Federal excise tax on specific foreign contract payments
Foreign contractors must submit IRS Form W-14 with each payment request to claim exemptions or ensure correct withholding, or face a default 2% excise tax on federal contract payments.
Overview
FAR 29.204 addresses the requirements for federal excise tax withholding on certain foreign contract payments, as mandated by 26 U.S.C. 5000C and its implementing regulations. Agencies are required to withhold a 2% excise tax on applicable payments to foreign contractors, acting solely as withholding agents for the IRS. Contractors subject to this tax must submit IRS Form W-14 with each invoice or voucher to claim exemptions or ensure proper withholding. Exemptions must be claimed at the time of offer submission, and any self-certified exemptions are subject to IRS audit. All substantive tax matters, including disputes and interpretations, fall under IRS jurisdiction, not the contracting agency. The section also clarifies that other FAR excise tax exemptions do not apply to this specific tax.