52.229-1
State and Local Taxes
Contractors must exclude state and local taxes from the contract price and invoice them separately, with the government responsible for payment or providing exemption documentation.
Overview
FAR 52.229-1, State and Local Taxes, clarifies that the contract price does not include state and local taxes that are levied on or measured by the contract or sales price of the services or supplies provided. Contractors must list these excluded taxes separately on their invoices. The government is then responsible for either reimbursing the contractor for these taxes or providing documentation to support a tax exemption. This clause ensures transparency in tax handling and prevents double-charging or confusion over tax responsibilities in federal contracts.
Key Rules
- Exclusion of State and Local Taxes
- The contract price excludes all state and local taxes based on the contract or sales price of the provided goods or services.
- Separate Tax Statement
- Contractors must state excluded taxes separately on invoices.
- Government Responsibility
- The government will either pay the excluded taxes or provide evidence for exemption.
Responsibilities
- Contracting Officers: Ensure the clause is included in applicable contracts and verify proper handling of tax exclusions and payments.
- Contractors: Exclude state and local taxes from contract price, list them separately on invoices, and coordinate with the government for payment or exemption documentation.
- Agencies: Review and process tax payments or provide exemption evidence as required.
Practical Implications
- This clause prevents contractors from including certain taxes in their contract price, promoting transparency and compliance.
- Contractors must be diligent in identifying and documenting excluded taxes to avoid payment delays.
- Misunderstanding or misapplying this clause can result in disputes or non-reimbursed tax expenses.