Matters requiring special consideration
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.