dence or proof of any claim, loss or damage in the manner and form required by the Government, and (iii) immediately furnish to the Government copies of all pertinent papers received by the Contractor. The Govern ment may direct, participate in, and supervise the settlement or defense of any such claim or action. The Contractor shall comply with the Government's directions, and execute any authorizations required in regard to such settlement or defense. (g) The Contractor shall procure and maintain, to the extent available, such insurance against unusually hazardous risks as the Contracting Officer may from time to time require or approve. All such insurance shall be in such form, in the amounts, for the periods of time, at such rates, and with such insurers, as the Contracting Officer may from time to time require or approve. The obligations of the Government under this clause shall not apply to claims, loss or damage to the extent that insurance is available and is either required or approved pursuant to this paragraph. The Contractor shall be reimbursed the cost of any such insurance in excess of that maintained by the Contractor as of the date of this contract, to the extent the cost thereof is properly allocable to this contract and is not included in the contract price. (May 1964) (c) In contracts of the Department of the Navy, substitute the word "Department" for the words "Contracting Officer" wherever they appear in paragraph (b) and alternate paragraph (g) of the foregoing clause. (d) Where indemnification against nuclear risks not considered unusually hazardous is to be provided, the clause paragraphs shall be modified as follows: (1) Clause for cost-reimbursement type contracts covered by paragraph (b) (1) of this section. In paragraph (a) (iii) (C), in paragraph (d), and in paragraph (f), delete the words "unusually hazardous" and substitute the words "a nuclear risk". (2) Substitute clause paragraph for fixed-price type contracts covered by paragraph (b) (2) of this section. In paragraph (g), delete the words "unusually hazardous risks" and substitute the words "nuclear risks". (e) Each contract containing the clause in paragraph (b) of this section shall clearly define the specific risks to which the clause applies. This definition shall be submitted for approval with the request for authorization to grant indemnification. The definition may be included as an additional paragraph of the clause or inserted elsewhere in the contract. The fact that one or more risks under a contract may appropriately be defined either as unusually hazardous or as nuclear risks does not justify so defining other risks; neither does it preclude indemnification of such other risks under appropriate authority. (f) In contracts containing the clause in paragraph (b) of this section, there shall be added to the "Definitions" clause of the contract (see § 7.103-1 or § 7.203-1 of this chapter) the following: () For purposes of the clause of this contract entitled "Indemnification Under Public Law 85-804", a claim, loss or damage shall be considered to have arisen out of the direct performance of this contract if the cause of such claim, loss or damage occurred during the period of performance of this contract or as a result of the performance of this contract. (May 1964) § 10.703 Indemnification under contracts involving both research and development and work that cannot be so classified. Certain contracts require a substantial amount of research and development work as well as a substantial amount of work that cannot be so classified. When indemnification is to be provided for such contracts, an appropriate clause, utilizing the authority of both 10 U.S.C. 2354 and Public Law 85-804 may be used. In such cases, the use of Public Law 85-804 to provide indemnification is limited to work which cannot be indemnified pursuant to 10 U.S.C. 2354 and is subject to compliance with the provisions of Subpart C, Part 17 of this chapter. Certificate of export to a possession or to Puerto Rico. 11.501-2 Exemption certificate for supplies for vessels of war. 11.501-3 Exemption certificate for oil used for nonlubricating purposes. Cutting oil certificate. State and local taxes. 11.501-4 11.502 11.502-1 Types of evidence of exemption. 11.502-2 When evidence of exemption is to be furnished. AUTHORITY: The provisions of this Part 11 issued under R.S. 161, sec. 2202, 70A Stat. 120; 5 U.S.C. 22, 10 U.S.C. 2202. Interpret or apply secs. 2301-2314, 70A Stat. 127-133; 10 U.S.C. 2301-2314. § 11.000 Resolution of tax problems. (a) The problems presented in connection with the administration of the tax aspects of a contract or transaction are widely varied. The right to immu nity, exemption, refund, credit, or drawback depends upon the nature of the tax. the particular tax law, the party sought to be taxed, the items being procured, and the provisions of the contract. These problems are essentially legal; therefore, when questions arise, contracting officers shall request the assistance of counsel. (b) It is desirable that uniform and consistent tax policies and procedures be maintained throughout the Department of Defense. Accordingly, negotiations will not be undertaken or directed by procuring activities with any taxing authority for the purpose of determining the validity or applicability of, or for obtaining exemption from or refund of, any tax, except with the approval of: Chief, Procurement Law Division, Office of the Judge Advocate General, for the Army; the General Counsel, for the Navy; The Judge Advocate General, i Headquarters, USAF, for the Air Force; and The Counsel, for the Defense Supply Agency. In addition, where the constitutional immunity of the United States from State or local taxation may reasonably be in issue, contracting officer should discourage contractors having cost-reimbursement type contracts or fixed-! price type contracts containing a tax escalation clause from undertaking independent negotiations with taxing authorities pending approval as indicated above. [29 F.R. 2834, Feb. 29, 1964] Subpart A-Federal Excise Taxes § 11.100 General. This subpart deals with Federal taxes involved in the procurement of certain supplies and services. It is for the general information of Government personnel and does not purport to present the full scope of the applicable provisions of law and implementing regulations as they may be amended from time to time. [29 F.R. 2834, Feb. 29, 1964] § 11.101 Retailers excise taxes. Chapter 31 of the Internal Revenue Code imposes retailers excise taxes upon various types of articles, sold at retail The tax is not imposed on sales for resale. The sale of taxable articles to the Government for use or consumption is a taxable retail sale. A lease of supplies is treated as a sale for the purpose of these taxes. In general, the tax attaches when title passes from the seller. The amount of tax is based on the sale price or the amount of rental payment. The sale price or rental payment for the purpose of computing the tax excludes: (a) Whether or not separately stated, the retailers excise tax; (b) If separately stated, any retail sales tax imposed by any State, Territory, or political subdivision thereof, or the District of Columbia, whether liability for such tax is imposed on the vendor or vendee; and (c) All other service charges such as for transportation, delivery, insurance, and installation; But includes any charges for packaging or packaging materials. If, after the tax has been paid, the sale price is adjusted for any reason, such as by discount, rebate, allowance, or return of containers, the amount of the tax applicable to such sale price also shall be adjusted by credit or refund. The retailer, in turn, is entitled to a refund or credit from the Internal Revenue Service for such tax adjustment. [25 F.R. 14261, Dec. 31, 1960] § 11.101-2 Jewelry and related items. A tax of 10 percent of the sales price is imposed upon the following articles sold at retail: all articles commonly or commercially known as jewelry, whether real or imitation; certain specifically listed stones, whether real or synthetic; articles made of, ornamented, mounted, or fitted with precious metals or imitations thereof; watches, clocks, cases and movements therefor; gold, goldplated, silver, or sterling flatware or hollowware and silver-plate hollowware (which excludes silver-plated flatware); opera glasses, lorgnettes; and marine glasses, field glasses, and binoculars except those which, because of their size or weight, are ordinarily mounted on tripods or other bases. This tax does not apply to (a) articles used for religious purposes; (b) surgical and dental instruments; (c) frames or mountings for eyeglasses; (d) fountain pens, mechanical pencils, or smokers' pipes if the only parts of such articles which consist of precious metals are essential parts not used for ornamentation; (e) watches designed especially for the blind; (f) watches, clocks, cases and movements previously subjected to manufacturers tax or constituting a part of a nontaxable control or regulatory device; (g) or to buttons, insignia, and any other devices prescribed for use with the uniforms of the Armed Forces. Where the manufacturers excise tax has been imposed on a pen, mechanical pencil, or cigarette lighter, which is further processed so as to make it subject to the retailers excise tax on jewelry, the retailer, in computing the retailers excise tax due on the sale, is entitled to a credit or refund in the amount of the manufacturers excise tax paid on the article. [25 F.R. 14261, Dec. 31, 1964] § 11.101-3 Furs. (a) A tax of 10 percent of the sales price is imposed upon the following articles sold at retail: articles made of fur on the hide or pelt, and articles of which such fur is the component of chief value, i.e., its value is more than three times that of the next most valuable component material. The tax is not imposed upon the sale of raw fur. (b) If the fur on the hide or pelt is supplied to a dresser or dyer of fur skins or a manufacturer or repairer of fur articles who produces a taxable article for the use of the supplier of the fur, the transaction is deemed to be a sale at retail and is subject to the tax. The tax applicable to such a transaction is computed upon the fair retail market value of the finished article. Normally, the fair retail market value may be considered as the sales price at which the same or a similar finished article is sold by retailers generally in the ordinary course of retail trade. [29 F.R. 2834, Feb. 29, 1964] § 11.101-4 Toilet preparations. A tax of 10 percent of the sales price is imposed upon toilet preparations sold at retail and any other similar substance, article, or preparation by whatsoever name known which is used or applied, or intended to be used or applied for toilet purposes, but not including any article intended to be used or applied only in the care of babies, or to sales for use in barber shops and beauty parlors. [25 F.R. 14261, Dec. 31, 1960] § 11.101-5 Luggage and handbags. A tax of 10 percent of the sales price is imposed upon certain specifically listed articles (including fittings or accessories sold therewith) sold at retail such as: luggage, handbags, cases, kits and similar items for use in carrying toilet articles or wearing apparel. [25 F.R. 14261, Dec. 31, 1960] § 11.101-6 Special fuels. (a) Diesel fuel. A tax at the indicated rates is imposed upon any liquid other than that taxable as gasoline under section 4081 of the Internal Revenue Code (see § 11.102-4), which is (1) sold by any person to an owner, lessee, or other operator of a diesel-powered highway vehicle, for use as a fuel in such vehicle, or (2) used by any person as a fuel in a diesel-powered highway vehicle unless there was a taxable sale of such liquid pursuant to subparagraph (1) of this section, as follows: (1) At 4 cents per gallon, if sold for use or if used as fuel in a diesel-powered highway vehicle; (i) Which, at the time of such sale or use, is registered, or is required to be registered, for highway use under the laws of any State or foreign country; or (ii) Which, if owned by the United States, is used on the highways; or (2) At 2 cents per gallon, if sold for use or if used as fuel in a diesel-powered highway vehicle; (i) Which, at the time of such sale or use, is not registered, and is not required to be registered, for highway use under the laws of any State or foreign country; or (ii) Which, if owned by the United States, is not used on the highway; and (3) At an additional 2 cents per gallon, if fuel on which a tax of 2 cents was paid pursuant to subparagraph (2) of this paragraph, is used as fuel in a diesel-powered highway vehicle: (i) Which, at the time of such use, is registered, or is required to be registered, for highway use under the laws of any State or foreign country; or (ii) Which, if owned by the United States, is used on the highway. No tax is imposed on diesel fuel sold for use or used as fuel in a nonhighway vehicle, such as certain military vehicles, construction equipment, and equipment designed for use at mines, factories, railroad stations, and farms. (b) Special motor fuels. A tax at the rates indicated below is imposed upon benzol, benzene, naphtha, liquefied petroleum gas, or any other liquid (other than kerosene, gas oil, fuel oil, or a product taxable as diesel fuel under paragraph (a) of this section, or as gasoline under section 4081 of the Internal Revenue Code (see § 11.102-4)), which is (a) sold by any person to an owner, lessee, or other operator of a motor vehicle, motorboat, or airplane for use as a fuel for the propulsion thereof, or (b) used by any person as a fuel for the propulsion of a motor vehicle, motorboat, or airplane, unless there was a taxable sale of such liquid pursuant to (a) above, as follows: (1) At 4 cents per gallon, if such liquid is sold for use or is used as a fuel for a highway vehicle: (i) Which, at the time of such sale or use, is registered, or is required to be registered, for highway use under the laws of any State or foreign country; or (ii) Which, if owned by the United States, is used on the highway, or (2) At 2 cents per gallon, if such liquid is sold for use or is used as a fuel for the propulsion of a motorboat or airplane, or motor vehicle: (i) Which, at the time of such sale or use, is not registered, and is not required to be registered, for highway use under the laws of any State or foreign country; or (ii) Which, if owned by the United States, is not used on the highway; and (3) At an additional 2 cents per gallon, if a liquid on which a tax of 2 cents was paid pursuant to subparagraph (2) of this paragraph, is used as fuel in a highway vehicle: (i) Which, at the time of such use, is registered, or required to be registered, for highway use under the laws of any State or foreign country; or (ii) Which, if owned by the United States is used on the highway. (c) Procedures-(1) General. The sale of diesel fuel to an owner, lessee, or other operator of a diesel-powered highway vehicle, or of special motor fuel to an owner, lessee, or other operator of a motor vehicle, motor boat, or airplane is considered as a taxable sale by the Internal Revenue Service only (i) if the liquid is delivered by the seller into the fuel supply tank of the vehicle, motor boat, or airplane, or (ii) where not so delivered, the purchaser indicates in writing to the seller prior to or at the time of the sale that the entire quantity of the liquid covered by the sale is for use by him for a taxable purpose as a fuel in such a vehicle, motor boat or airplane. If such a written statement is not furnished by the purchaser, he is liable for the tax at the applicable rate on that quantity of the liquid which is used by him as fuel in such a vehicle. motor boat or airplane, or which is sold by him in a taxable transaction. (2) Diesel fuel. Within the departments, diesel fuel is the only product which could be taxable under paragraph (a) of this section. Diesel fuel shall be procured by the departments at a price exclusive of the tax on diesel fuel unless the contract under which such fuel is to be furnished requires the contractor to deliver it into the fuel supply tank of a diesel-powered highway vehicle. The activity of any department using diesel fuel in a diesel-powered highway vehicle, where the fuel had not been delivered by the contractor into the fuel supply tank of the vehicle and had therefore been procured tax free, shall be responsible for making payment of the tax, at the applicable rate, directly to the Internal Revenue Service. Such payment shall be made quarterly on TD Form 720 "Quarterly Federal Excise Tax Return”. A Certificate of Export is not required to support a tax-free sale of diesel fuel exported to a foreign country or shipped to a possession of the United States or to Puerto Rico. (3) Special motor fuel (jet fuel). The only product procured by the departments to which the tax under paragraph (b) of this section could apply is jet fuel. Benzol, benzene, naphtha, liquefied petroleum gas or any other liquid (other than kerosene, gas oil, fuel oil, or a product taxable as diesel fuel or as gasoline) is not used by the departments as a fuel for the propulsion of motor vehicles, motor boats or airplanes and, therefore, the procurement of these products by the departments would not be subject to the tax on special motor fuel. Moreover, none of these products is subject to the manufacturers excise tax on gasoline. The procurement of jet fuel by the departments, except on AF Form 15, shall be at a price exclusive of the tax on special motor fuels. The furnishing of a tax exemption certificate (vessel-of-war) is not required unless the contract under which such fuel is to be furnished requires the contractor to deliver it into the fuel supply tank of aircraft or unless such fuel meets the specification requirements of motor gasoline set forth in paragraph (A) of section 314.30 of Regulation 44 of the Internal Revenue Service. The contract price for jet fuel procured by any department shall not include an amount for manufacturers excise tax on gasoline used in the production of such fuel. (If the manufacturers excise tax on gasoline has been paid on any material used in the production of jet fuel, the manufacturer of the gasoline is entitled to a refund or credit of such tax.) Jet fuel procured on AF Form 15 shall be at a price inclusive of the tax on special motor fuels. [27 F.R. 6136, June 29, 1962, as amended at 29 F.R. 2834, Feb. 29, 1964] § 11.102 Manufacturers excise taxes. [29 F.R. 14262, Dec. 31, 1960] § 11.102-1 General. Chapter 32 of the Internal Revenue Code imposes manufacturers excise taxes upon various types of supplies sold by a manufacturer, producer, or importer. In general, the tax attaches when title passes from the manufacturer. The amount of the tax is based on the amount of the sale price. A lease of supplies is treated as a sale for the purpose of these taxes, in which event the tax is measured by the rental payments until such payments equal the price or fair value of the article (but see § 11.102-12 with respect to lease of business machines by the Government). The sale price or rental payment excludes the tax itself and all service charges connected with the sale, such as transportation, delivery, insurance, or installation charges. However, charges for packaging materials are included. If, after the tax has been paid, the sale price is adjusted for any reason, such as by discount, rebate, allowance, or return of containers, the amount of the tax applicable to such sale price also should be adjusted. The manufacturer, in turn, is entitled to a refund or credit from the Internal Revenue Service for such tax adjustment. Articles subject to the retailers excise tax on jewelry (see § 11.101-2) are not subject to manufacturers excise taxes, except any clock or watch, or any case or movement for a clock or watch, sold as a part or accessory, or sold on or in connection with or with the sale of any article. Supplies of native Indian handicraft manufactured or produced by Indians on Indian reservations, or in Indian schools, or by Indians under the jurisdiction of the United States Government in Alaska are not subject to manufacturers excise taxes. [29 F.R. 14262, Dec. 31, 1960] § 11.102-2 Motor vehicles. (a) A tax at the rates indicated below is imposed upon the following articles |