29.202
General exemptions
FAR 29.202 provides clear exemptions from federal excise taxes for specific uses and recipients, but contractors must follow strict documentation and procedural requirements to claim these exemptions.
Overview
FAR 29.202 outlines specific situations where federal manufacturers’ or special-fuels excise taxes do not apply to government contracts. These exemptions are based on the intended use or recipient of the supplies, such as state or local governments, export shipments, further manufacturing, use on vessels of war, nonprofit educational organizations, and emergency vehicles. The section details the documentation and procedural requirements for claiming these exemptions, including contract notations, proof of export, and exemption certificates.
Key Rules
- State or Political Subdivision Use
- Supplies for exclusive use by states, political subdivisions, or the District of Columbia are exempt from excise taxes.
- Export Shipments
- Supplies shipped for export within six months of title transfer are exempt, provided the contract states "for export" and proof of export is furnished.
- Further Manufacture
- Supplies intended for further manufacture or resale for further manufacture (excluding tires and inner tubes) are exempt.
- Vessels of War
- Supplies used as fuel, stores, or equipment on vessels of war, certain aircraft, and guided missiles are exempt; requires a tax-exclusive purchase and an exemption certificate.
- Nonprofit Educational Organizations
- Supplies for nonprofit educational organizations are exempt.
- Emergency Vehicles
- Supplies for emergency vehicles are exempt from excise taxes.
Responsibilities
- Contracting Officers: Ensure proper contract notations, provide proof of export, and furnish exemption certificates as required.
- Contractors: Claim exemptions appropriately, maintain required documentation, and comply with contract requirements for tax exemptions.
- Agencies: Oversee compliance with exemption procedures and maintain records for IRS verification.
Practical Implications
- This section helps contractors and agencies avoid unnecessary federal excise taxes by clarifying exemption scenarios and documentation requirements. Failure to follow the outlined procedures can result in tax liability or audit issues. Common pitfalls include missing contract notations, lack of timely export, or incomplete exemption certificates.