TAXES economically advantageous to do so, this credit or refund shall be utilized by purchase from a dealer on a tax-exclusive basis and execution of the required exemption certificate set forth in 11–501.2. (v) on the sale of any article for the exclusive use of a State or local government; and (vi) on the sale of any article to a nonprofit educational organization for its exclusive use. 11-203 Supplies and Services for the Exclusive Use of the United States. By virtue of action taken by the Secretary of the Treasury, pursuant to Section 4293 of the Internal Revenue Code, exemption is available and shall be obtained, to the extent indicated, from the Federal excise tax on communication services and facilities furnished directly to the United States (as distinguished from being furnished to a Government contractor) and paid for directly by the Government. Such exemption is obtained without any exemption certificate. 11-203 ARMED SERVICES PROCUREMENT REGULATION TAXES Part 3-State and Local Taxes 11-300 General. As used in this Section, the term "State and local taxes" includes taxes of the several States, the District of Columbia, the possessions of the United States, Puerto Rico, and political subdivisions thereof. 11-301 Applicability. (a) As a general rule, purchases made by the Government itself are exempt from State and local sales and use taxes; similarly, personal and real property is exempt from State and local property taxes when the property is both owned and possessed by the Government. These exemptions shall be made use of to the fullest extent available when Government property is located in a State or local tax jurisdiction, or when purchases are made directly by the Government, by asserting the Government's immunity from taxation of its property by States and localities, and in case of purchases, by executing an approved tax exemption certification (see 3-607.4(a) and 11-500(b)). (b) However, when purchases are not made by the Government itself, but by a prime contractor of the Government 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. Similarly, when property is owned by the Government, but the property is in the possession of a contractor or subcontractor on tax day, situations may arise where States or localities believe they may have the right to tax the property directly or to tax the contractor's or subcontractor's possession of, interest in, or use of that property. (c) Whenever there is any doubt as to the availability of the Government's immunity or exemption from any State or local tax, the matter shall be handled in accordance with 11-000. 11-302 North Carolina State and Local Sales and Use Tax. (a) A provision of the North Carolina Sales and Use Tax Act authorizes counties and incorporated cities and towns in North Carolina to obtain each year from the Commissioner of Revenue of the State of North Carolina a refund of sales and use taxes indirectly paid on building materials, supplies, fixtures and equipment which become a part of or are annexed to any building or structure erected, altered or repaired for such counties and incorporated cities and towns in North Carolina. In United States v. Clayton, 250 F. Supp. 827 (1965), appeals dismissed per curiam 384 U.S. 154, 156 (1966), it was held that the United States is entitled to the benefit of such provision of the North Carolina Sales and Use Tax Act, but that the United States must resort to the refund procedure of the Act and the regulations to recover what it is due. (b) The Act provides that in order to receive the refund authorized thereby claimants must file a written request for refund within six months after the close of the fiscal year of the claimant and must substantiate such request for refund by such records, receipts and information as the Commissioner of Revenue may require. The Act further provides that no refunds shall be made on applications not filed within the time allowed thereby and in such manner as the Commis 11-302 ARMED SERVICES PROCUREMENT REGULATION TAXES sioner may otherwise require. The requirements of the Commissioner are set forth in regulations which, in pertinent part, provide: "To substantiate a refund claim for sales or use taxes paid on purchases of building materials, supplies, fixtures and equipment by its contractor, the claimant must secure from such contractor certified statements setting forth the cost of the property purchased from each vendor and the amount of sales and/or use taxes paid thereon. In the event the contractor makes several purchases from the same vendor, such certified statement must indicate the invoice numbers, the inclusive dates of the invoices, the total amount of the invoices and the sales and use taxes paid thereon. Such statement must also include the cost of any tangible personal property withdrawn from the contractor's warehouse stock and the amount of sales or use tax paid thereon by the contractor. Similar certified statements by his subcontractors must be obtained by the general contractor and furnished to the claimant. Any local sales or use taxes included in the contractors' statements must be shown separately from the State sales or use taxes." (c) To assure that the United States will be in a position to obtain refunds of North Carolina State and local sales and use taxes to which it is entitled, the clause in 7-602.27 shall be inserted in all construction contracts to be performed in North Carolina, including vessel repair contracts. (d) The clause in 7-602.27 requires construction contractors, including vessel repair contractors, to submit to contracting officers by August 31 each year certified statements covering North Carolina State and local sales and use taxes paid during the twelve month period which ended the preceding June 30. It will be the responsibility of each contracting officer concerned to assure that contractors comply with this requirement and to obtain the annual refund of North Carolina State and local sales and use taxes to which his activity may be entitled. The application for refund must be filed each year before December 31 and in the manner and form required by the Commissioner of Revenue of the State of North Carolina. The first refund application to be filed by contracting officers will cover taxes paid during the twelve month period from July 1, 1966 to June 30, 1967. Copies of the form to be used in filing refund claims may be obtained by writing to the State of North Carolina Department of Revenue, Raleigh, North Carolina 27602. 11-302 ARMED SERVICES PROCUREMENT REGULATION TAXES Part 4-Contract Clauses 11–401 Fixed-Price Type Contracts. The clauses prescribed herein are for use in fixed-price type contracts except those to be performed entirely outside the United States, its possessions, and Puerto Rico. 11-401.1 Advertised and Certain Negotiated Contracts. (a) Use of Clause. The clause in 7-103.10(a) shall be used in: (i) all formally advertised contracts except in construction contracts which do not exceed $10,000; (ii) all competitively negotiated fixed-price contracts in excess of $10,000; (iii) all noncompetitive negotiated fixed-price contracts in excess of $10,000, when use of the clause in in 7-103.10(b) is not required; and (iv) any negotiated fixed-price contract in excess of $2,500 but not in excess of $10,000, at the discretion of the contracting officer. However, this clause shall not be used in purchases made under Section III, Part 6. (b) Description. The clause provides that the contract price includes all applicable taxes. It provides for an increase or decrease in the contract price to compensate for changes in applicable Federal excise taxes or duties, except for social security or other employment taxes. It does not provide for any adjustment in the contract price to compensate for changes in State or local taxes. 11-401.2 Noncompetitive Negotiated Contracts. (a) Use of Clause. The clause in 7–103.10(b) shall be used in all noncompetitive negotiated fixed-price contracts in excess of $10,000, when the contracting officer is satisfied (i) that the contract price does not include contingencies for State and local taxes and (ii) that unless this clause is used the contract price will include such contingencies. (b) Description. The clause provides that the contract price includes all applicable Federal, State, and local taxes. It provides for an increase or decrease in the contract price to compensate for changes in Federal excise taxes or duties, and, with some exceptions, for changes in State and local taxes. 11-401.3 Supplementary Clause for Possessions of the United States and Puerto Rico. When a contract will be performed in whole or in part in a possession of the United States or in Puerto Rico, and either the clause in 7-103.10(a) or that in 7-103.10(b) is used, the contract shall contain the supplementary clause in 7-103.10(c). 11-401.4 Matters Requiring Special Consideration. (a) A contract may, in accordance with (b) below, provide that the contract price include or exclude a specific tax, or require that the contractor take certain actions with regard to nonpayment, payment, protest or other treatment of a specific tax. Such special treatment may be required, for example, where the State or local tax law has been recently changed, where there is doubt as to the applicability or allocability of the tax, or where the applicability of the tax is being litigated. 58-110 - 77-49 11-401.4 ARMED SERVICES PROCUREMENT REGULATION TAXES (b) The specific provisions described in (a) above shall be used only with the approval of the officials designated in 11-000(b) except in the case of the Air Force, approval may be given by the Staff Judge Advocate of the Air Force Logistics Command. (c) (1) Whether State or local taxes are applicable to a purchase of supplies by the Government may depend upon the place and terms of delivery. For example, if the legal incidence of a State tax is on the vendor, and performance of the contract and delivery to the Government are in that State, the tax may apply. If, however, the contract requires delivery to the Government outside that State, the tax may not apply because the transaction is in interstate commerce. The form of bill of lading used (i.e., Government bill, commercial bill, commercial bill convertible to Government bill at destination) may also affect the taxability of the transaction. (2) When a contract will be in a substantial amount, available alternative places and terms of delivery should be considered in the light of possible tax consequences. (d) When Government property is provided under a facilities contract, the contracting officer shall review the facilities contract when negotiating a subsequent supply contract to assure that the contractor is not reimbursed twice for the same taxes. 11-402 Cost-Reimbursement Type Contracts. No specific tax clause is required in any cost-reimbursement type contract. In all such contracts the problem of Federal, State, and local taxes, which presents solely a question of allowability of costs in connection with the performance of cost-reimbursement type contracts is covered in the contract clause in 7-203.4 and is treated in Section XV. 11-403 Foreign Tax Clauses. 11-403.1 General. (a) Use of Clauses. Tax agreements have been made with Belgium, Republic of China, Denmark, France, Federal Republic of Germany (including West Berlin), Greece, Iceland, Italy, Japan, Republic of Korea, Luxembourg, the Netherlands, Norway, the Philippines, Portugal, Spain, Turkey, the United Kingdom, and Yugoslavia, under which the United States expenditures for the common defense are exempt from certain specified taxes of the countries in which these expenditures are made. Countries which have not executed a tax agreement with the United States may nevertheless grant relief from certain internal taxes in order to promote or subsidize exports. Accordingly, the appropriate clause of those required by 11-403.2 shall be included in all contracts to be performed by contractors or by foreign governments in foreign countries. However, such clauses need not be included in contracts under $1,000 if the contracting officer determines that the administrative burden of securing relief from such taxes would be out of proportion to the relief obtained; provided, that such clauses shall be included in all contracts in support of NATO infrastructure programs involving the expenditure of funds under Section 503(b) of the Foreign Assistance Act of 1961, as amended. (b) Exclusion of Specific Taxes from the Contract Price. The contracting officer, at the time of negotiation of a contract that is to contain one of the clauses 11-403.1 ARMED SERVICES PROCUREMENT REGULATION |