29.203 Other Federal tax exemptions
Source: FAR 29.203 on acquisition.gov
Government contracts for exclusive U.S. use are exempt from certain federal excise taxes, and contractors must ensure these exemptions are properly applied.
Overview
FAR 29.203 outlines specific federal tax exemptions applicable to government contracts. It clarifies that the United States is exempt from the communications excise tax (26 U.S.C. 4251) and the federal highway vehicle users tax (26 U.S.C. 4481) when supplies and services are for the exclusive use of the U.S. government. These exemptions apply regardless of whether vehicles are owned or leased by the government. Contracting professionals must ensure that these exemptions are properly applied and documented in relevant contracts to avoid unnecessary tax charges and ensure compliance with federal law.
Key Rules
- Communications Excise Tax Exemption
- The U.S. government is exempt from the communications excise tax for supplies and services used exclusively by the government.
- Federal Highway Vehicle Users Tax Exemption
- The U.S. government is exempt from the federal highway vehicle users tax, whether vehicles are owned or leased by the government.
Responsibilities
- Contracting Officers: Must ensure that contracts for supplies and services for exclusive government use reflect these tax exemptions and communicate them to contractors.
- Contractors: Should not charge the government for these specific federal excise taxes when the exemptions apply and must maintain documentation supporting the exemptions.
- Agencies: Should oversee compliance and provide guidance on applying these exemptions as needed.
Practical Implications
- This section prevents unnecessary federal tax charges on government contracts, reducing costs and administrative burden.
- Contractors must be aware of these exemptions to avoid billing errors and potential disputes.
- Failure to apply exemptions correctly can result in overpayment or compliance issues during audits.
(a) Pursuant to http://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title26-section4293&num=0&edition=prelim" target="_blank">26 U.S.C.4293, the Secretary of the Treasury has exempted the United States from the communications excise tax imposed in http://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title26-section4251&num=0&edition=prelim" target="_blank">26 U.S.C.4251, when the supplies and services are for the exclusive use of the United States. (Secretarial Authorization, June 20,1947, Internal Revenue Cumulative Bulletin,1947-1, 205.)
(b) Pursuant to http://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title26-section4483(b)&num=0&edition=prelim" target="_blank">26 U.S.C. 4483(b), the Secretary of the Treasury has exempted the United States from the federal highway vehicle users tax imposed in http://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title26-section4481&num=0&edition=prelim" target="_blank">26 U.S.C. 4481. The exemption applies whether the vehicle is owned or leased by the United States. (Secretarial Authorization, Internal Revenue Cumulative Bulletin,1956-2, 1369.)