TAXATION; MFGR'S FEDERAL EXCISE TAX; TREAD RUBBER; IMMUNITY OF COUNTY FROM FEDERAL TAX; STATE SALES TAX MEASURE

TAXATION; MFGR'S FEDERAL EXCISE TAX; TREAD RUBBER; IMMUNITY OF COUNTY FROM FEDERAL TAX; STATE SALES TAX MEASURE

1. Federal mfgr's excise tax on tread rubber, itemized separately in bill to a county for treading services, is not imposed on the county in violation of constitutional immunity from tax of governmental body.

2. Charge made to county for retreading its tires is subject to state sales tax, and amount of Federal mfgr's excise tax on tread rubber is not deductible in computing measure of sales tax.

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                                                                October 17, 1956

Honorable Don J. Clark
Prosecuting Attorney of Yakima County
Yakima County Courthouse
Yakima, Washington                                                                                       Cite as:  AGO 55-57 No. 329

Attn:  !ttMr. Richard Focht,Deputy Prosecuting Attorney

Dear Sir:

            You have requested the opinion of this office on the following questions:

            Yakima County has sent several tires which it owns to a private individual for recapping.  The bill for recapping sets out the amount for the recapping, an amount for Federal excise tax levied under the Federal Highway Revenue Act of 1956, and the Washington state sales tax on the total of these amounts.  You inquire whether:

            (1) The county should pay the Federal excise tax.

            (2) The county should pay the state tax on that portion of the amount set out as Federal excise tax.

            We answer both of your questions in the affirmative.

                                                                     ANALYSIS

             [[Orig. Op. Page 2]]                                                                           

            Section 204 of the "Federal-Aid Highway Act of 1956" (Public Law 627), which took effect July 1, 1956, provides in part as follows:                                                                        

            "Sec. 4071

            "(a) There is hereby imposed upon the following articles, if wholly or in part of rubber, sold by the manufacturer, producer, or importer, a tax at the following rates:

            "(4) Tread rubber, 3 cents a pound."

            Examination of the foregoing reveals that the tax is imposed upon the manufacturer, producer or importer.  The purchaser (here the retreader) is not the taxpayer.  He pays or may pay the producer more for the goods because of the latter's tax obligation, but that is all.  In the case ofSkinner v. U.S., D.C. Ohio 1934, 8 F. Supp. 999, the court specifically held that a person retreading tires by the addition of rubber to old carcasses was not a "manufacturer" or a "producer" within the Revenue Act of 1932, § 602, imposing a tax upon articles sold by the manufacturer, producer or importer, but a "repairman."  The fact that the manufacturer has elected to pass on this obligation to the purchaser, and he in turn to the eventual consumer, in this case the County of Yakima, does not violate the principles of governmental immunity.  The political subdivision is affected by this tax only through the increased cost of services or materials; the tax is valid under the "legal incidence" test laid down by the United States supreme court in the cases of Alabama v. King & Boozer, 314 U.S. 1, andEsso Standard Oil Co. v. Evans, 345 U.S. 495.

            Your next inquiry is whether the retreading of a tire which is the property of a political subdivision, with the identical tire being returned to the political subdivision, can be regarded as a resale of tread rubber within the meaning of § 6416 (B) (2) (a) of the Internal Revenue Code.  In our opinion it cannot for the reasons set forth by the court in the case ofSkinner v. U.S., supra.  The same reasoning applies to the exemptions granted under § 4224 of the Internal Revenue Code.

            With respect to the question concerning state sales tax, that tax is, of course, properly payable by the county upon purchases made by it.  Klickitat County v. Jenner, 15 Wn. (2d) 373.  And the measure of the tax properly includes the total charge made by the retailer to the county, though part of that total may have been itemized as Federal excise tax.  RCW 82.08.010 defines "Selling price," which is the statutory term against which the sales tax is imposed, as:

             [[Orig. Op. Page 3]]

            ". . . the consideration, . . . paid or delivered by a buyer to a seller, all without any deduction on account of the cost of tangible property sold, the cost of materials used, labor costs, interest, discount, delivery costs, taxes, . . ."

            There is thus no deduction from the measure of the sales tax for taxes imposed on and paid by the vendor and which are recovered by him as part of the selling price.

            We trust that the foregoing will prove helpful to you.

Very truly yours,

DON EASTVOLD
Attorney General

JOHN J. CHAMPAGNE
Assistant Attorney General