Federal Cartridge Corporation v. United States, 47675.
| Decision Date | 03 May 1948 |
| Docket Number | No. 47675.,47675. |
| Citation | 77 F. Supp. 380,111 Ct. Cl. 372 |
| Parties | FEDERAL CARTRIDGE CORPORATION v. UNITED STATES. |
| Court | U.S. Claims Court |
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Loring M. Staples, of Minneapolis, Minn. (Faegre & Benson, of Minneapolis, Minn., on the brief), for plaintiff.
Paris T. Houston, of Washington, D. C., and H. G. Morison, Asst. Atty. Gen., for defendant.
Before JONES, Chief Justice, and WHITAKER, HOWELL, MADDEN and LITTLETON, Judges.
Plaintiff sues for Social Security taxes which it alleges it was required to pay on account of its performance of a cost-plus-a-fixed-fee contract which it entered into with the defendant for the operation of the Twin Cities Ordnance Plant at New Brighton, Minnesota.
Prior to entering into this contract with defendant on July 14, 1941, plaintiff had been operating at Anoka, Minnesota, about 13 miles from New Brighton, a plant for the manufacture of sporting-type ammunition, shotgun shells, .22 calibre rifle ammunition, and air-rifle ammunition. Its annual pay roll at this plant ran in the neighborhood of $600,000. On this it was subject to a Social Security tax levied by the State of Minnesota of ¾ of 1 percent. The Minnesota tax was graduated from 0.5 of 1 percent to 2.75 percent, depending upon the amount payable from the Minnesota unemployment fund on account of unemployment in an individual plant. In plaintiff's plant there was but little unemployment, and consequently the tax levied upon it was comparatively small.
At the Twin Cities Ordnance Plant there was manufactured .30 calibre and .50 calibre cartridges. These were cartridges used by the armed forces. It was a war plant. Its operations ceased upon termination of the war.
In 1943 the State of Minnesota amended its Employment and Security law to provide for unemployment which would be brought about by the termination of the war. Insofar as plaintiff's situation is concerned, it provided for a levy of 3 percent on that part of an employer's pay roll which exceeded 200 per cent of its 1940 pay roll. Plaintiff's pay roll at its Anoka plant during the war years was much less than 200 percent of its 1940 pay roll; but, its quarterly pay rolls at the Twin Cities Ordnance Plant ran from $3,511,103.42 to $14,204,176.71 as against the largest 1940 quarterly pay roll of $170,698.34. Hence, plaintiff became liable for the 3 percent tax. It became liable for it only because of its operations at the Twin Cities Ordnance Plant.
The question presented is whether or not it is entitled to charge as a cost of performance the entire 3 percent levied on its combined Anoka and New Brighton pay rolls, or whether or not this 3 percent tax should be apportioned between the New Brighton Plant and the Anoka Plant in accordance with the pay rolls at each, and only a portion charged as a cost of performance under the cost-plus-a-fixed-fee contract. The Comptroller General took the latter view and plaintiff sues on the theory that the entire 3 percent tax was an expense attributable to its operation of the Twin Cities Ordnance Plant, and that under its contract with the Government it is entitled to reimbursement therefor.
The contracting officer agreed with plaintiff, and reimbursed it for the entire amount it paid on account of this 3 percent tax; but the Comptroller General overruled the contracting officer, and the contracting officer in turn required plaintiff to make reimbursement for the amount of this tax attributable to the Anoka pay roll. Notwithstanding this decision of the Comptroller General, the Board of Contract Appeals in the War Department also held that the plaintiff was entitled to be paid the entire 3 percent tax, but the Comptroller General adhered to his previous decision and plaintiff has not been paid the amount of this tax attributable to the pay roll at the Anoka plant.
Whether or not this is right is, of course, to be determined by the provisions of the contract.
Article V-A of the contract provided in part: "(1) The Contractor shall be reimbursed in the manner hereinafter described for such of...
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