US v. Benton, 89-0608-CV-W-3.
| Decision Date | 26 October 1990 |
| Docket Number | No. 89-0608-CV-W-3.,89-0608-CV-W-3. |
| Citation | 772 F. Supp. 453 |
| Parties | UNITED STATES of America, Plaintiff, v. Duane BENTON, Director of Revenue, State of Missouri; Missouri Department of Revenue; and State of Missouri, Defendants. |
| Court | U.S. District Court — Western District of Missouri |
E. Eugene Harrison, Gay L. Tedder, Alleen S. Castellani, U.S. Attorney's Office, Kansas City, Mo., David M. Katinsky, U.S. Dept. of Justice, Washington, D.C., for U.S.
James B. Deutsch, Missouri Atty. General's Office, Jefferson City, Mo., for defendants.
Before the Court are Plaintiff's and Defendants' motions for summary judgment. Fed.R.Civ.P. 56(c) states that a motion for summary judgment shall be rendered if there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law. A moving party for summary judgment must "establish the right to judgment with such clarity that there is no room for controversy." Buford v. Tremayne, 747 F.2d 445, 447 (8th Cir.1984). The material facts in this case are undisputed.
In its complaint, the U.S. seeks:
Defendants previously filed two motions to dismiss. Both were denied. The U.S. contends Olin is exempt from sales and use taxes because it is the operator of a U.S. owned munitions plant and the property is purchased for resale to the United States Army.
The plant is a government owned manufacturing facility located in Independence, Missouri, and manufactures ammunition for the U.S. and its allies. Since November 3, 1985, the plant has been operated and maintained by Olin pursuant to the terms of its contract with the Army. Olin is an independent contractor charged with the operation management and maintenance of the plant as the Army directs and is not an agent of the U.S. Olin made payments of Missouri sales and use taxes between November 1985 and April 1988, all of which were reimbursed by the U.S.
The contract is a cost plus award fee contract where Olin receives an annual fee for operation and maintenance of the plant and reimbursement for its costs of operating the plant. The annual fee is divided into two portions. The first portion is a base fee, which is approximately 15% of the total fee potential and is paid in 12 monthly payments and represents a `fixed fee.' It is negotiated in advance and based upon the forthcoming year's projections. The second portion of the annual fee is an award fee and is paid annually. It is based on the Army's evaluation of Olin's operation and management of the plant.
Instead of providing a final manufactured product for the Army, Olin furnishes personnel to manage and operate the plant. The Army reimburses Olin for salaries and other allowable personnel costs. Olin furnishes all equipment, supplies, and materials to operate and maintain the plant as prescribed in the contract. Olin is not required to obtain the U.S.'s specific approval for each transaction, and has the discretion to remove the amount of property from inventory that is needed to perform the contract. Olin must report to the U.S. and most tasks are expressly subject to the direction or approval of the Army's Contracting Officer. Olin issues checks from its account to pay for the property and is reimbursed by the United States for funds expended.
Although Olin executes contracts for the purchase of all tangible personal property needed for the operation of the plant in its own name, the contract provides that the title to the property passes directly to the U.S., incorporating by reference Federal Acquisition Clause 52.245-05. Thus, Olin never holds title to the property purchased. The purchase orders which Olin places with third party vendors also provide for the passage of title to the U.S., consistent with the contract.
Defendant contends that Plaintiff is an improper party, and argues that Olin purchased the property in question and resold it for cost to the U.S., thus Olin is the proper party to bring this suit. The sales tax was collected from Olin on its purchases from third party vendors. No sales tax was collected from the United States on its reimbursement of Olin's purchases. Section 144.190.2, RSMo.1986, provides that the entity under Missouri tax law who is required to remit taxes is the seller of tangible personal property and the U.S. is not a seller. Missouri concludes that the U.S. is not the proper party to receive a refund. Additionally, Missouri contends that the U.S. has not followed § 144.190.3, RSMo.1989, which provides that "Every claim for refund must be in writing under oath, and must state the specific grounds upon which the claim is founded."
These arguments are premised on a state law action for refund. In an action brought by the U.S. against a county to recover a refund of ad valorem taxes paid by mistake by the U.S. and its contractor, the Eleventh Circuit held:
In contending that the district court was without subject matter jurisdiction because prior to 1975 payments of taxes were voluntarily made and thereafter the administrative procedure provided by the Georgia statute was ignored, the county misconceives the theory of the Government's claim. It was not posited upon state law, common or statutory, but upon Federal law. Its action sounded in quasi-contractus for the recovery of its treasury funds paid by mistake which resulted in the unjust enrichment of the county. Neither voluntary payment nor the failure to exhaust state administrative remedies was available as a defense to its claim.
United States v. DeKalb County, 729 F.2d 738, 741 (11th Cir.1984).
Where the U.S. seeks a refund of state taxes erroneously collected from a federal contractor and paid by the U.S., the U.S. is bringing an action in indebitatus assumpsit, or quasi-contract, for money had and received, and is not bringing a state law cause of action for refund of taxes. See U.S. v. Broward County, 901 F.2d 1005 (11th Cir.1990); U.S. v. Michigan, 851 F.2d 803 (6th Cir.1988); and New Orleans v. U.S., 371 F.2d 21 (5th Cir.), cert. denied, 387 U.S. 944, 87 S.Ct. 2076, 18 L.Ed.2d 1330 reh. denied, 389 U.S. 890, 88 S.Ct. 19, 19 L.Ed.2d 201 (1967). Under federal common law principles, the U.S. has the right to sue for the recovery of funds paid from the federal treasury, whether or not any specific state statute authorizes the suit. DeKalb County, 729 F.2d at 741 n. 4. "The interpretation of a contract between the United States and another party is a federal issue." U.S. v. Benton, 729 F.Supp. 671, 673 (W.D.Mo.1990).
The U.S. is the proper party to bring a quasi-contractual action for money had and received where its contractor has wrongly paid over taxes to a state or political subdivision and the United States has reimbursed the contractor. See DeKalb County, 729 F.2d at 738; U.S. v. Nevada Tax Comm'n, 439 F.2d 435 (9th Cir.1971); and Marquardt Corp. v. Weber County, 360 F.2d 168 (10th Cir.1966). Similarly, federal courts have held that the U.S. need not exhaust state administrative procedures, such as presenting a claim for refund in writing, prior to bringing a federal quasi-contractual action. DeKalb County, 729 F.2d at 741. The United States' claim will not be dismissed because the U.S. failed to follow § 144.190.3, RSMo.1986.
Further, this Court previously held that the U.S. demonstrated it suffered direct pecuniary injury as a result of the imposition of the Missouri sales and use taxes on Olin's purchases of tangible personal property, where the contract required the U.S. to reimburse Olin for all purchases of property. Benton, 729 F.Supp. at 673. Thus, the U.S. is a proper party; does not lack standing; and need not resort to State courts to obtain relief. Id. at 673-76.
Defendants contend the U.S. is procedurally barred from receiving at least a portion of its claimed refund because section 144.190.2, RSMo.1989, provides:
No ... credit or refund shall be allowed unless duplicate copies of a claim for refund are filed within three years from the date of overpayment.
The federal doctrine of sovereign immunity bars the application of state statutes of limitations brought by the United States. Badaracco v. Commissioner, 464 U.S. 386, 400 n. 10, 104 S.Ct. 756 n. 10, 78 L.Ed.2d 549 (1984). Further, 28 U.S.C. § 2415(a), (1980), provides that "every action for money damages brought by the United States ... which is founded upon any contract express or implied in law or fact, shall be barred unless the complaint is filed within six years after the right of action accrues." This suit was filed on June 23, 1989, and the period for which the United States seeks a refund is subsequent to June 23, 1983, thus this action is not precluded.
Taxing statutes must be construed strictly, and taxes will not be assessed against the United States unless they are expressly authorized by law. St. Louis Country Club v. Administrative Hearing Comm'n, 657 S.W.2d 614, 617 (Mo. banc 1983). It is unconstitutional under McCulloch v. Maryland, 4 Wheat 316, 4 L.Ed. 579 (1819), for a state to directly tax the United States or one of its instrumentalities. See also United States v. County of Fresno, 429 U.S....
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