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Shabbat Parashat Miketz| 5771

Pninat Mishpat: The Meaning of Including V.A.T. When There Is No V.A.T.

(condensed from Shurat Hadin, vol. IV, pp. 319-321)

Case: The plaintiff (=pl) signed a memorandum of understanding with the defendant (=def) for the latter to build an aron kodesh. The price of 22,800 shekels was to include assembly and V.A.T. (Value Added Tax= Ma’am - the Israeli sales tax). After the work was done and the money paid, pl requested a detailed receipt, including for the V.A.T paid. Def responded that there was no V.A.T. payment because the workshop belongs to a non-profit organization, which is exempt. Pl argues that if no V.A.T. was paid, he should be refunded the 17% of the sales price which the document implies would be paid, when “including V.A.T.” was written. Def claims that the phrase means only that the buyer does not have to worry about paying V.A.T. beyond the stated price.


Ruling: We can distinguish between different types of taxes. Income and capital gains taxes “accompany” the transaction somewhat externally. V.A.T., though, is an integral part of the sales price and is generally included in the quoted price. Therefore, when a price is set and V.A.T. is not mentioned, the seller cannot add on to cover it. If V.A.T. would have been an external payment and would have been mentioned as “included” when it was not paid, the buyer could demand money back.

Still, there is a question how to look at the matter. Do we say that the buyer agreed to pay as much as he did because he thought the seller would be earning less, due to the expected V.A.T.? If so, he was deceived. Or do we look at the phrase as promising the buyer that the quoted price is the total price? If so, how much the seller kept does not make a difference.

The Shulchan Aruch (Choshen Mishpat 61:15) says that we look carefully into a document’s language and do not say that a party was not so careful with his language. He also says (ibid.:16) that we do not follow the actual words but the parties’ intent. The Rama (CM 42:10) says that if most people who hear the words of a document understand it one way, we follow it even to enhance the position of the possessor of the document. The Knesset Hagedola cites a machloket between the Maharik and the Rashba, whether in the case where the language could be understood well either way but better in one direction, we would say that the document’s possessor can receive the better conditions.

Beit din looked into the language of “including.” In a parallel case, where the payment was “including transportation costs” and it turned out that there were no such expenses, the Pitchei Choshen (Pikadon, pg. 260) said that if there was a set fee that included transportation (as opposed to writing how much each element would be), he does not have to return any money.

Furthermore, since it was pl who wrote “including V.A.T.,” when def signed the document he did so based on standard language of such contracts, just like a document that says payment will be even from the “shirt off my back,” which is not taken literally. In this case, where def has already been paid, it is difficult to take money back from him.

However, there is geneivat da’at in the matter, and def should appease pl and in the future should make it clear that he is exempt from V.A.T.

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