29.202 General exemptions
Source: FAR 29.202 on acquisition.gov
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.
No Federal manufacturers’ or special-fuels excise taxes are imposed in many contracting situations as, for example, when the supplies are for any of the following:
(a) The exclusive use of any State or political subdivision, including the District of Columbia (http://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title26-section4041&num=0&edition=prelim" target="_blank">26 U.S.C. 4041 and http://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title26-section4221&num=0&edition=prelim" target="_blank">4221).
(b) Shipment for export to a foreign country or an outlying area of the United States. Shipment must occur within 6 months of the time title passes to the Government. When the exemption is claimed, the words "for export" must appear on the contract or purchase document, and the contracting officer must furnish the seller proof of export (see 26 CFR 48.4221-3).
(c) Further manufacture, or resale for further manufacture (this exemption does not include tires and inner tubes) (26 CFR 48.4221-2).
(d) Use as fuel supplies, ships or sea stores, or legitimate equipment on vessels of war, including (1) aircraft owned by the United States and constituting a part of the armed forces and (2) guided missiles and pilotless aircraft owned or chartered by the United States. When this exemption is to be claimed, the purchase should be made on a tax-exclusive basis. The contracting officer shall furnish the seller an exemption certificate for Supplies for Vessels of War (an example is given in 26 CFR 48.4221-4(d)(2) ; the IRS will accept one certificate covering all orders under a single contract for a specified period of up to 12 calendar quarters) (http://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title26-section4041&num=0&edition=prelim" target="_blank">26 U.S.C. 4041 and http://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title26-section4221&num=0&edition=prelim" target="_blank">4221).
(e) A nonprofit educational organization (http://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title26-section4041&num=0&edition=prelim" target="_blank">26 U.S.C. 4041 and http://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title26-section4221&num=0&edition=prelim" target="_blank">4221).
(f) Emergency vehicles (http://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title26-section4053&num=0&edition=prelim" target="_blank">26 U.S.C. 4053 and http://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title26-section4064(b)(1)(c)&num=0&edition=prelim" target="_blank">4064(b)(1)(c)).