Overview
FAR 29.202 identifies specific circumstances and categories of use where Federal manufacturers’ and special-fuels excise taxes are not applicable to government contracts. It provides a framework for contracting officers to avoid unnecessary tax costs when supplies are destined for state use, export, military vessels, or specific non-profit and emergency entities.
Key Rules
- State and Local Use: Supplies intended for the exclusive use of any State, political subdivision, or the District of Columbia are exempt.
- Export Requirements: Goods exported to foreign countries or U.S. outlying areas are exempt, provided they are shipped within six months of title transfer to the Government. The contract must be labeled "for export," and proof of export must be provided to the seller.
- Manufacturing and Resale: Exemptions apply to items used for further manufacture or resale for that purpose, though this specifically excludes tires and inner tubes.
- Vessels of War: Fuel and supplies for military vessels, aircraft, and guided missiles are exempt. These purchases must be made on a tax-exclusive basis, and the contracting officer must provide an exemption certificate (which can cover up to 12 calendar quarters).
- Specific Entities: Exemptions are granted for supplies used by nonprofit educational organizations and for the purchase of emergency vehicles.
Practical Implications
- Cost Reduction: Contracting officers can significantly reduce procurement costs by ensuring that solicitations and contracts are priced on a tax-exclusive basis when these exemptions apply.
- Administrative Compliance: To validly claim these exemptions, the government must adhere to strict documentation standards, such as including specific "for export" language in purchase documents or issuing IRS-compliant exemption certificates to vendors.