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29.303 48 CFR Ch.

1 (10–1–14 Edition)

requiring advice and assistance of the or use of that property. In such cases,
agency-designated counsel. the contracting officer shall seek re-
(b) When it is economically feasible view and advice from the agency-des-
to do so, executive agencies shall take ignated counsel on the appropriate
maximum advantage of all exemptions course of action.
from State and local taxation that may
be available. If appropriate, the con- 29.304 Matters requiring special con-
tracting officer shall provide a Stand- sideration.
ard Form 1094, U.S. Tax Exemption The imposition of State and local
Form (see part 53), or other evidence taxes may result in special contract
listed in 29.305(a) to establish that the considerations including the following:
purchase is being made by the Govern-
(a) With coordination of the agency-
designated counsel, a contract may (1)
[48 FR 42293, Sept. 19, 1983, as amended at 62 state that the contract price includes
FR 237, Jan. 2, 1997] or excludes a specified tax or (2) re-
quire that the contractor take certain
29.303 Application of State and local actions with regard to payment, non-
taxes to Government contractors
and subcontractors. payment, refund, protest, or other
treatment of a specified tax. Such spe-
(a) Prime contractors and sub- cial treatment may be appropriate
contractors shall not normally be des- when there is doubt as to the applica-
ignated as agents of the Government bility or allocability of the tax, or
for the purpose of claiming immunity when the applicability of the tax is
from State or local sales or use taxes. being litigated.
Before any activity contends that a
(b) The applicability of State and
contractor is an agent of the Govern-
local taxes to purchases by the Federal
ment, the matter shall be referred to
Government may depend on the place
the agency head for review. The refer-
and terms of delivery. When the con-
ral shall include all pertinent data on
which the contention is based, together tract price will be substantial, alter-
with a thorough analysis of all rel- native places and terms of delivery
evant legal precedents. should be considered in light of pos-
(b) When purchases are not made by sible tax consequences.
the Government itself, but by a prime (c) Indefinite-delivery contracts for
contractor or by a subcontractor under equipment rental may require the con-
a prime contract, the right to an ex- tractor to furnish equipment in any of
emption of the transaction from a sales the States. Since leased equipment re-
or use tax may not rest on the Govern- mains the contractor’s property,
ment’s immunity from direct taxation States and local governments impose a
by States and localities. It may rest in- wide variety of property, use, or other
stead on provisions of the particular taxes on equipment leased to the Gov-
State or local law involved, or, in some ernment. The amount of these taxes
cases, the transaction may not in fact can vary considerably from jurisdiction
be expressly exempt from the tax. The to jurisdiction. See 29.401–1 for the pre-
Government’s interest shall be pro- scription of the contract clause to be
tected by using the procedures in included in contracts when delivery
29.101. points are not known at time of con-
(c) Frequently, property (including tracting.
property acquired under the progress (d) The North Carolina State and
payments clause of fixed-price con- local sales and use tax.
tracts or the Government property (1) The North Carolina Sales and Use
clause of cost-reimbursement con- Tax Act authorizes counties and incor-
tracts) owned by the Government is in porated cities and towns to obtain each
the possession of a contractor or sub- year from the Commissioner of Rev-
contractor. Situations may arise in enue of the State of North Carolina a
which States or localities assert the refund of sales and use taxes indirectly
rljohnson on DSK3VPTVN1PROD with CFR

right to tax Government property di- paid on building materials, supplies,

rectly or to tax the contractor’s or sub- fixtures, and equipment that become a
contractor’s possession of, interest in, part of or are annexed to any building


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