[Code of Federal Regulations]

[Title 48, Volume 1]

[Revised as of October 1, 2005]

From the U.S. Government Printing Office via GPO Access

[CITE: 48CFR29.303]



[Page 570]

 

            TITLE 48--FEDERAL ACQUISITION REGULATIONS SYSTEM

 

                CHAPTER 1--FEDERAL ACQUISITION REGULATION

 

PART 29_TAXES--Table of Contents

 

                   Subpart 29.3_State and Local Taxes

 

Sec. 29.303  Application of State and local taxes to Government contractors and subcontractors.



    (a) Prime contractors and subcontractors shall not normally be 

designated as agents of the Government for the purpose of claiming 

immunity from State or local sales or use taxes. Before any activity 

contends that a contractor is an agent of the Government, the matter 

shall be referred to the agency head for review. The referral shall 

include all pertinent data on which the contention is based, together 

with a thorough analysis of all relevant legal precedents.

    (b) When purchases are not made by the Government itself, but by a 

prime contractor or by a subcontractor under a prime contract, the right 

to an exemption of the transaction from a sales or use tax may not rest 

on the Government's immunity from direct taxation by States and 

localities. It may rest instead on provisions of the particular State or 

local law involved, or, in some cases, the transaction may not in fact 

be expressly exempt from the tax. The Government's interest shall be 

protected by using the procedures in 29.101.

    (c) Frequently, property (including property acquired under the 

progress payments clause of fixed-price contracts or the Government 

property clause of cost-reimbursement contracts) owned by the Government 

is in the possession of a contractor or subcontractor. Situations may 

arise in which States or localities assert the right to tax Government 

property directly or to tax the contractor's or subcontractor's 

possession of, interest in, or use of that property. In such cases, the 

contracting officer shall seek review and advice from the agency-

designated counsel on the appropriate course of action.