29.304 Matters requiring special consideration
Source: FAR 29.304 on acquisition.gov
Proper handling and documentation of state and local taxes—especially for North Carolina contracts—are essential to ensure compliance and secure government tax refunds.
Overview
FAR 29.304 addresses special considerations for contracts affected by state and local taxes, outlining procedures for handling tax inclusion/exclusion in contract pricing, evaluating delivery terms for tax impact, and managing tax obligations for indefinite-delivery equipment rental contracts. It provides detailed guidance for contracts involving North Carolina State and local sales and use taxes, including the process for obtaining tax refunds on building materials and equipment incorporated into public works for counties and municipalities in North Carolina. The section emphasizes the importance of proper documentation, certified statements from contractors and subcontractors, and strict adherence to filing deadlines to ensure the government receives entitled tax refunds.
Key Rules
- Tax Inclusion/Exclusion in Contracts
- Contracts may specify whether prices include or exclude certain taxes, and may require contractors to take specific actions regarding disputed or uncertain taxes.
- Delivery Terms and Tax Applicability
- The place and terms of delivery can affect tax liability; alternative delivery options should be considered for substantial contracts.
- Indefinite-Delivery Equipment Rental
- Contractors may face varying state and local taxes on leased equipment; contracts must address these potential liabilities, especially when delivery points are unknown.
- North Carolina Sales and Use Tax Refunds
- Special procedures apply for claiming refunds on taxes paid for materials used in public works in North Carolina, including certified statements and strict filing deadlines.
Responsibilities
- Contracting Officers: Coordinate with counsel on tax matters, ensure contract clauses address tax issues, collect certified statements, and file refund applications on time.
- Contractors: Provide detailed, certified statements of taxes paid, including invoice details and segregation of state/local taxes; comply with annual reporting deadlines.
- Agencies: Oversee compliance, coordinate with legal counsel, and ensure timely refund applications are submitted.
Practical Implications
- This section ensures the government does not overpay due to improper tax handling and maximizes potential refunds, especially in North Carolina. Contractors must maintain meticulous records and adhere to reporting requirements to avoid missed refunds or compliance issues. Failure to follow procedures can result in lost tax benefits or contract disputes.
The imposition of State and local taxes may result in special contract considerations including the following:
(a) With coordination of the agency-designated counsel, a contract may (1) state that the contract price includes or excludes a specified 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 time of contracting.
(d) The North Carolina State and local sales and use tax.
(1) The North Carolina Sales and Use Tax Act authorizes counties and incorporated cities and towns to obtain each year from the Commissioner of Revenue of the State of North Carolina a refund of sales and use taxes indirectly paid on building materials, supplies, fixtures, and equipment that become a part of or are annexed to any building or structure erected, altered, or repaired for such counties and incorporated cities and towns in North Carolina. In United States v. Clayton, 250 F. Supp. 827 (1965), it was held that the United States is entitled to the benefit of the refund, but must follow the refund procedure of the Act and the regulations to recover what it is due.
(2) The Act provides that, to receive the refund, claimants must file, within 6 months after the claimant’s fiscal year closes, a written request substantiated by such records, receipts, and information as the Commissioner of Revenue may require. No refund will be made on an application not filed within the time allowed and in such manner as the Commissioner may require. The requirements of the Commissioner are set forth in regulations that provide that, to substantiate a refund claim for sales or use taxes paid on purchases of building materials, supplies, fixtures, or equipment by a contractor, the Government must secure from the contractor certified statements setting forth the cost of the property purchased from each vendor and the amount of sales or use taxes paid. In the event the contractor makes several purchases from the same vendor, the certified statement must indicate the invoice numbers, the inclusive dates of the invoices, the total amount of the invoices, and the sales and use taxes paid. The statement must also include the cost of any tangible personal property withdrawn from the contractor’s warehouse stock and the amount of sales or use tax paid by the contractor. Similar certified statements by subcontractors must be obtained by the general contractor and furnished to the claimant. Any local sales or use taxes included in the contractor’s statement must be shown separately from the State sales or use taxes.
(3) The clause prescribed at 29.401-2 requires contractors to submit to contracting officers by November 30 of each year a certified statement disclosing North Carolina State and local sales and use taxes paid during the 12-month period that ended the preceding September 30. The contracting officer shall ensure that contractors comply with this requirement and shall obtain the annual refund to which the Government may be entitled. The application for refund must be filed each year before March 31 and in the manner and form required by the Commissioner of Revenue. Copies of the form may be obtained from the-
State of North Carolina,
Department of Revenue,
PO Box 25000 Raleigh,
North Carolina 27640.