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(b) Chapter 53A of the Internal Revenue Code imposes a transfer tax and a tax on the manufacturer of machine guns and certain other firearms. Transfer to, or manufacture for, the United States is specifically exempted.
(c) Clearly identified orders or contracts of a Military Department, signed by an authorized officer of such Department, will be accepted in support of the exemption. In the absence of such orders or contracts, a statement signed by an authorized officer of a Military Department that the firearms, shells, or cartridges were purchased with funds appropriated for the Military Departments will be acceptable. § 11.103 Excise taxes on facilities and
services. Chapter 33 of the Internal Revenue Code imposes excise taxes on communications and certain transportation of persons by air. In general, the tax is based upon the amount paid for the service and is imposed upon the person paying for the service. f 11.104 Use tax on highway motor ve
hicles. (a) A tax of $3 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, 1912 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.
(b) Taxable gross weight is the sum of
(1) The actual unloaded weight of the vehicle and any semitrailers and trailers customarily used with such a vehicle, all units fully equipped for seryice; and
(2) The weight of the maximum load customarily carried by all units of a vehicle of this type.
(c) The tax is payable by the person in whose name the vehicle is, or is required to be, registered under the law of any State, or if owned by the United States, by the agency or instrumentality of the United States operating such vehicle. If a tax has been paid for a particular vehicle, no further liability can be incurred in the same taxable year, even though there is a change of ownership of the vehicle.
(d) The Secretary of the Treasury, however, has authorized an exemption for vehicles used by the United States whether or not they are Government owned. Subpart B-Exemptions From Federal
Excise Taxes SOURCE: The provisions of this Subpart B appear at 31 F.R. 13335, Oct. 14, 1966, unless otherwise noted. § 11.200 Policy.
It is the policy of the Department of Defense to take maximum advantage of all exemptions from Federal excise taxes available to the United States and its contractors and to claim all refunds and credits which may be available to the United States and its contractors, except as otherwise provided in this subpart and Subpart A of this part. $ 11.201 Retailers excise taxes.
No retailers excise tax is imposed:
(a) On the sale of special fuels for the exclusive use of any State, any political subdivision thereof, or the District of Columbia, or with respect to the use thereof by any of the foregoing;
(b) On the sale of special fuels for export or for shipment to a possession the United States (which for the purpose of this exemption includes Puerto Rico), and in due course so exported or shipped
(1) This exemption shall be utilized by purchasing on a tax-exclusive basis and furnishing the required proof of exportation or shipment to a possession if:
(i) The purchase is substantial, and
(ii) Exportation or shipment to a possession is intended to follow not more than 6 months after title passes to the Government.
(2) To qualify for the exemption of sales for export or for shipment to a possession:
(i) The supplies must be identified as having been sold by the manufacturer (if the tax is a manufacturers excise tax) or the retailer (if the tax is a retailers excise tax) for export or shipment to a possession. The words "for export or shipment to a possession” incorporated into or stamped on a contract or purchase order are acceptable to the Internal Revenue Service as evidence that the sale is for export or for shipment to a possession. In solicitations and contracts, the terms of which imply that the supplies will be either exported or shipped to a possession (e.g., delivery to a port of embarkation or special packing requirements for overseas shipment) where the purchase is not substantial and it is therefore desired to purchase on a Federal excise tax-inclusive basis, the solicitations and the contract should clearly state that proof of export certificates will not be issued.
(ii) The supplies must be exported or shipped to a possession in due course. Proof of export or shipment will be furnished to the contractor in the form set forth in § 11.501.
(c) On the sale of special fuels to retailers for resale. (Sales by the United States, or any agency or instrumentality thereof, are not exempt unless specifically made exempt by statute.);
(d) On the sale of special motor fuels for use or used in the propulsion of vessels of war or military aircraft of the type enumerated in § 11.202(d);
(e) On the sale of special fuels to a nonprofit educational organization for its exclusive use, or, with respect to the use thereof by a nonprofit educational organization. f 11.202 Manufacturers excise taxes.
No manufacturers excise tax is imposed:
(a) On the sale of any article for use by the purchaser for further manufacture or for resale to a second purchaser for use by such second purchaser in further manufacture (An article shall be treated as sold for use in further manufacture if sold for use by the purchaser as material in the manufacture or production of, or as a component part of another taxable article to be manufactured or produced. In the case of truck or bus parts and accessories, it is not necessary that the produced article be
a taxable article. This exemption does not apply to tires or inner tubes.); or
(b) On the sale of any article for export, or for shipment to a possession of the United States which for the purpose of this exemption includes Puerto Rico. This exemption shall be obtained only when the purchase is substantial and exportation or shipment to a possession is intended to follow not more than 6 months after title passes. For proper utilization of this exemption, see § 11.201(b).
(c) On the sale of any article for resale to a second purchaser for export. If articles upon which a manufacturers excise tax has been paid are resold by a dealer for export, or for shipment to a possession, the manufacturer is entitled to a credit or refund of the tax paid. If it is 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 § 11.501-1.
(d) On sales of supplies for use as fuel supplies, ships' stores, sea stores, or legitimate equipment on vessels of war of the United States or of any foreign nation, including aircraft owned by the United States or by any foreign nation and constituting a part of the armed forces thereof, and guided missiles and pilotless aircraft owned or chartered by the United States. This exemption and the exemption from the retailers excise tax on special motor fuels (see § 11.201(d)) shall be utilized by purchasing on a taxexclusive basis and furnishing the required exemption certificate (see $11.501-2) only if:
(1) The purchase is substantial,
(2) The contracting officer determines at the time of the purchase that the supplies are intended for use in vessels of war or military aircraft, and
(3) The administrative burden of insuring that the supplies are used for exempt purposes does not make use of the exemption uneconomical. Administrative difficulties normally will not exist if the particular supply is suited exclusively for use in vessels or aircraft. If supplies upon which a manufacturers excise tax has been paid are sold by a dealer for any of the exempt uses enumerated above, the manufacturer is entitled to a credit or refund of the tax paid. If it is 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.
(e) On the sale of any article for the exclusive use of a State or local government; and
(f) On the sale of any article to a non profit 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. [36 F.R. 21153, Nov. 4, 1971]
Subpart C—State and Local Taxes $ 11.300 General.
As used in this part, 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. [29 F.R. 2837, Feb. 29, 1964) § 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) of this chapter).
(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. [26 F.R. 9640, Oct. 12, 1961, as amended at 29 F.R. 2837, Feb. 29, 1964; 34 F.R. 13846, Aug. 29, 1969) $ 11.302 N.C. Sales and Use Tax.
(a) A provision of the N.C. 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 N.C. 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 6 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 appli
cations not filed within the time allowed thereby and in such manner as the Commissioner 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 such contractor certified statements ment must indicate the invoice numbers, the inclusive dates of the invoices, the total amount of the invoices and the sales and
oices 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.
(c) To assure that the United States will be in a position to obtain refunds of North Carolina sales and use taxes to which it is entitled, the clause set forth in paragraph (e) of this section shall be inserted in all construction contracts to be performed in North Carolina, including vessel repair contracts.
(d) The clause set forth in paragraph (e) of this section requires construction contractors, including vessel repair contractors, to submit to contracting officers by August 31 each year certified statements covering N.C. sales and use taxes paid during the 12-month period which ended the preceding June 30. It will be the responsibility of each contracting officer concerned to assure that contrac
tors comply with this requirement and to į obtain the annual refund of N.C. sales
and use taxes to which his activity may
be entitled. The application for refund i 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 12month 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, N.C. 27602.
(e) Contract clauses: N.C. SALES AND USE TAX (OCTOBER 1966)
(a) As used throughout this clause, the term "materials" means building materials, supplies, fixtures and equipment which become a part of or are annexed to any building or structure erected, altered, or repaired under this contract.
(b) If this is a fixed-price type contract as defined in the Armed Services Procurement Regulation, the contract price includes N.C. sales and use taxes to be paid with respect to materials, notwithstanding any other provision of this contract. If this is a cost-reimbursement type contract as defined in such regulation, any N.C. sales and use taxes paid by the Contractor with respect to materials shall constitute an allowable cost under this contract.
(c) At the time specified in paragraph (d) below:
(1) The Contractor shall furnish the Contracting Officer certified statements setting forth the cost of the materials purchased from each vendor and the amount of N.C. sales and use taxes paid thereon. In the event the Contractor makes several purchases from the same vendor, such certified statement shall indicate the invoice numbers, the inclusive dates of the invoices, the total amount of the invoices and the N.C. sales and use taxes paid thereon. Such statement shall also include the cost of any tangible personal property withdrawn from the Contractor's warehouse stock and the amount of N.C. sales or use tax paid thereon by the Contractor. The Contractor shall furnish such additional information as the Commissioner of Revenue of the State of North Carolina may require to substantiate a refund claim for sales or use taxes.
(ii) The Contractor shall obtain and furnish to the Contracting Officer similar certified statements by its subcontractors.
(d) If this contract is completed before the next July 1, the certified statements to be furnished pursuant to paragraph (c) above shall be submitted within 60 days after completion. If this contract is not completed before the next July 1, such certified statements shall be submitted on or before the 31st day of August of each year and shall cover taxes paid during the 12-month period which ended the preceding June 30.
(e) The certified statements to be furnished pursuant to paragraph (c) above shall be in the following form:
I hereby certify that during the period ------------ to ------------ (name of contractor or subcontractor) paid N.C. sales and use taxes aggregating $------ with respect to building materials, supplies, fixtures, and equipment which have become a part of or annexed to a building or structure erected, altered, or repaired by (name of contractor) for the United States of America, 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;
and that the vendors from whom the property was purchased, the dates and numbers of the invoices covering the purchases, the total amount of the invoices of each vendor, the N.C. sales and use taxes paid thereon, and the cost of property withdrawn from warehouse stock and N.C. sales or use taxes paid thereon are as set forth in the attachments hereto.
NOTE: In ship repair contracts, change paragraph (a) to read as follows:
(a) As used throughout this clause, the term “materials" means materials, supplies, fixtures, and equipment which become a part of or are annexed to any vessel altered or repaired under this contract. [33 F.R. 274, Jan. 9, 1968)
Subpart D-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. (29 F.R. 2837, Feb. 29, 1964) § 11.401-1 Advertised and certain nego
tiated contracts. (a) Use of clause. The clause set forth in paragraph (c) of this section shall be used in:
(1) All formally advertised contracts except construction contracts which do not exceed $10,000;
(2) All competitively negotiated fixed. price contracts in excess of $10,000;
(3) All noncompetitive negotiated fixed-price contracts in excess of $10,000, when use of the clause set forth in § 11.401–2(c) is not required; and
(4) Any negotiated fixed-price contract in excess of $2,500 but not in excess of $10,000, at the discretion of the contracting officer.
(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. It does not provide for any adjustment in the contract price to compensate for changes in State or local taxes.
(c) Contract clause. 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
(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 bave 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 & refund or drawback of, any such Federal excise tax or duty.
(c) No adjustment of less than 8100 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 11 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 reason. able basis to sustain an exemption, the Govt ernment 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 will be furnished at the discretion of the Government.
(1) The Contractor shall promptly notify the Contracting Officer of matters which will result in either an increase or decrease in the contract price, and shall take action with respect thereto as directed by the Contracting Oficer. 126 F.R. 9640, Oct. 12, 1961 and 29 F.R. 2837, Feb. 29, 1964, as amended at 33 F.R. 7401, May 18, 1968) § 11.401-2 Noncompetitive negotiated
contracts. (a) Use of clause. The clause set forth in paragraph (c) of this section shall be