Overview
FAR 29.201 provides foundational guidance on the application of federal excise taxes to government contracts, identifying the specific authorities governing these taxes and mandating that agencies utilize all available exemptions.
Key Rules
- Regulatory Authority: Federal excise taxes are governed by Subtitle D of the Internal Revenue Code and implemented via 26 CFR parts 40 through 299.
- Common Taxable Items: Taxes primarily apply to manufacturers' goods (e.g., motor vehicles, tires, fuel, firearms, and ammunition) and retail-level special fuels (e.g., diesel).
- Solicitation Requirements: Contracting officers must structure solicitations based on tax status:
- Tax-exclusive: Used when it is known the government is exempt.
- Tax-inclusive: Used when no exemption is available.
- Mandatory Exemptions: Executive agencies are required by law to take maximum advantage of any available federal excise tax exemptions.
- Legal Coordination: Contracting officers are directed to refer specific questions regarding excise tax requirements to agency-designated counsel.
Practical Implications
- Contracting officers must conduct market research or consult legal counsel during the acquisition planning phase to determine the taxability of specific supplies, ensuring the solicitation's price instructions prevent the government from paying unnecessary tax costs.
- Contractors must be aware of whether their specific products fall under the categories listed (such as coal or tires) to ensure their pricing strategy aligns with the tax-exclusive or tax-inclusive requirements of the solicitation.