Looking for guidance/comments on the possibility of a contractor getting tax exempt status for goods that they are purchasing for a Federal Agency. The Agency would request the goods from the company who goes out and buys them from the appropriate vendor. Thnanks

By ZELDA ANON on Thursday, January 24, 2002 - 11:59 am:

Check FAR Part 29 for State and Local Taxes. FAR 29.303 may give you the guidance you're looking for. And, while it doesn't address taxes, if you're going to have the contractor purchase supplies and services for your agency, you may also want to look at FAR Part 51, Use of Government Sources by Contractors.

By joel hoffman on Thursday, January 24, 2002 - 10:12 pm:

I'll check for the citation, Friday. However, as a general rule, the Government's contractors can't get a sales tax exemption for indirect sales to the Government. The Government can usually only obtain the exemption by directly purchasing materials and supplies from a vendor.

If the contractor is a retail or wholesale vendor, it can sell directly to the Government. I'm curious - why would you want to purchase goods from a reseller? Isn't that doubling the mark-up (the reseller tacks on its OH and profit on top of the vendor's markups. happy sails! joel

By joel hoffman on Friday, January 25, 2002 - 09:13 am:

DCAA Contract Audit Manual, 7-1403.6 discusses state sales taxes. "State law dictates whether the government is the buyer or not in transactions involving government contracts."

Some states, like Connecticut, exempt cost reimbursement contractors from state sales taxes, when the government will be the recipient of the materials. The DCAA says to consult your counsel, who should research state tax codes, and court descisions, etc. happy sails! joel hoffman

By joel on Friday, January 25, 2002 - 09:30 am:

Check out Federal Supremacy in the Constitution (I think) for the source of tax exemption for direct sales to the Government. Have a meeting to run to, so can't look it up at the moment... h.s.

By bob antonio on Friday, January 25, 2002 - 10:57 am:

First anonymous:

A few years ago, the General Accounting Office (GAO) was asked to look at taxes contractors paid for the purchase of items used in the building of a facility. The states have a wide assortment of taxes called "sales," "use," or some other name. They also have various exemptions from these taxes for various types of contractors, non-profits, educational institutions, in-state organizations, etc.

The question GAO dealt with was about a facility that the Department of Energy (DOE) planned to build in Tennessee. In this case, DOE did pay these types of taxes.

By joel hoffman on Friday, January 25, 2002 - 11:13 am:

Zelda's reference to FAR 29.303 was excellent. It clearly addresses State taxes and Government contractors and is consistent with the DCAA Contract Audit Manual.

Anon, I still wonder whether it is sound to hire a contractor, including markups, to purchase supplies and materials for the Agency. What do you inteend to save? happy sails! joel


happy sails! joel