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or after acceptance by the Government) or furnished by the Government to the Contractor under this contract, including all Government Property placed or installed therein or attached thereto; provided, however, that such aircraft and property are not covered by a separate bailment agreement.

(11) The term "flight" means any flight demonstration, flight test, taxi test, or other flight, made in the performance of this contract, or for the purpose of safeguarding the aircraft, or previously approved in writing by the 2 As to land based aircraft, "flight" shall commence with the taxi roll from a flight line and continue until the aircraft has completed the taxi roll to a flight line; as to sea planes, "flight” shall commence with the launching from a ramp and continue until the aircraft has completed its landing run and is beached at a ramp; as to helicopters, "flight" shall commence upon engagement of the rotors for the purpose of take-off and continue until the aircraft has returned to the ground and rotors are disengaged; and for vertical take-off aircraft, "flight" shall commence upon disengagement from any launching platform or device and continue until the aircraft has been re-engaged to any launching platform or device.

(iii) The term "flight crew members" means the pilot, the co-pilot and, unless otherwise specifically provided in the Schedule, the flight engineer, navigator, bombardier-navigator, and defensive systems operator, when required, or assigned to their respective crew positions, to conduct any flight on behalf of the Contractor.

(c) If any aircraft is damaged, lost, or destroyed during flight, and if the amount of such damage, loss, or destruction exceeds one hundred thousand dollars ($100,000) or twenty percent (20%) of the estimated cost (exclusive of any fee) of this contract, whichever is less, and if the Contractor is not liable for the damage, loss, or destruction pursuant to the "Government Property" clause of this contract together with paragraph (a) above, than an equitable adjustment for any resulting repair, restoration, or replacement that is required under this contract shall be made (1) in the estimated cost, delivery schedule, or both, and (ii) in the amount of any fee to be paid to the Contractor, and the contract shall be modified in writing accordingly; provided, in determining the amount of adjustment in the fee is equitable, any fault of the Contractor, his employees, or any subcontractor, which materially contributed to the damage, loss, or destruction shall be taken into consideration. Failure to agree on any adjustment shall be a dispute con

Insert, in contracts of the Department of the Army or the Department of the Air Force, the words "the Contracting Officer," and insert, in contracts of the Department of the Navy, the activity designated in accordance with Departmental procedures.

cerning a question of fact within the meaning of the "Disputes" clause of this contract.

(b) In the foregoing clause, the definition of "aircraft" may be appropriately modified in the Schedule if the contract covers helicopters, vertical take-off aircraft, lighter-than-air airships, or other nonconventional types of aircraft. If the contract includes the Government Property clause in § 13.506 of this chapter, the reference in subparagraph (a) of the foregoing clause to subparagraph (f) (1) of the Government Property clause should be changed to (i) (1). [27 F.R. 1713, Feb. 22, 1962]

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Subpart A-Federal Excise Taxes

§ 11.101-6 Special fuels.

(a) Diesel fuel. A tax at the indicated rates is imposed upon diesel fuel, other than that taxable 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 diesel-powered highway vehicle, for use as a fuel in such vehicle, or (b) used by any person as a fuel in a diesel-powered highway vehicle unless there was a taxable sale of such liquid pursuant to (a) above, 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) Refunds and credits. (1) A retailer, who has paid a tax on diesel fuel or special motor fuel, is entitled to a refund or credit of the tax paid, if such retailer has not included the tax in the sales price or otherwise collected the tax from the purchaser, has repaid the tax to the purchaser, or has the purchaser's written consent to take the refund or credit, as follows:

(i) A refund or credit of 4 cents or 2 cents per gallon, as appropriate, if a liquid upon which a tax of either 4 cents or 2 cents per gallon has been paid, is not used as fuel in a diesel-powered highway vehicle or to propel a motor vehicle, motorboat, or airplane;

(ii) A refund or credit of 2 cents per gallon, if diesel fuel, upon which a tax of 4 cents per gallon has been paid pursuant to paragraph (a)(1) of this section, is used as a fuel for a dieselpowered highway vehicle:

(a) Which, at the time of such use is not registered, and is not required to be registered, for highway use under the laws of any State or foreign country; or

(b) Which, if owned by the United States, is not used on the highway; or

(iii) A refund of 2 cents per gallon, if special motor fuel, upon which a tax of 4 cents per gallon has been paid pursuant to paragraph (b)(1) of this section, is used to propel a motorboat or airplane, or motor vehicle:

(a) Which, at the time of such use is not registered, and is not required to be registered, for highway use under the laws of any State or foreign country; or

(b) Which, if owned by the United States, is not used on the highway.

These refunds or credits shall be utilized, in accordance with Departmental procedures, by adjustment of the contract price whenever it is economically advantageous to do so.

(2) If the manufacturers excise tax on gasoline (see § 11.102-4) has been paid on any material used in the production of a special motor fuel taxable under paragraph (b) of this section, the manufacturer of the gasoline is entitled to a refund or credit of such tax, subject to the conditions similar to those stated in the opening lines of subparagraph (1) of this paragraph. The contract price for special motor fuels purchased by any Department shall not include an amount for manufacturers excise tax on gasoline used in the production of such special motor fuel.

[27 F.R. 6136, June 29, 1962]

§ 11.102-2 Motor vehicles.

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(b) Chassis and bodies of automobiles, and of trailers and semitrailers (other than house trailers) suitable for use with passenger automobiles-10 percent; and

(c) Parts or accessories-when sold separately from an automobile, truck, or other item taxable as indicated in paragraphs (a) and (b) of this section-8 percent. Parts or accessories are defined to include any article:

(1) The primary use of which is to improve, repair, replace or serve as a component part of a motor vehicle;

(2) Designed to be attached to or used in connection with a motor vehicle or to add to its utility or ornamentation;

or

(3) The primary use of which is in connection with a motor vehicle whether or not essential to its operation

or use.

[Paragraphs (b) and (c) amended, 27 F.R. 6137, June 29, 1962]

§ 11.102-3 Tires and tubes.

(a) A tax at the rates indicated below is imposed on the following supplies, made wholly or in part of rubber, including synthetic and substitute rubber, sold by a manufacturer, producer, or importer:

(1) Tires of the type used on highway vehicles, which includes motor vehicles which are highway vehicles, and vehicles of the type used with motor vehicles which are highway vehicles-10 cents per pound;

(2) Other tires, which are designed to fit the wheel of any type of vehicle capable of transporting a person or burden (other than laminated tires which consist wholly of scrap rubber from used tire casings with an internal metal fastening agent)-5 cents per pound;

(3) Inner tubes, which include any type of air container for pneumatic tires 10 cents per pound on total weight, including air valves and stems;

(4) Laminated tires (not of the type used on highway vehicles) which consist wholly of scrap rubber from used tire casings with an internal metal fastening agent-1 cent per pound; and

(5) Tread rubber, which includes any material commonly or commercially known as tread rubber or camelback of a type used in retreading or recapping tires-5 cents per pound. An exemption exists for the sale of tread rubber or camelback by a manufacturer to a purchaser for use by that purchaser other than for recapping or retreading tires of the type used on highway vehicles. In addition, if tread rubber, upon which the tax has been paid, is sold for use or is used other than for recapping or retreading tires of the type used on highway vehicles, the manufacturer is entitled to a refund or credit of the tax, provided, that the credit under paragraph (b) of this section is not available. The contract price for supplies purchased by any Department will not include an amount for the manufacturers excise tax on tread rubber to the extent that this exemption of refund or credit is available to the manufacturer. In determining weight of taxable tires under subparagraphs (1) and (2) of this paragraph, metal rims or rim bases are excluded, but any other material or fastening device that forms a part of the tire is included. The tax imposed under subparagraphs (1) and (2) of this paragraph, does not apply to tires which are not more than 20 inches in diameter and not more than 14 inches in cross-section, if such tires are of all-rubber construction without fabric or metal reinforcement, nor does it apply to tires of extruded tiring with an internal wire fastening agent.

(b) The exemption for sales for further manufacture does not apply to taxable tires and tubes (see § 11.202). However, if tax-paid tires and tubes normally sold in connection with the sale by a manufacturer of a taxable

motor vehicle are sold therewith, a credit against the tax on the motor vehicle is allowed to the extent of the motor vehicle tax rate applied to the manufacturers purchase price on the tires and tubes. The contract price for supplies purchased by any Department shall not include an amount for manufacturers excise tax on tires and tubes to the extent that this credit is available to the manufacturer.

[27 F.R. 6137, June 29, 1962]

§ 11.102-4 Gasoline.

(a) A tax of 4 cents per gallon is imposed on gasoline sold by a producer or importer. Gasoline means all products commonly or commercially known as gasoline, including casinghead and natural gasoline, but excluding kerosene, gas oil, or fuel oil, and also excluding any product taxable as a special motor fuel under section 4041 of the Internal Revenue Code (See § 11.101-6). The tax does not apply to the sale of gasoline to a producer, which is defined to include a refiner, compounder, blender, or dealer who sells gasoline exclusively to producers of gasoline.

(b) The ultimate purchaser of gasoline is entitled to a refund of 2 cents per gallon for gasoline used otherwise than as fuel in a highway vehicle; for example, gasoline used in stationary engines, in cleaning tools, in motorboats, aircraft, fork lift trucks, bulldozers and earth movers. Refunds will also be made on gasoline used as fuel in a highway vehicle:

(1) Which, at the time of such use is not registered, nor required to be registered, for highway use under the laws of any State or foreign country; or

(2) Which, if owned by the United States is not used on the highway.

In accordance with Departmental procedures, necessary data shall be compiled, to the extent economically advantageous, to support a direct application to the Internal Revenue Service for refund. Such application shall be in accord with pertinent requirements of the Internal Revenue Service.

[27 F.R. 6137, June 29, 1962]

§ 11.102-13 Pens, mechanical pencils, and lighters.

(a) A tax at the rates indicated below is imposed upon the sale by the manufacturer, producer, or importer of the following articles:

(1) Mechanical pencils, fountain pens and ballpoint pens-10 percent;

(2) Mechanical lighters for cigarettes, cigars, and pipes-10 cents for each lighter but not more than 10 percent of the price for which so sold.

(b) The tax on pens, mechanical pencils, and lighters does not apply if the article also is subject to the retailers excise tax on jewelry imposed by section 4001 of the Internal Revenue Code. If the manufacturers excise tax has been paid, but the article is further processed so as to subject it to the retailers excise tax, the retailer (but not the manufacturer who originally paid the tax) is entitled to a credit to the extent of the manufacturers excise tax paid on the article. (See § 11.101-2.) [27 F.R. 6138, June 29, 1962]

§ 11.104 Use tax on highway motor vehicles.

(a) A tax of $3.00 a year for each 1,000 pounds of taxable gross weight, or fraction thereof, is imposed upon the use of any highway motor vehicle which, together with semitrailers and trailers customarily used in connection with a vehicle of this type, has a taxable gross weight in excess of 26,000 pounds. The full tax is due for any vehicle which is used on the public highways of the United States at any time during the month of July, irrespective whether the vehicle is later removed from highway use. If the first use of a taxable vehicle occurs after the end of July, the tax is computed proportionately from the first day of the month in which the vehicle is first used, through the end of the following June. For example, if a vehicle is placed in use during August,

of the total tax is payable. No tax applies to vehicles, even though of a highway type, which are never used on the public highways during the taxable year.

[Paragraph (a) amended, 27 F.R. 6138, June 29, 1962]

Subpart C-State and Local Taxes [Revised]

SOURCE: §§ 11.301 and 11.302 appear at 26 F.R. 9640, Oct. 12, 1961.

Prior Amendments 1961: 26 F.R. 2615, Mar. 28.

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(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.

(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 exemption, the matter shall be referred to the appropriate office of the executive agency concerned.

§ 11.302 Tax exemption forms.

Except when a different form is required by a particular State or local tax jurisdiction, Standard Form 1094 Revised (U.S. Government Tax Exemption Certificate) shall be used in accordance with agency procedures. Unless the contract under which the exemption is claimed otherwise requires, an exemption certificate will not be issued if the amount of the taxes on any one invoice or purchase is one dollar or less. [27 F.R. 6138, June 29, 1962]

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FEDERAL, STATE, AND LOCAL TAXES (AUG. 1961)

(a) Except as may be otherwise provided in this contract, the contract price included all applicable Federal, State, and local taxes and duties.

(b) Nevertheless, with respect to any Federal excise tax or duty on the transactions or property covered by this contract, if a statute, court decision, written ruling, or regulation takes effect after the contract date, and

(1) Results in the Contractor being required to pay or bear the burden of any such Federal excise tax or duty or increase in the rate thereof which would not otherwise have been payable on such transaction or property, the contract price shall be increased by the amount of such tax or duty or rate increase, provided the Contractor warrants in writing that no amount for such newly imposed Federal excise tax or duty or rate increase was included in the contract price as a contingency reserve or otherwise;

or

(2) Results in the Contractor not being required to pay or bear the burden of, or his obtaining a refund or drawback of, any such Federal excise tax or duty which would otherwise have been payable on such transactions or property or which was the basis of an increase in the contract price, the contract price shall be decreased by the amount of the relief, refund, or drawback, or that amount shall be paid to the Government, as directed by the Contracting Officer. The contract price shall be similarly decreased if the Contractor, through his fault or negligence or his failure to follow instructions of the Contracting Officer, is required to pay or bear the burden of, or does not obtain a refund or drawback of, any such Federal excise tax or duty.

(c) No adjustment of less than $100 shall be made in the contract price pursuant to paragraph (b) above.

(d) As used in paragraph (b) above, the term "contract date" means the date set for bid opening, or if this is a negotiated contract, the contract date. As to additional supplies or services procured by modification to this contract, the term "contract date" means the date of such modification.

(e) Unless there does not exist any reasonable basis to sustain an exemption, the Government upon the request of the Contractor shall, without further liability, furnish evidence appropriate to establish exemption from any Federal, State, or local tax; provided that, evidence appropriate to establish exemption from any Federal excise tax or duty which may give rise to either an increase or decrease in the contract price

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