND A CITY TAX OF 1 1/2%. THE 2 1/2% TAX IS LEVIED BY THE GATEWAY BOROUGH PURSUANT TO AUTHORITY GIVEN UNDER THE ALASKA STATUTES, SECTION 29.53.415 WHICH PROVIDES IN PERTINENT PART:

"SEC. 29.53.415. SALES AND USE TAX. (A) A BOROUGH MAY LEVY AND COLLECT A SALES TAX NOT EXCEEDING THREE PERCENT ON SALES OR RENTS, AND ON SERVICES MADE WITHIN THE BOROUGH. THE SALES TAX MAY APPLY TO ANY OR ALL OF THESE SOURCES. EXEMPTIONS MAY BE GRANTED BY ORDINANCE."

THE 1 1/2% SALES TAX IS LEVIED BY THE CITY OF KETCHIKAN PURSUANT TO THE FOLLOWING PROVISION OF ALASKA STATUTES, SECTION 29.53.440:

"SEC. 29.53.440. POWER OF LEVY. CITIES WITHIN A BOROUGH WHICH LEVIES AND COLLECTS SALES OR USE TAXES FOR AREAWIDE BOROUGH FUNCTIONS MAY LEVY SALES OR USE TAXES UPON ALL SOURCES TAXED BY THE BOROUGH IN THE MANNER PROVIDED FOR BOROUGHS."

WE HAVE BEEN ADVISED BY AN OFFICIAL OF THE BOROUGH OFFICE, GATEWAY BOROUGH, THAT THE TAX INVOLVED IS A GENERAL SALES TAX IMPOSED ON SERVICES, INCLUDING THE EXTENSION OF CREDIT, WITHIN THE BOROUGH. THE TAX COMPUTED AS A PERCENTAGE OF THE LOAN ORIGINATION FEE IS IMPOSED ON ALL TYPES OF HOME LOAN TRANSACTIONS AND IS CUSTOMARILY PAID BY THE PURCHASER. IT IS IMPOSED ON FINANCING OBTAINED FOR THE PURCHASE OF EXISTING AS WELL AS NEWLY CONSTRUCTED RESIDENCES. THEREFORE, THE SALES TAX PAID BY MESSRS. SCHNEIDER AND THOMAS IN CONNECTION WITH FINANCING THE PURCHASE OF THEIR HOMES WOULD APPEAR TO BE A TRANSFER TAX WITHIN THE MEANING OF FTR PARA. 2- 6.2D (MAY 1973). THE FACT THAT THE AMOUNT OF THE TAX ON THE SERVICE OF EXTENDING CREDIT IS DETERMINED AS A PERCENTAGE OF THE LOAN ORIGINATION FEE DOES NOT PRECLUDE PAYMENT OF AN OTHERWISE REIMBURSABLE MORTGAGE TAX.

ACCORDINGLY THE RECLAIM VOUCHERS MAY BE CERTIFIED FOR PAYMENT.