B-44333, OCTOBER 2, 1944, 24 COMP. GEN. 263

B-44333, OCTOBER 2, 1944, 24 COMP. GEN. 263

FEDERAL PROPERTY TRANSPORTATION TAX - GOVERNMENT LIABILITY UNDER DELIVERY AND DRAYAGE CONTRACTS, STIPULATING THAT THE CONTRACT PRICES INCLUDE "ALL TRANSPORTATION TAXES," WHICH WERE EXECUTED BETWEEN THE DATE--- FEBRUARY 25, 1944--- OF ENACTMENT OF THE REVENUE ACT OF 1943 ELIMINATING THE GOVERNMENT'S EXEMPTION FROM THE FEDERAL TRANSPORTATION TAX AND THE EFFECTIVE DATE--- JUNE 1, 1944--- OF SUCH ELIMINATION, AND WHICH CONTEMPLATED THAT PAYMENT FOR THE CONTRACT SERVICES WOULD NOT BE MADE BEFORE JUNE 1, 1944, OR THOSE WHICH WERE EXECUTED ON OR AFTER JUNE 1, 1944, THE CARRIER MAY NOT BE PAID AN AMOUNT REPRESENTING THE TRANSPORTATION TAX, IN ADDITION TO THE CONTRACT PRICE. 24 COMP. GEN. 50, DISTINGUISHED. UNDER DELIVERY AND DRAYAGE CONTRACTS, STIPULATING THAT THE CONTRACT PRICES INCLUDE "ALL TRANSPORTATION TAXES," WHICH WERE EXECUTED ON OR BEFORE FEBRUARY 25, 1944--- THE DATE OF ENACTMENT OF THE REVENUE ACT OF 1943 ELIMINATING, EFFECTIVE JUNE 1, 1944, THE GOVERNMENT'S EXEMPTION FROM THE FEDERAL TRANSPORTATION TAX--- THE CARRIER MAY BE PAID AN AMOUNT IN ADDITION TO THE CONTRACT PRICE REPRESENTING THE TRANSPORTATION TAX WITH RESPECT TO PAYMENTS MADE ON OR AFTER JUNE 1, 1944, PROVIDED IT BE DETERMINED ADMINISTRATIVELY THAT A CHARGE REPRESENTING THE TAX WAS NOT IN FACT INCLUDED IN THE CONTRACT PRICE AND THAT THE CARRIER WAS NOT AT FAULT IN NOT OBTAINING PAYMENT SOONER. UNDER DELIVERY AND DRAYAGE CONTRACTS, STIPULATING THAT THE CONTRACT PRICES INCLUDE "ALL TRANSPORTATION TAXES," WHICH WERE EXECUTED AFTER FEBRUARY 25, 1944--- THE DATE OF ENACTMENT OF THE REVENUE ACT OF 1943 ELIMINATING, EFFECTIVE JUNE 1, 1944, THE GOVERNMENT'S EXEMPTION FROM THE FEDERAL TRANSPORTATION TAX--- AND WHICH CONTEMPLATED PAYMENT BEFORE JUNE 1, 1944, FOR THE CONTRACT SERVICES, THE CARRIER MAY BE PAID AN AMOUNT IN ADDITION TO THE CONTRACT PRICE REPRESENTING THE TRANSPORTATION TAX WITH RESPECT TO PAYMENTS MADE ON OR AFTER JUNE 1, 1944, PROVIDED IT BE DETERMINED ADMINISTRATIVELY THAT A CHARGE REPRESENTING THE TAX WAS NOT AT FAULT IN NOT OBTAINING PAYMENT SOONER.

COMPTROLLER GENERAL WARREN TO THE SECRETARY OF WAR, OCTOBER 2, 1944:

I HAVE YOUR LETTER OF SEPTEMBER 5, 1944, AS FOLLOWS:

IN DECISION OF JULY 25, 1944, B-43208, YOU HELD THAT CARRIERS OPERATING UNDER CONTRACTS WITH THE GOVERNMENT WHICH CONTAIN NO PROVISION FOR PAYMENT TO THE CARRIER OF THE TRANSPORTATION TAX LEVIED ON AND AFTER JUNE 1, 1944 ( SEC. 307B OF REVENUE ACT OF 1943, PUBLIC LAW 235, 78TH CONG.) MAY BE REIMBURSED FOR SUCH TRANSPORTATION TAX PAID, IN THE ABSENCE OF ANY EVIDENCE THAT THE CONTRACT RATES WERE INTENDED OR UNDERSTOOD TO INCLUDE THE AMOUNT OF THE TAX.

THE WAR DEPARTMENT HAS MANY CONTRACTS FOR DELIVERY AND DRAYAGE SERVICES, EXECUTED BOTH PRIOR AND SUBSEQUENT TO JUNE 1, 1944, ON W.D. FORM NO. 47, GOVERNMENT'S ORDER AND CONTRACTOR'S ACCEPTANCE (COPY INCLOSED) WHICH CONTAINS THE FOLLOWING CLAUSE:

"4. TAXES.--- UNLESS OTHERWISE INDICATED IN THIS CONTRACT (A) THE PRICES HEREIN DO NOT INCLUDE ANY OF THE FOLLOWING TAXES IN EFFECT AT THE DATE OF THIS CONTRACT: (I) ANY FEDERAL TAX WHICH IS DIRECTLY APPLICABLE TO THE COMPLETED SUPPLIES COVERED HEREBY (INCLUDING COMPONENT PARTS, ARTICLES, OR UNITS OF WHICH THE CONTRACTOR IS THE MANUFACTURER, IMPORTER, OR PRODUCER) AND AS TO WHICH EXEMPTION FROM TAX IS AVAILABLE, OR (II) ANY STATE OR LOCAL SALES, USE, OR OTHER TAX FROM WHICH THE CONTRACTOR OR THIS TRANSACTION OF THE PROCUREMENT OF THESE SUPPLIES IS EXEMPT, AND (B) THE PRICES HEREIN INCLUDE ALL OTHER FEDERAL, STATE, AND LOCAL TAXES (INCLUDING WITHOUT LIMITATION OF THE FOREGOING ALL TRANSPORTATION TAXES). UPON REQUEST OF THE CONTRACTOR THE GOVERNMENT WILL ISSUE TAX-EXEMPTION CERTIFICATES OR FURNISH OTHER SIMILAR PROOF OF EXEMPTION WITH RESPECT TO ALL TAXES EXCLUDED FROM THE PRICE.'

AT THE TIME THESE CONTRACTS WERE ENTERED INTO IT WAS NEVER CONTEMPLATED THAT THE CARRIER WOULD PAY THE TRANSPORTATION TAX EITHER IN THE CASE OF CONTRACTS EXECUTED PRIOR TO JUNE 1, 1944, PROVIDING FOR THE RENDITION OF SERVICES AFTER THAT DATE, OR IN THE CASE OF CONTRACTS ENTERED INTO AFTER JUNE 1, 1944, INASMUCH AS THE INCIDENCE OF THE TAX WAS BELIEVED TO FALL ON THE SHIPPER, NAMELY THE GOVERNMENT. ACCORDINGLY, PRIOR TO JUNE 1, 1944, NO TRANSPORTATION TAX WAS PAID BY THE CARRIER, AND SUBSEQUENTLY COMPANIES OPERATING UNDER THIS CONTRACT HAVE INCLUDED IN THEIR INVOICES IN ADDITION TO THE FULL CONTRACT RATE THE 3 PERCENT TRANSPORTATION TAX THEREON NOW LEVIED UNDER SECTION 3475 OF THE REVENUE CODE, AS AMENDED BY SECTION 307 OF THE REVENUE ACT OF 1943, EFFECTIVE JUNE 1, 1944.

YOUR DECISION IS REQUESTED WHETHER CONTRACTORS OPERATING UNDER CONTRACTS CONTAINING THE ABOVE QUOTED CLAUSE EXECUTED PRIOR TO AND SUBSEQUENT TO JUNE 1, 1944, MAY BE PAID THE TRANSPORTATION TAX IN ADDITION TO THE SPECIFIED CONTRACT RATES.

ALTHOUGH IT IS TRUE, AS WAS POINTED OUT IN THE DECISION OF JULY 25, 1944, B-43208, 24 COMP. GEN. 50, TO WHICH YOU REFER, THAT THE LEGAL INCIDENCE OF THE FEDERAL EXCISE TAX PRESCRIBED BY THE TERMS OF SECTION 3475 OF THE INTERNAL REVENUE CODE, 56 STAT. 979, 26 U.S.C. 3475, IS UPON THE SHIPPER AND THAT THE PROVISIONS OF SECTION 307 OF THE REVENUE ACT OF 1943, 58 STAT. 65, EVIDENCE A LEGISLATIVE INTENT THAT THE UNITED STATES GENERALLY SHOULD BEAR THE TAX IN MAKING PAYMENT FOR SERVICES RENDERED BY COMMON CARRIERS OR OTHER PERSONS IN CONNECTION WITH THE TRANSPORTATION OF PROPERTY FOR THE FEDERAL GOVERNMENT, IT DOES NOT APPEAR THAT THE RULING IN THAT CASE IS CONTROLLING IN THE CONSIDERATION OF THE QUESTION HERE PRESENTED.

IN THE CITED CASE, THE CONTRACT INVOLVED DID NOT CONTAIN ANY RECITAL WITH RESPECT TO MATTER OF TAXES AND THE HOLDING THEREIN THAT PAYMENT WAS AUTHORIZED TO A CARRIER OF AN AMOUNT REPRESENTING THE APPLICABLE TAX ON TRANSPORTATION CHARGES WAS BASED UPON THE PROPOSITION THAT THERE WAS NO OBLIGATION RESTING ON THE CARRIER TO BEAR THE BURDEN OF A TAX REQUIRED TO BE PAID BY THE GOVERNMENT AS THE SHIPPER. HOWEVER, THE PROVISIONS OF THE DELIVERY AND DRAYAGE CONTRACTS WHICH ARE THE SUBJECT OF YOUR PRESENT SUBMISSION NOT ONLY SPECIFY THE TYPES OF TAXES WHICH WERE EXCLUDED FROM THE CONTRACT PRICES BUT ALSO EXPRESSLY STIPULATE THAT SUCH PRICES "INCLUDE ALL OTHER FEDERAL, STATE, AND LOCAL TAXES (INCLUDING WITHOUT LIMITATION OF THE FOREGOING ALL TRANSPORTATION TAXES)" AND THERE IS NOTHING APPEARING THEREIN OR ELSEWHERE IN THE CONTRACT FORM WHICH ACCOMPANIED YOUR LETTER TO INDICATE THAT SUCH PROVISIONS WERE NOT INTENDED TO COMPREHEND EVERY TYPE OF TAX IMPOSED BY THE TERMS OF EXISTING LAW UPON THE VARIOUS TRANSACTIONS INVOLVED IN THE DISCHARGE OF THE OBLIGATIONS IMPOSED BY THE TERMS OF THE CONTRACT, REGARDLESS OF WHETHER THE INCIDENCE OF THE TAX WAS UPON THE CONTRACTOR OR THE GOVERNMENT.

MOREOVER, IT IS TO BE OBSERVED THAT THE TAX CLAUSE CONTAINED IN THE SUBJECT CONTRACTS SPECIFICALLY PROVIDES THAT "ALL TRANSPORTATION TAXES" ARE INCLUDED IN THE CONTRACT PRICES; AND, WHILE YOU STATE THAT IT WAS NOT CONTEMPLATED THAT CARRIERS FURNISHING DELIVERY AND DRAYAGE SERVICES UNDER SUCH CONTRACTS WOULD BE REQUIRED TO BEAR THE FEDERAL EXCISE TAX ON TRANSPORTATION CHARGES, IT IS WELL ESTABLISHED THAT IN DETERMINING THE INTENTION OF THE PARTIES WITH RESPECT TO THE TERMS OF A WRITTEN CONTRACT, THE QUESTION IS NOT NECESSARILY WHAT INTENTION MAY HAVE EXISTED IN THE MINDS OF THE PARTIES, BUT WHAT INTENTION IS EXPRESSED BY THE LANGUAGE USED IN THE CONTRACT.

SECTION 307 OF THE REVENUE ACT OF 1943, SUPRA, ENACTED FEBRUARY 25, 1944, AMONG OTHER THINGS, AMENDED THE TERMS OF SECTION 3475 OF THE INTERNAL REVENUE CODE, EFFECTIVE JUNE 1, 1944, SO AS TO ELIMINATE THE EXEMPTION WHICH PREVIOUSLY HAD EXISTED IN THE CASE OF PAYMENTS BY THE UNITED STATES FOR THE TRANSPORTATION OF PROPERTY AND PROVIDED, IN EFFECT, THAT ALL AMOUNTS PAID BY THE UNITED STATES ON AND AFTER JUNE 1, 1944, FOR TRANSPORTATION SERVICES, SHOULD BE SUBJECT TO THE TAX EXCEPT SUCH AS WERE SPECIFICALLY EXEMPTED BY THE TERMS OF SAID LAW OR BY THE SECRETARY OF THE TREASURY FROM THE OPERATION OF THE TAXING STATUTE. BUT NEITHER SAID LAWS NOR THE REGULATIONS PROMULGATED BY THE SECRETARY OF THE TREASURY WITH RESPECT THERETO PURPORT TO PROHIBIT THE INCLUSION OF A CHARGE REPRESENTING THE TAX IN THE PRICES SPECIFIED IN A CONTRACT FOR THE TRANSPORTATION OF PROPERTY FOR THE GOVERNMENT OR OTHER SHIPPERS. HENCE, IN A CASE WHERE THE PROVISIONS OF A CONTRACT BETWEEN THE GOVERNMENT AND THE CARRIER FOR THE TRANSPORTATION OF PROPERTY DO NOT STIPULATE FOR THE INCLUSION OF THE AMOUNT OF THE TAX IN THE CONTRACT PRICES, THE GOVERNMENT IS REQUIRED TO PAY THE CARRIER AN AMOUNT REPRESENTING THE TAX, THE OBLIGATION RESTING UPON THE UNITED STATES WITH RESPECT TO THE PAYMENT OF THE TAX IS COMPLETELY DISCHARGED, SO FAR AS THE RELATIONSHIP BETWEEN THE PARTIES IS CONCERNED, BY THE PAYMENT TO THE CONTRACTOR OF THE PRICES FIXED IN THE CONTRACT.

CONSEQUENTLY, SINCE THE INTENTION OF THE PARTIES TO A WRITTEN CONTRACT IS TO BE DEDUCED FROM THE TERMS OF THE CONTRACT AND THE SITUATION EXISTING WHEN IT WAS ENTERED INTO, AND SINCE A CARRIER IS CHARGEABLE WITH NOTICE FROM FEBRUARY 25, 1944--- THE DATE OF THE ENACTMENT OF THE ABOVE-MENTIONED AMENDMENT TO SECTION 3475 OF THE INTERNAL REVENUE CODE--- THAT THE TERMS OF SAID TAXING STATUTE WOULD BE FOR APPLICATION IN THE CASE OF AMOUNTS PAID BY THE GOVERNMENT ON AND AFTER JUNE 1, 1944, FOR THE TRANSPORTATION OF PROPERTY, IT MUST BE HELD THAT THE LIABILITY OF THE UNITED STATES TO CARRIERS UNDER SUCH OF THE SUBJECT CONTRACTS WHICH WERE EXECUTED AFTER FEBRUARY 25, 1944, AND PRIOR TO JUNE 1, 1944, AS CONTEMPLATED THAT PAYMENT WOULD NOT BE MADE FOR THE SERVICES COVERED THEREBY BEFORE JUNE 1, 1944, AS WELL AS ITS LIABILITY UNDER SUCH OF THE SUBJECT CONTRACTS AS WERE EXECUTED ON OR AFTER JUNE 1, 1944, IS LIMITED TO THE PRICES SPECIFIED IN THE CONTRACTS, AND THAT PAYMENT IS NOT AUTHORIZED TO A CARRIER OF AN AMOUNT REPRESENTING THE FEDERAL EXCISE TAX ON TRANSPORTATION CHARGES IN ADDITION TO THE PRICES FIXED IN SAID CONTRACTS.

HOWEVER, WITH RESPECT TO SUCH OF THE SUBJECT CONTRACTS AS WERE EXECUTED ON OR BEFORE FEBRUARY 25, 1944, AND THOSE EXECUTED AFTER THAT DATE WHICH CONTEMPLATED THAT PAYMENT WOULD BE MADE FOR THE SERVICES COVERED THEREBY PRIOR TO JUNE 1, 1944, ALTHOUGH IT APPEARS THAT THE CONTRACTUAL PROVISION HERE INVOLVED RELATING TO THE TAXES WHICH WERE INCLUDED IN THE CONTRACT PRICES DID NOT EXPRESSLY LIMIT THE SCOPE OF THAT PROVISION TO THE TAXES IN EFFECT ON THE DATE OF THE CONTRACT, AS DID THE PROVISION CONCERNING THE TAXES WHICH WERE EXCLUDED FROM SUCH PRICES, IT DOES NOT SEEM THAT THE FIRST-MENTIONED PROVISION NECESSARILY MUST BE REGARDED AS COMPREHENDING A TAX--- THE LEGAL INCIDENCE OF WHICH IS NOT ON THE CONTRACTOR--- WHICH WAS NOT IN EFFECT AT THE TIME OF THE EXECUTION OF A CONTRACT OR WHICH WAS NOT TO BE PERFORMED AND PAYMENT MADE FOR THE SERVICES COVERED THEREBY. AND, WHILE THE UNITED STATES IS NOT OBLIGATED--- IN THE ABSENCE OF A CONTRACTUAL PROVISION EXPRESSLY STIPULATING THEREFOR--- TO COMPENSATE A CONTRACTOR FOR THE AMOUNT OF A TAX REQUIRED TO BE PAID BY IT IN CONNECTION WITH THE PERFORMANCE OF A GOVERNMENT CONTRACT AND WHICH WAS NOT INCLUDED IN ITS QUOTED PRICES, IRRESPECTIVE OF THE TIME WHEN THE TAX WAS ACTUALLY IMPOSED, IT WOULD APPEAR THAT THERE IS A SUBSTANTIAL BASIS FOR THE VIEW THAT IN A CASE WHERE THE LEGAL INCIDENCE OF THE TAX RESTS UPON THE GOVERNMENT AND THE STATUTE IMPOSING THE TAX WAS ENACTED AFTER THE EXECUTION OF THE CONTRACT INVOLVED OR THE CONTRACT CONTEMPLATED THAT THE TRANSACTION TO WHICH THE TAX ATTACHED WOULD TAKE PLACE PRIOR TO THE EFFECTIVE DATE OF THE TAX, THE UNITED STATES IS OBLIGATED TO PAY THE AMOUNT OF THE TAX IN ADDITION TO THE CONTRACT PRICES IF SUCH PRICES DID NOT INCLUDE A CHARGE REPRESENTING THE TAX AND THE GOVERNMENT'S LIABILITY FOR THE TAX DID NOT ARISE THROUGH ANY FAULT OF THE CONTRACTOR.

ACCORDINGLY, YOU ARE ADVISED THAT IF IT BE DETERMINED ADMINISTRATIVELY THAT THE PRICES SPECIFIED IN ANY OF THE SUBJECT CONTRACTS WHICH WERE EXECUTED ON OR BEFORE FEBRUARY 25, 1944, OR IN ANY OF THE CONTRACTS EXECUTED AFTER THAT DATE WHICH CONTEMPLATED THAT PAYMENT WOULD BE MADE FOR THE SERVICES COVERED THEREBY PRIOR TO JUNE 1, 1944, DID NOT, IN FACT, INCLUDE A CHARGE REPRESENTING THE TAX PRESCRIBED BY THE TERMS OF SECTION 3475 OF THE INTERNAL REVENUE CODE AND THAT THE FAILURE OF THE CARRIER TO OBTAIN PAYMENT FOR ITS SERVICES PRIOR TO JUNE 1, 1944, WAS NOT DUE TO ANY FAULT ON ITS PART, THIS OFFICE WILL NOT BE REQUIRED TO OBJECT TO THE PAYMENT TO A CARRIER OF THE AMOUNT OF THE TAX IN ADDITION TO THE PRICES FIXED BY SUCH CONTRACTS.