Overview
This section outlines specific scenarios where State and local taxes require tailored contract language, strategic delivery planning, or specialized administrative procedures, with a particular focus on equipment rentals and construction projects in North Carolina.
Key Rules
- Contract Customization: With coordination from agency counsel, contracts may explicitly include or exclude specific taxes or require contractors to take specific actions (such as protesting a tax) when the tax's applicability is litigated or uncertain.
- Strategic Delivery: For substantial contracts, the place and terms of delivery (e.g., F.O.B. points) must be evaluated, as these factors often determine the applicability of State and local taxes.
- Leased Equipment: Because leased equipment remains the property of the contractor, it is subject to diverse state property and use taxes; Contracting Officers must use specific clauses (see FAR 29.401-1) when delivery points are unknown at the time of award.
- North Carolina Refund Procedures:
- The Federal Government is entitled to refunds on sales and use taxes paid indirectly on building materials and equipment incorporated into North Carolina structures.
- Contractor Requirement: Contractors must submit certified statements of taxes paid by November 30th annually for the period ending September 30th.
- Government Requirement: The Contracting Officer must ensure compliance and file the refund application with the North Carolina Department of Revenue by March 31st each year.
Practical Implications
- Cost Savings through Logistics: Contracting Officers can reduce total acquisition costs by selecting delivery terms that minimize tax exposure in jurisdictions with high sales or use tax rates.
- Administrative Oversight in NC: For construction and repair contracts in North Carolina, the government must maintain a strict reporting calendar; failure to obtain certified statements from contractors or meet the March 31st filing deadline results in the forfeiture of significant tax refunds.