Overview
This section prescribes the specific clauses that contracting officers must include in domestic solicitations and contracts to account for federal, state, and local tax requirements. It provides tailored guidance for fixed-price contracts, leased equipment, and specialized tax agreements in states like North Carolina and New Mexico.
Key Rules
- Standard Fixed-Price Contracts: Clause 52.229-3 is required for fixed-price contracts exceeding the Simplified Acquisition Threshold (SAT) performed in the U.S. or its outlying areas.
- Noncompetitive Adjustments: For noncompetitive fixed-price contracts, Clause 52.229-4 may be used instead of 52.229-3 to allow for price adjustments if state or local taxes change, preventing the need for high-risk contingencies in the bid price.
- Leased Equipment: Clause 52.229-1 must be used for fixed-price indefinite-delivery contracts for leased equipment when the specific delivery locations are unknown at the time of the award.
- North Carolina Construction: Clause 52.229-2 is mandatory for construction in North Carolina, with a specific "Alternate I" version required for vessel repairs.
- New Mexico Cost-Reimbursement: Clause 52.229-10 is required for cost-reimbursement service contracts in New Mexico issued by 14 specific agencies (e.g., DoD, DOE, NASA) to eliminate double taxation on property where title passes to the government.
Practical Implications
- Contractors must be aware that their tax obligations and ability to seek price adjustments vary significantly depending on the contract type and the specific state in which the work is performed.
- The use of specific clauses in North Carolina and New Mexico highlights the importance of localized tax compliance and the government's efforts to mitigate financial risks through formal state-federal tax agreements.