Presentation Products, Inc. dba Spinitar

ARMED SERVICES BOARD OF CONTRACT APPEALS

Appeal of -- )

)

Presentation Products, Inc. dba Spinitar ) ASBCA No. 61066

)

Under Contract No. W912CN-15-P-0174 )

APPEARANCE FOR THE APPELLANT: Mr. Drake Wayson

Vice President

APPEARANCES FOR THE GOVERNMENT: Raymond M. Saunders, Esq.

Army Chief Trial Attorney

MAJ Christopher C. Cross, JA

Trial Attorney

OPINION BY ADMINISTRATIVE JUDGE O'SULLIVAN

Appellant Presentation Products, Inc. dba Spinitar (Spinitar) seeks an equitable

adjustment of $7,624.14 to its contract with the Army to install a video conferencing

system at Fort Shafter Flats, Hawaii. This amount represents general excise tax that

Spinitar did not include in its proposed price but was required to pay by the State of

Hawaii on its revenues under the contract. Spinitar has elected to proceed under Board

Rule 12.2. 1 The government opposes Spinitar's claim and asserts the contract does not

obligate it to pay state taxes that were not included in the contract price. We agree

with the government and deny the appeal.

FINDINGS OF FACT

1. On 2 June 2015, the Army issued Solicitation No. W912CN-15-T-0187

requesting proposals to install a video conferencing system for the 18th Medical

Command Operations Center at Fort Shafter Flats, Hawaii. The solicitation included

the Federal Acquisition Regulation (FAR) 52.212-4, CONTRACT TERMS AND

CONDITIONS-COMMERCIAL ITEMS (MA y 2015) clause, which states in subsection (k):

"'Taxes. The contract price includes all applicable Federal, State, and local taxes and

duties." (Supp. R4, tab 29 at 1, 15)

2. Spinitar submitted its proposal on 2 July 2015 (R4, tab 2 at I). Its cost

proposal contained the following note: "'The above prices do not include any

1

Under Rule 12.2, Small Claims (Expedited) Procedure, written decisions issued by

the Board will be short and contain only summary findings of fact and legal

conclusions. A decision under Rule 12.2 shall have no value as precedent and,

in the absence of fraud, shall be final and conclusive and may not be appealed

or set aside.

applicable sales taxes. Hawaii's GET [general excise tax] tax reimbursement policy

implemented for federal purchases will be utilized." (Id. at 21)

3. Contract No. W912CN-15-P-0174 (the contract) was awarded to Spinitar

effective 11 September 2015 in the amount of $165,417.31. The contract was

firm-fixed-price and incorporated the Commercial Items clause (FAR 52.212-4 ),

including its subsection (k). (R4, tab 1 at 1, 16)

4. On 26 January 2016, Spinitar submitted a change proposal (erroneously

dated 26 January 2015) that included the following with respect to Hawaii's GET:

We have spoken extensively with Hawaii's Sales/GET tax

office. Your indication to my prior email that this is not

subject to such taxes is based on the "Goods Only"

definition. However, we are informed that "Goods and

Installation" is subject to the taxes at a rate of 4.5% for

Oahu. This is a total tax of $7,624.14 including the

approved Change Proposal 1.

You will recall that we excluded taxes in our proposal so

these will need to be added to our contract.

(R4, tab 4 at 67) The prior communications alluded to above are not included in the

record.

5. On 9 August 2016, Spinitar submitted a claim for $7,624.14 which stated,

in relevant part:

In the pricing section of the proposal (page 21 of the

proposal), Spinitar specifically excluded any applicable

sales taxes including GET tax which is a sales tax imposed

on goods and services when provided together under a

single order.

After numerous conversations with the State of Hawaii, we

determined that the GET tax would not be waived or

reimbursed for this project.

(R4, tab 4 at 2)

6. On 17 February 2017 the contracting officer issued a final decision denying

Spinitar's claim. The final decision stated in relevant part:

2

Per the State of Hawaii's Department of Taxation, GET is

a tax on businesses rather than a sales tax on customers.

Furthermore, businesses are not required by law to collect

GET from their customers. Businesses may choose to

visibly pass on the GET to their customers provided that

the customer agrees to pay it as part of the sale (Tax Facts

3 7-1 attached as Exhibit 1).

Under FAR Clause 52.212-4, Contract Terms and

Conditions, (k) Taxes, states, "The contract price includes

all applicable Federal, State, and local taxes and duties."

Solicitation W912CN-15-T-0187, and resultant contract

W912CN-15-P-0174, incorporated the FAR clause 52.212-4

by reference. The failure of the contractor to incorporate

applicable taxes in the quote is not a valid basis for a claim

or equitable adjustment.

(R4, tab 28 at 1)

7. Spinitar appealed the final decision and its appeal was docketed by the

Board on 22 February 2017.

8. According to its proposal, Spinitar is an experienced firm that over the last

twenty years has supplied and/or built audio-visual and video conferencing systems

for numerous government and military facilities (R4, tab 2 at 4-5).

DISCUSSION

The Hawaii GET is an excise tax imposed on the gross revenues of

businesses, including federal government contractors, derived from the privilege of

doing business in Hawaii. It is not a sales tax paid by the customer. See generally

HAW. REV. STAT. ANN.§ 237-13 (West 2017). The Board previously decided an

appeal involving Hawaii's GET in All Star/SAB Pacific, JV., ASBCA No. 50856,

98-2 BCA ~ 29,958, recon. denied, 99-1BCA~30,214. In that appeal, All Star

sought to recover from the federal government the additional GET ($34,097) that it

had to pay as a result of increased revenues resulting from a contract wage rate

adjustment. The Board denied the appeal, stating:

It is well-settled that under a firm, fixed-price

contract, the contractor assumes the risk of all increased

costs except as specifically provided for in the contract.

Appellant contends that the Wage Rate adjustment clauses

provide for reimbursement of the general excise tax levied

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by the State of Hawaii, and hence the Government should

assume the risk of this cost.

We reject appellant's interpretation as unreasonable.

The clauses could not be more clear. They provide that

any contract price adjustment for changes in mandated

wage rates shall be limited to the changes in the wages,

fringe benefits and accompanying changes in social

security, unemployment taxes and workmen's

compensation insurance and shall not include any

additional amounts for G&A, overhead or profit on these

costs.... The contract also clearly states that that all

Federal, state and local taxes shall be included in a

contractor's bid. This state excise tax and any projected

increases thereof, should have been included in appellant's

bid. [Citations omitted]

All Star, 98-2 BCA ~ 29,958 at 148,234.

In Robertson & Penn, Inc., ASBCA No. 55622, 08-2 BCA ~ 33,921 at 167,859

(citing Hunt Construction Corp. v. United States, 281 F .3d 1369, 13 72-73

(Fed. Cir. 2002)), we denied a contractor's claim for $659,257.71 in assessed

Tennessee state taxes, holding that the contract to operate laundry facilities at

Fort Campbell placed squarely upon the contractor the responsibility to include

all applicable taxes in its bid. And in GarCom, Inc., ASBCA No. 55034, 06-1 BCA

~ 33,146, we denied a claim for $63,578.28 for Arizona state "transaction privilege

tax" under a contract for telecommunications work at Yuma Proving Grounds that

contained the identical contract clause, FAR 52.212-4, Contract Terms and

Conditions-Commercial Items (although an earlier version), as the applicable clause

in this appeal.

Spinitar argues for a different result in this case because it expressly noted in

its price proposal that it had not included the GET in its price and that "Hawaii's GET

tax reimbursement policy implemented for federal purchases will be utilized"

(app. br. at 2). While Spinitar has not further elucidated what it meant by this

statement, we note that it appeared to be surprised to learn from its conversations with

the Hawaii Department of Taxation that the GET exemption for goods sold to the

federal government would not apply to its installation contract (finding 4). From this,

we infer that Spinitar, in its price proposal, was stating that no GET was included

because it expected the transaction to be exempt from GET. Regardless, Spinitar did

nothing more in its proposal than state it had not included GET in its price and why.

4

This statement did nothing to alter the contract's allocation of the risk of state tax cost

to the contractor. 2 The government is not liable for Spinitar's mistake.

CONCLUSION

The contract placed the burden on the contractor to include all applicable taxes in

its price. The appeal is denied.

Dated: 12 June 2017

Administrative Judge

Armed Services Board

of Contract Appeals

I certify that the foregoing is a true copy of the Opinion and Decision of the

Armed Services Board of Contract Appeals in ASBCA No. 61066, Appeal of

Presentation Products, Inc. dba Spinitar, rendered in conformance with the Board's

Charter.

Dated:

JEFFREY D. GARDIN

Recorder, Armed Services

Board of Contract Appeals

2

Spinitar avers that its proposal was incorporated by reference into the resulting

contract (app. br. at 2). We disagree (the cited contract page merely reproduces

Spinitar's Engineered Materials List). But even if its proposal had been

incorporated by reference, it would not change the contract's allocation of risk

on state taxes.

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