FAR Part 29 Flashcards
Taxes
Part 29
Taxes
Overview of FAR Part 29 - Taxes
- Purpose: Establishes policies and procedures related to taxes in
federal contracting (FAR 29.000). - Key Sections:
- 29.1 General
- 29.2 Federal Excise Taxes
- 29.3 State and Local Taxes
- 29.4 Contract Clauses
Part 29 - Taxes
Subpart 29.1 - General
- Purpose: Provides general policies and guidelines regarding taxes in
federal contracts (FAR 29.101).
Key Features
Defines the scope of tax policies applicable to federal contracts (FAR 29.102).
Emphasizes the importance of including tax provisions in contracts to ensure compliance (FAR 29.103).
Part 29 - Taxes
Subpart 29.2 - Federal Excise Taxes
- Purpose: Addresses the treatment of federal excise taxes in federal
contracts (FAR 29.201). - Key Features:
- Procedures for excluding federal excise taxes from contract prices (FAR 29.202).
- Guidelines for obtaining tax exemptions or refunds (FAR 29.203).
Part 29 - Taxes
Subpart 29.3 - State and Local Taxes
- Purpose: Establishes policies for handling state and local taxes in
federal contracts (FAR 29.301). - KeyFeatures:
Procedures for addressing state and local tax issues in contracts (FAR 29.302).
Guidelines for claiming tax exemptions or handling tax disputes (FAR 29.303).
Part 29 - Taxes
Subpart 29.4 - Contract Clauses
- Purpose: Lists the specific contract clauses related to taxes that must
be included in federal contracts (FAR 29.401). - KeyFeatures:
- Mandatory tax clauses for federal contracts (FAR 29.402).
- Guidelines for incorporating tax-related clauses into contract documents (FAR 29.403).
FAR 29.201
Federal Excise Tax
SubtitleD of the Internal Revenue Code of the Internal
Revenue Code of 1954
Miscellaneous Excise Taxes and
its implementing regulations * 2 6CFRparts40through299
FAR PART 29. TAXES
FAR-based contracts are not immune from taxing authorities.
FAR part 29 helps
define, understand, and provides prescriptions whenever federal, state, and local taxes on certain supplies and services are contemplatedon a government contract, including government contracting with foreign concerns. (FAR 29.000)
Taxation, as applied to a contract, is essentially a legal matter contracting officers should request assistance from an agency designated legal counsel.
To ensure continuity of application, the contracting officer should consult with agency designated counsel before negotiating with any taxing authority when,
- determining whether or not a tax is valid or applicable; or
- obtaining exception from, or refund of, a tax.
Another aspect of taxation is constitutional immunity that the federal government has from state or local taxation.
There are however two contract types that contractors are discouraged from negotiating independently with taxing authorities:
- cost reimbursement contract; and
- fixed-price contract containing a tax escalation clause
Lastly, before purchasing goods or services from a foreign source the contracting officer should
consult with the agency designated counsel to address any foreign treaties or tax relief programs and resolve any other tax questions affecting the prospective contract.
B. FEDERAL EXCISE TAXES (FAR 29.201, 29.202, and 29.203)
Federal excise taxes are taxes that are levied on the sale or use of a particular supplies or services.
Common supplies or services to which excise taxes are imposed are
motor vehicle articles tires inner tubes gasoline lubricating oils etc. other are some special fuels excise tax that are imposed at the retail level and diesel and special motor fuels.
Questions arising in this area should be directed to the agency designated counsel.
There are exemptions from federal excise tax and position.
The contracting officer should solicit prices on tax exclusive basis
when it is known that the government is exempt from these taxes and on a tax inclusive basis when no exemption exists, FAR part 29.202 and 29.203 provide further explanation of exemptions.
C. STATE AND LOCAL TAXES (FAR
29.300-305)
Generally, purchases and leases made by the federal government are immune from state and local taxation, however
as taxation is a legal matter consultation with the agency designated counsel is advised. When possible, where exemptions do exist the contracting officer shall take maximum advantage.
Two notable exceptions to this are the states of North Carolina and New Mexico.
In matters of prime and subcontractor purchases on a federal contract the question of immunity from
taxation is less clear. As a prime or a subcontractor is not an agent of the federal government, they don’t enjoy the general immunity; however,
there are state and local laws that might provide exemptions to taxation based on a contract with the federal government.
In such cases consultation with the designated agency counsel is required.
Contractors are encouraged to seek nontaxable transaction exemptions for purchases or subcontracts that are for resale to the federal government to avoid double taxation.
