                   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


                                            3
              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.
                                               5
