________________________________ DENIED: April 6, 1993 ________________________________ GSBCA 11527-IBWC WALKER EQUIPMENT, Appellant, v. INTERNATIONAL BOUNDARY AND WATER COMMISSION, Respondent. Rebecca Walker, Walker Equipment, Fort Hancock, TX, appearing for Appellant. Rand McMains, International Boundary and Water Commission, El Paso, TX, counsel for Respondent. Before Board Judges DANIELS (Chairman), LaBELLA, and HYATT. HYATT, Board Judge. This appeal arises from a contract between Walker Equipment, appellant, and the International Boundary and Water Commission (IBWC), respondent, for the removal of silt in the Rio Grande River between the United States and Mexico. Walker claims an adjustment to its contract price is due because Texas state sales tax was unexpectedly applied to its rental of equipment needed to perform the contract. Respondent has filed alternative motions seeking dismissal or summary relief. We grant the motion for summary relief and deny the appeal. Background 1. Walker, a company in the heavy equipment business, was awarded contract number IBM 87-26 on September 29, 1987. The contract required Walker to provide heavy excavating equipment with operators to IBWC, on a rental basis, for silt removal projects along the Rio Grande River in Texas and New Mexico. Appeal File, Exhibit 4. 2. To perform the contract, Walker entered into a subcontract with Rust Tractor under which Rust leased to Walker six crawler-type tractors and six single-engine scrapers. Appeal File, Exhibit 5. The Government was aware of this subcontract, but was not a party to it. Id. 3. Contract performance commenced on October 27, 1987, and was completed on March 31, 1988. Appeal File, Exhibits 6, 10. Appellant's performance under the contract was "fully satisfactory" and appellant was paid the amount of $741,898.90. Id., Exhibit 10. 4. A clause in the contract between Walker and IBWC, addressing the payment of taxes, stated in relevant part that "[t]he contract includes all applicable Federal, State, and local taxes and duties." Appeal File, Exhibit 4. This provision defined an "after-imposed Federal tax" as "any new or increased Federal excise tax or duty, or tax that was exempted or excluded on the contract date but whose exemption was later revoked or reduced during the contract period, on the transactions or property covered by this contract that the Contractor is required to pay or bear as a result of legislative, judicial, or administrative action taking place after the contract date." This same provision also stated that "The Government shall, without liability, furnish evidence appropriate to establish exemption from any Federal, State, or local tax when the Contractor requests such evidence and a reasonable basis exists to sustain the exemption." Id. 5. Section 151.309 of the Texas Tax Code provides as follows with respect to sales and use taxes chargeable to government entities: A taxable item sold, leased, or rented to, or stored, used, or consumed by, any of the following governmental entities is exempted from the taxes imposed by this chapter: (1) the United States; (2) an unincorporated instrumentality of the United States; (3) a corporation that is an agency or instrumentality of the United States and is wholly owned by the United States or by another corporation wholly owned by the United States; (4) this state; or (5) a county, city, special district, or other political subdivision of this state. Motion for Summary Relief, Exhibit 1. 6. The parties agree that direct transactions under the contract between IBWC and Walker were not subject to state taxes. IBWC issued the appropriate exemption certificate to Walker for the rental of the equipment. Appeal File, Exhibit 11. 7. Walker, believing that it would be similarly exempt from payment of state taxes on the transaction between itself and Rust Tractor, did not pay any state sales taxes to Rust Tractor. Appellant reached this conclusion, it states, in reliance on a conversation it had with the contract specialist, who indicated to Walker, prior to execution of the contract, that "you do not pay state taxes on Federal jobs." Appeal File, Exhibit 16, Notice of Appeal. 8. In performing this contract, Walker requested a tax exempt number from the Texas Comptroller's office. Walker was told it did not need a tax exempt number for this contract. The Comptroller's office provided several tax exempt certificates and advised appellant to issue them to suppliers. Appeal File, Exhibit 16. 9. In early 1990, Rust Tractor was audited by the Texas state tax authorities and ordered to pay $26,573 in sales and use taxes on the contract with Walker. Under a clause in its contract with Walker, providing that Walker would pay all sales taxes due on the rented equipment, Rust requested that Walker reimburse it this amount. Walker in turn presented the tax bill to the Government, seeking to be compensated under its contract. Walker sought payment on the ground that its contract with the Government had not included an amount for such taxes. Appeal File, Exhibit 14. 10. The contracting officer issued a decision denying this claim on the ground that the Government was not liable to pay "after-imposed" state taxes on the rental transaction between Rust Tractor and Walker. The decision notes that the contract between IBWC and Walker provides relief from "after-imposed Federal taxes" but does not speak to after-imposed state taxes. Moreover, the subject state tax was a matter of record at the time that Walker submitted its bid to IBWC. The contracting officer also noted that there was no evidence that Walker had omitted such taxes from its bid in reliance on an exemption. Appeal File, Exhibit 15. Discussion Walker's claim as submitted to the contracting officer sought recovery of the Texas state taxes on the ground that they were "after-imposed" taxes which were not included in Walker's bid.[foot #] 1 The taxes were not included because ----------- FOOTNOTE BEGINS --------- [foot #] 1 Although Walker refers to these taxes as "after-imposed" state taxes, it is not disputed that the taxes in fact were applicable as of the time the subcontract between (continued...) ----------- FOOTNOTE ENDS ----------- Walker did not know that they existed. The Government has moved to dismiss, urging that appellant's claim is not ripe and that appellant has not stated a claim for which relief may be granted. Alternatively, IBWC argues that this claim should be denied summarily. We address first the contention that this matter is not ripe for adjudication. According to IBWC, there is no proof that Walker is obligated to pay, or has paid, the taxes owed by Rust Tractor to the state of Texas. There is no evidence that Rust Tractor has even attempted to collect the tax from Walker. As such, IBWC argues, the matter does not warrant the issuance of what would be at best a declaratory judgment. The basic purpose of the "ripeness" doctrine is the avoidance of premature adjudication of abstract issues. Abbott Laboratories v. Gardner, 387 U.S. 136, 148-49 (1967). The matter before us for decision is not so abstract as to preclude issuance of a decision, however. Walker states that under the Texas tax code, it is obligated as a purchaser to pay the taxes to the seller. Rust Tractor has demanded payment from Walker. Walker has paid the taxes in part and admits that under its contract with Rust Tractor it was obligated to pay applicable excise taxes to that company. Having conceded its liability, Walker has a sufficiently matured interest in recovering these monies under its prime contract to pursue this matter. It need not actually prove it has already paid the amounts to Rust Tractor to pursue this claim. In general, a case should only be dismissed for failure to state a claim for which relief may be granted when that conclusion can be reached by looking solely to the pleadings. To the extent that materials outside the pleadings are considered, the matter should be treated as a motion for summary judgment. Carter v. Stanton, 405 U.S. 669 (1972). In either event, we consider the facts alleged in the light most favorable to appellant, the non-moving party. See Armco, Inc. v. Cyclops Corp., 791 F.2d 147, 149 (Fed. Cir. 1986); Johns-Manville Corp. v. United States, 12 Cl. Ct. 1, 14-15 (1987). In ruling on the Government's motions, we do not confine ourselves to the pleadings, but also consider various documents provided by the parties. Accordingly, because we find that, as a matter of law, ----------- FOOTNOTE BEGINS --------- [foot #] 1 (...continued) Walker and Rust Tractor was entered into. Walker regards the taxes as "after-imposed" because neither it nor Rust Tractor realized there was any liability for them until Rust Tractor was audited. In fact, however, it makes no difference whether a state tax is in existence at the time of contract award or is imposed or increased subsequently. Under the clause in Walker's contract with IBWC, the contractor is solely liable in either event. R. B. Hazard, Inc., ASBCA 35752, 88-3 BCA 20,873. __________________ ----------- FOOTNOTE ENDS ----------- appellant cannot prevail, we grant respondent's motion for summary relief. The Board has recently issued a decision that is fundamentally "on all fours" with the issue presented in this appeal. Turner Construction Co. v. General Services Administration, GSBCA 11361, 92-3 BCA 25,115. In Turner, the Board considered a contractor's claim to recover taxes paid on materials bought in connection with performance under a construction project. The contract contained the same clause governing federal, state, and local taxes. See Finding 4. The contractor based its theory of recovery on advice given by the contracting officer to the effect that the project should be exempt from sales tax. The Board effected a two-pronged analysis in Turner. First, it pointed out that Turner had entered into a fixed-price contract to provide the specified services. The contract contains a clause that explicitly provides that applicable state taxes are included in the bid price. This clause places on contractors the risk of ascertaining the applicability of federal, state, and local taxes, and of including sufficient amounts to cover such taxes in their bids. Turner, 92-3 BCA at 125,212; see also Hugh S. Ferguson Co., PSBCA 2178, 89-1 BCA 21,294; cf. Inland Empire Builders, Inc. v. United States, 191 Ct. Cl. 742, 424 F.2d 1370 (1970) (contractor assumes risk that state and local taxes will be increased after contract award); R. B. Hazard, Inc., ASBCA 35752, 88-3 BCA 20,873. There is no immunity from a tax whose incidence is upon a contractor doing business with the United States. Turner, 93-2 BCA at 125,212, quoting United States v. Boyd, 378 U.S. 39, 44 (1964); see also United States v. New Mexico, 455 U.S. 720 (1982). Walker erroneously surmised that it would not be required to pay state taxes applicable under the subcontract with Rust Tractor. The contract provided that such taxes were to be included in the bid price. There simply is no legal basis for awarding these costs merely because Walker misunderstood the law. Cf. United States v. Hamilton Enterprises, 711 F.2d 1038, 1046 (Fed. Cir. 1983) (no recovery for contractor's mistake in business judgment). Next, the Board in Turner considered whether the Government might be held liable for the tax under an estoppel theory. Walker, like the appellant in Turner, also asserts that it relied on the advice of the contract specialist, who stated that the company "did not have to pay state taxes on Federal jobs." The Board in Turner recognized that even when erroneous advice concerning the obligation to pay state taxes is given to and relied upon by the contractor, there is still no legal basis supporting recovery of the taxes under the contract. Unpalatable though the result might be, estoppel is generally not available to individuals who rely on incorrect legal advice received from Government employees. See Office of Personnel Management v. Richmond, 496 U.S. 414 (1990); Federal Crop Insurance Corp. v. Merrill, 332 U.S. 380 (1947); Turner, 92-3 BCA at 125,212-14, and cases cited therein. The estoppel argument is particularly tenuous in this case, because the representation made by the contract specialist, as characterized by Walker, was far from clear as to whether the immunity from taxation would extend to the transaction between Walker and Rust Tractor, which was one step removed from Walker's contract with the Government. Her comment could just as reasonably be construed to be limited to the contract between Walker and IBWC, as to which no state taxes were in fact paid. We are not unmindful of appellant's statement that the imposition of these unanticipated taxes will cause it to suffer substantial hardship. Nonetheless, as the Board concluded in Turner, "[n]o matter how much the equities of the instant case might tug at our heartstrings . . . we must conclude that estoppel is not available to the contractor here." 92-3 BCA at 125,214. Decision The Government's motion for summary relief is granted. The appeal is DENIED. ___________________________ CATHERINE B. HYATT Board Judge We concur: _____________________________ ____________________________ STEPHEN M. DANIELS VINCENT A. LaBELLA Board Judge Board Judge