Overview
FAR 29.305 outlines the types of documentation required to establish and support claims for state and local tax exemptions. It also defines the specific contractual conditions under which the government is authorized to provide this evidence of exemption to a contractor.
Key Rules
- Types of Evidence: Valid evidence depends on the taxing jurisdiction but may include Standard Form (SF) 1094 (U.S. Tax Exemption Form), copies of contracts or purchase orders, state-specific exemption forms, or shipping documents proving interstate commerce.
- Standard Tax Clauses: For contracts containing FAR 52.229-3 or 52.229-4, the government provides evidence of exemption in accordance with the specific terms of those clauses.
- Cost-Reimbursement Contracts: The Contracting Officer (CO) may provide evidence of exemption at their discretion or upon a contractor's request.
- Contracts Lacking Tax Provisions: If a contract has no tax clause, the CO may only provide exemption evidence if the contract price excludes the tax, or if the contractor agrees to a price reduction equivalent to the tax savings.
- Grounds for Exemption: Documentation must specifically identify the agency or instrumentality of the United States as the buyer or indicate the supplies/services are for the exclusive use of the federal government.
Practical Implications
- Contractors should not assume tax exemption is automatic; they must proactively identify required state-specific forms and request necessary documentation (like SF 1094) from the Contracting Officer early in the performance period.
- To avoid double-counting costs, contractors must ensure that if they receive a tax exemption after contract award, the government is entitled to a credit or price reduction if the tax was originally included in the bid price.