2024: The FAR, Federal Acquisition Regulations - Part 29

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2024 Webinar Series
THE FAR

2024 Webinar Series
THE FAR
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2024 Webinar Series
THE FAR
THE FAR – PART 29

2024 Webinar Series
THE FAR
FAR PART #29:
Taxes
SPEAKER: Meredith Pilaro
FIRM: BDO USA
EMAIL: mpilaro@bdo.com

FAR Part 29
Prescribes policies and procedures for:
(a) using tax clauses in contracts (including foreign contracts),
(b) asserting immunity or exemption from taxes, and
(c) obtaining tax refunds.
It explains Federal, State, and local taxes on certain supplies and services acquired by executive
agencies and the applicability of such taxes to the Federal Government. It is for the general
information of Government personnel and does not present the full scope of the tax laws and
regulations.

FAR Part 29
Subpart 29.1 – General
Subpart 29.2 – Federal Excise Taxes
Subpart 29.3 – State and Local Taxes
Subpart 29.4 – Contract Clauses
29.401 – Domestic Contracts
29.402 – Foreign Contracts

FAR Part 29- Subpart 29.2 – Federal Excise Taxes
29.201(a) Common excise taxes:
 Manufacturer’s excise taxes imposed on certain motor vehicle articles, tires and inner tubes,
gasoline, lubricating oils, coal, fishing equipment, firearms, shells, and cartridges sold by
manufacturers, producers, or importers; and
 Special-fuels excise taxes imposed at the retail level on diesel fuel and special motor fuels.
29.201(b) Sometimes the law exempts the Federal Government from these taxes. Contracting officers
should solicit prices on a 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.
29.201(c) Executive agencies shall take maximum advantage of available Federal excise tax
exemptions

FAR Part 29- Subpart 29.3 – State and Local Taxes
29.303 Application of State and local taxes to Government contractors and subcontractors
(a) Prime contractors and subcontractors shall not normally be designated as agents of the Government
for the purpose of claiming immunity from State of local sales or use taxes.
(b) When purchases are not made by the Government itself, but by a prime contractor or by a
subcontractor under a prime contract, the right to an exemption of the transaction from a sales or use
tax may not rest on the Government’s immunity from direct taxation by States and localities. It may rest
instead on provisions of the particular State or local law involved, or, in some cases, the transaction
may not in fact be expressly exempt from the tax. The Government’s interest shall be protected by using
the procedures in 29.101.

29.303 Application of State and local taxes to Government contractors and subcontractors
(c) Frequently, property (including property acquired under the progress payments clause of fixed-price
contracts or the Government property clause of cost-reimbursement contracts) owned by the
Government is in the possession of a contractor or subcontractor. Situations may arise in which States
or localities assert the right to tax Government property directly or to tax the contractor’s or
subcontractor’s possession of, interest in, or use of that property. In such cases, the contracting officer
shall seek review and advice from the agency-designated counsel on the appropriate course of action.

29.304 Matters requiring special consideration
a) With coordination of the agency-designated counsel, a contract may (1) state that the contract price
includes or excludes a specific tax or (2) require that the contractor take certain actions with regard to
payment, nonpayment, refund, protest, or other treatment of a specified tax. Such special treatment may
be appropriate when there is doubt as to the applicability or allocability of the tax, or when the applicability
of the tax is being litigated.
b) The applicability of State and local taxes to purchases by the Federal Government may depend on the
place and terms of delivery. When the contract price will be substantial, alternative places and terms of
delivery should be considered in light of possible tax consequences.
c) Indefinite-delivery contracts for equipment rental may require the contractor to furnish equipment in any of
the States. Since leased equipment remains the contractor’s property, States and local governments
impose a wide variety of property, use, or other taxes on equipment leased to the Government. The
amount of these taxes can vary considerably from jurisdiction to jurisdiction. See 29.401-1 for the
prescription of the contract clause to be included in contracts when delivery points are not known at the
time of contracting.
d) The North Carolina State and local sales and use tax.

29.305 State and local tax exemptions
(b) Furnishing proof of exemption. If a reasonable basis to sustain a claimed exemption exists, the seller will
be furnished evidence of exemption, as follows:
1) Under a contract containing the clause 52.229-3 Federal, State, and Local Taxes, or at 52.229-4 Federal,
State, and Local Taxes (State and Local Adjustments), in accordance with the terms of those clauses.
2) Under a cost-reimbursement contract, if requested by the contractor and approved by the contracting
officer or at the discretion of the contracting officer.
3) Under a contract or purchase order that contains no tax provision, if-
(i) Requested by the contractor and approved by the contracting officer at the discretion of the contracting officer; and
(ii) Either the contract price does not include the tax, or if the transaction or property is tax exempt, the contractor consents to a
reduction in the contract price.

FAR Part 29- Subpart 29.401 Domestic Contracts
Outlines specific clauses to be inserted into solicitations and contracts in various circumstances.
29.401-3 Federal, State and local taxes
a) Except as provided in paragraph (b) of this section, insert the clause 52.229-3… if
(1) The contract is to be performed wholly or partly in the United States or its outlying areas;
(2) A fixed-price contract is contemplated; and
(3) The contract is expected to exceed the simplified acquisition threshold.
b) In a noncompetitive contract that meets all the conditions in paragraph (a) of this section, the
contracting officer may insert the clause at 52.229-4,… instead of the clause at 52.229-3, if the price
would otherwise include an inappropriate contingency for potential postaward change(s) in State or
local taxes.

29.401-4 New Mexico gross receipts and compensating tax
b) Contract clause. The contracting officer shall insert the clause at 52.229-10….in solicitations and
contracts issued by the agencies defined in paragraph (c) of this subsection when all three of the
following conditions exist:
(1)The contractor will be performing a cost-reimbursement contract.
(2)The contract directs or authorizes the contractor to acquire tangible personal property as a direct
cost under a contract and title to such property passes directly to and vests in the United States
upon delivery of the property by the vendor.
(3)The contract will be for services to be performed in whole or in part within the State of New
Mexico.

29.401-4 New Mexico gross receipts and compensating tax
c) Participating agencies:
(1) The agencies below have entered into an agreement with the State of New Mexico to eliminate
double taxation of Government cost-reimbursement contracts when contractors and their
subcontractors purchase tangible property to be used in performing services in whole or in part in
the State of New Mexico…. Therefore, the clause applies only to solicitations and contracts issued by
the:
Defense Advanced Research Projects Agency, Defense Threat Reduction Agency,
Department of Agriculture, Department of the Air Force, Department of the Army, Department of
Energy, Department of Health and Human Services, Department of the Interior, Department of Labor,
Department of the Navy, Department of Transportation, General Services Administration, Missile
Defense Agency and the National Aeronautics and Space Administration
(2) Any other Federal agency which expects to award cost-reimbursement contracts to be performed in
New Mexico should contact the New Mexico Taxation and Revenue Department to execute a similar
agreement.

FAR Part 29- Subpart 29.402 Foreign Contracts
Outlines specific clauses to be inserted into solicitations and contracts in various circumstances.
29.402-1 Clauses for Foreign fixed-price contracts
29.402-2 Clauses for Foreign cost-reimbursement contracts
29.402-3 Clauses for Tax on certain foreign procurements
29.402-4 Clauses for Foreign Contracts in Afghanistan

2024 Webinar Series
THE FAR
THANK YOU FOR ATTENDING!
FAR PART #29:
Taxes
SPEAKER: Meredith Pilaro
FIRM: BDO USA
EMAIL: mpilaro@bdo.com

2024 Webinar Series
THE FAR
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2024: The FAR, Federal Acquisition Regulations - Part 29

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2024: The FAR, Federal Acquisition Regulations - Part 29