FAR 29.201—General.
Plain-English Summary
FAR 29.201 explains the basic federal policy for handling federal excise taxes in contracting. It identifies what federal excise taxes are, points readers to the Internal Revenue Code and Treasury regulations that govern them, and notes that questions should be sent to agency-designated counsel. The section highlights the most common excise taxes relevant to procurement, including manufacturers’ excise taxes on certain motor-vehicle articles, tires and inner tubes, gasoline, lubricating oils, coal, fishing equipment, firearms, shells, and cartridges, as well as special-fuels excise taxes on diesel fuel and special motor fuels. It then sets the contracting rule for pricing solicitations: use tax-exclusive pricing when the Government is known to be exempt, and tax-inclusive pricing when no exemption exists. Finally, it directs executive agencies to take maximum advantage of any available federal excise tax exemptions, making tax treatment a practical acquisition issue that affects solicitation preparation, price evaluation, and overall contract cost.
Key Rules
Excise taxes are covered here
This section addresses federal excise taxes imposed on the sale or use of certain supplies or services. It points to Subtitle D of the Internal Revenue Code and the implementing Treasury regulations as the controlling tax authorities.
Common excise taxes identified
The section specifically calls out manufacturers’ excise taxes on certain motor-vehicle articles, tires and inner tubes, gasoline, lubricating oils, coal, fishing equipment, firearms, shells, and cartridges, plus special-fuels excise taxes on diesel fuel and special motor fuels.
Tax questions go to counsel
When tax applicability, exemption status, or pricing treatment is unclear, the matter should be referred to agency-designated counsel. Contracting personnel are not expected to resolve complex tax-law questions on their own.
Use tax-exclusive pricing when exempt
If the Government is known to be exempt from the applicable excise tax, contracting officers should solicit prices without including that tax. This avoids overstating the Government’s expected cost.
Use tax-inclusive pricing when not exempt
If no exemption exists, solicitations should require prices that include the excise tax. This ensures offers are evaluated on a true total-cost basis and prevents later pricing disputes.
Maximize available exemptions
Executive agencies must take maximum advantage of any federal excise tax exemptions that are available. This means agencies should actively identify and apply exemptions whenever the law permits, rather than paying tax by default.
Responsibilities
Contracting Officer
Determine whether the Government is known to be exempt from the applicable federal excise tax and structure the solicitation accordingly, using tax-exclusive pricing when exempt and tax-inclusive pricing when not exempt.
Agency-Designated Counsel
Provide legal guidance on excise tax questions, including exemption status, applicability, and any other issues arising under the tax statutes and regulations.
Executive Agencies
Take maximum advantage of available federal excise tax exemptions and ensure procurement practices reflect any lawful tax relief available to the Government.
Offerors/Contractors
Prepare pricing in the format required by the solicitation and account for applicable excise taxes when tax-inclusive pricing is required.
Practical Implications
This section affects how prices are requested and compared, so getting the tax treatment wrong can distort competition and evaluation results.
A common pitfall is assuming all federal purchases are automatically tax-exempt; the rule is to verify exemption status before using tax-exclusive pricing.
Another risk is failing to distinguish between different excise taxes, since manufacturers’ excise taxes and special-fuels excise taxes apply to different products and at different points in the supply chain.
Contracting officers should coordinate early with counsel when a procurement involves fuel, vehicles, tires, firearms, or other items commonly subject to excise tax.
Agencies should document the basis for any claimed exemption so the solicitation and resulting contract reflect the correct tax treatment.
Official Regulatory Text
(a) Federal excise taxes are levied on the sale or use of particular supplies or services. Subtitle D of the Internal Revenue Code of 1954, Miscellaneous Excise Taxes, 26 U.S.C.4041 , etseq ., and its implementing regulations, 26 CFR parts 40 through 299, cover miscellaneous federal excise tax requirements. Questions arising in this area should be directed to the agency-designated counsel. The most common excise taxes are- (1) Manufacturers’ excise taxes imposed on certain motor-vehicle articles, tires and inner tubes, gasoline, lubricating oils, coal, fishing equipment, firearms, shells, and cartridges sold by manufacturers, producers, or importers; and (2) Special-fuels excise taxes imposed at the retail level on diesel fuel and special motor fuels. (b) Sometimes the law exempts the Federal Government from these taxes. Contracting officers should solicit prices on a tax-exclusive basis when it is known that the Government is exempt from these taxes, and on a tax-inclusive basis when no exemption exists. (c) Executive agencies shall take maximum advantage of available Federal excise tax exemptions.