Overview
This section establishes the general principle that Federal Government purchases and leases are immune from State and local taxation and mandates that executive agencies actively seek available tax exemptions.
Key Rules
- General Immunity: Federal purchases and leases are typically immune from State and local taxes, though specific cases require legal validation from agency-designated counsel.
- Mandatory Exemptions: Executive agencies must take maximum advantage of all available tax exemptions whenever it is economically feasible to do so.
- Evidence of Exemption: To establish tax-exempt status, the contracting officer is authorized to provide Standard Form 1094 (U.S. Tax Exemption Form) or other approved documentation to the vendor.
Practical Implications
- Contracting officers must proactively manage tax costs by providing proper documentation to vendors to prevent the government from paying unnecessary State and local taxes.
- Because tax immunity is a complex legal issue, contracting officers should not make independent determinations on taxability but must instead consult with agency legal counsel.