North Carolina State and Local Sales and Use Tax
Contractors performing construction or vessel repair in North Carolina must track, certify, and report all state and local sales and use taxes paid on materials, meeting strict documentation and deadline requirements.
Overview
FAR 52.229-2 requires contractors performing construction (or vessel repair, per Alternate I) in North Carolina to address state and local sales and use taxes on materials incorporated into the work. For fixed-price contracts, the contract price is deemed to include these taxes; for cost-reimbursement contracts, such taxes are allowable costs. Contractors must submit certified statements detailing the cost of materials and the taxes paid, broken down by vendor and by state/local tax, and must also collect similar statements from subcontractors. These statements are due within 60 days after contract completion (if before October 1) or by November 30 each year for contracts extending past October 1, covering the prior 12 months. The clause prescribes a specific certification format and requires contractors to provide any additional information needed for state refund claims. Alternate I modifies the definition of "materials" for vessel repair contracts.
Key Rules
- Inclusion of Taxes in Contract Price
- Fixed-price contracts include North Carolina sales and use taxes in the contract price; cost-reimbursement contracts treat them as allowable costs.
- Certified Statement Requirement
- Contractors must submit detailed, certified statements of taxes paid on materials, including vendor information and invoice details, and must obtain similar statements from subcontractors.
- Submission Deadlines
- Statements are due within 60 days after contract completion (if before October 1) or by November 30 annually for ongoing contracts.
- Recordkeeping and Additional Information
- Contractors must provide any further information required by the North Carolina Commissioner of Revenue for tax refund substantiation.
- Alternate I for Vessel Repair
- For vessel repair contracts, the definition of "materials" is tailored to vessel-specific work.
Responsibilities
- Contracting Officers: Ensure inclusion of the clause, collect and review certified statements, and request additional information as needed.
- Contractors: Accurately track, certify, and report North Carolina sales and use taxes paid on materials; collect and submit subcontractor statements; comply with deadlines and recordkeeping.
- Agencies: Oversee compliance and facilitate any required state tax refund processes.
Practical Implications
- This clause ensures transparency and compliance with North Carolina tax law for federal construction and vessel repair contracts. Contractors must maintain detailed records and timely reporting, or risk noncompliance. Common pitfalls include missing deadlines, incomplete documentation, or failing to separate state and local taxes.