Kaeser v. City of Everett

Ott, J.

The city of Everett, by ordinance, authorized the establishment of two local improvement districts, Nos. 624 and 626. In its call for bids for the construction of sewers therein, the bidder was requested to submit his bid on a form of “proposal and contract” prepared and furnished by the city. Throughout this opinion we shall mention only the contract relating to local improvement district No. 624, but what we say with reference to this contract will apply equally to the contract relating to local improvement district No. 626.

Harold Kaeser, doing business as Harold Kaeser Co., was the successful bidder, and the form of contract attached to the proposal was signed by both parties. The proposal and contract provided:

*667“Sales Tax to be included in the prices of the unit price bid as per Tax Comm, published rule No. 171.”

The contractor paid the sales tax to the state, and thereafter demanded reimbursement therefor from the city. The city refused the demand, contending that the amount of its tax was included in the unit price bid. This action followed.

The cause was tried to the court, sitting without a jury. At the trial, the plaintiff contractor contended that he did not include the sales tax in his unit price bid because the construction of sewer facilities is specifically excluded from the purview of rule No. 171.

The court found that the plaintiff had failed to establish any obligation or contract on behalf of defendant city to reimburse him for the sales tax paid by the plaintiff to the state.

From the judgment of dismissal, the plaintiff has appealed.

Appellant assigns as error the above finding of the trial court, and its failure to enter judgment for appellant.

Under the provisions of RCW 82.08.050, the liability for the payment of a sales tax is upon the buyer, but the duty to collect and remit it to the tax commission is upon the seller. Morrow v. Henneford, 182 Wash. 625, 632, 47 P. (2d) 1016 (1935). Pursuant to RCW 82.08.060, the tax commission has promulgated certain rules relating to the collection and payment of excise taxes.

This action involves simply the city’s method of payment of its retail sales tax, which it was required to pay, as a buyer and consumer, upon materials and supplies used in the construction of the sewers. The respondent, city of Everett, did not propose to avoid its obligation to pay the sales tax, or attempt to shift its tax liability to appellant. Recognizing that it was obligated to pay the tax, the city specifically requested the bidders to include the amount of the city’s excise tax in their unit price bids, in the following language: “Sales Tax to be included in the prices of the unit price bid as per Tax Comm, published rule No. 171.” The reason the city requested a unit price bid was to avoid the payment of tax upon that portion of the construction work which had to do with the clearing of land and moving *668of earth, which is nontaxable under the tax commission’s published rule No. 170, provided that such exempt items can be segregated and identified from the taxable items.

The appellant contends that he did not include the amount of the city’s sales tax in his unit price bid because, upon reading rule No. 171, he learned that it applied to bids involving the repair and improvement of publicly owned streets, and that the “constructing of sewage disposal facilities” was excluded from the rule. However, the method of collecting the sales tax, as established by rule No. 171, is precisely the method the city wanted the bidders to use in submitting their bids on this project.

With reference to the collection and payment of retail sales tax, rule No. 171 provides as follows:

“The Retail Sales Tax applies upon the sales to such contractors of all materials, . . . and supplies used or consumed in the performance of such contracts.
“The Retail Sales Tax does not apply upon any portion of the charge made hy such contractors.” (Italics ours.)

Under rule No. 171, “The Retail Sales Tax applies upon the sales to such contractors.” A contractor then includes in his unit price bid, as a part of his cost, the sales tax which he contemplates he will have to pay, and hence the state cannot request payment a second time “upon any portion of the charge made [to the city] by such contractors.”

The appellant poses the question, “Upon examination of the [city’s] proposal, he [the contractor] would notice reference to rule 171. Rule 171 stated this type of sewer was excluded. What was the contractor to do?”

Reading rule No. 171, the contractor knew that materials and supplies used or consumed in the performance of a contract were subject to the retail sales tax. He knew that, under rule No. 171, contractors are required to pay the sales tax to the state; that the contractors could include this tax item as part of their cost in the bid price, and that the state does not collect another tax “upon any portion of the charge made by such contractors.” The contractor, by reading the city’s proposal, knew that the city definitely wanted the “Sales Tax to be included in the price of the unit price bid,” *669and that, applying the tax collection method set out in rule No. 171, the tax would be collected from the city by including it in the unit price bid, as the proposal plainly directed.

The terms of the contract were plain and unambiguous. The signed contract stated:

“I have personally and carefully examined the plans, specifications and form of contract for the work to be done . . . and having made the necessary examinations, hereby propose to furnish all material and to perform all labor which may be required to complete said work . . . upon the terms and conditions provided in said . . . contract.”

The trial court correctly found that the appellant had failed to prove any obligation or contract on the part of the respondent city to reimburse appellant for the sales tax paid by him to the state. To hold otherwise would require the city to pay its sales tax twice—once to the contractor and again to the state.

The judgment is affirmed.

Hamley, C. J., Schwellenbach, and Weaver, JJ., concur.