FAR 29.401-1—Indefinite-delivery contracts for leased equipment.
Plain-English Summary
FAR 29.401-1 tells contracting officers when to include the clause at 52.229-1, State and Local Taxes, in solicitations and contracts for leased equipment. The section applies only when a fixed-price indefinite-delivery contract is contemplated, the contract will be performed wholly or partly in the United States or its outlying areas, and the place or places of delivery are not known at the time of contracting. Its purpose is to protect the Government’s and contractor’s ability to address state and local tax issues that may arise when leased equipment is delivered to locations that cannot be identified in advance. In practice, this means the tax clause must be built into the solicitation and resulting contract so the parties have a clear framework for allocating responsibility for applicable state and local taxes tied to delivery and performance locations. The rule is narrow but important because leased equipment often moves across jurisdictions, and unknown delivery points can create tax uncertainty, pricing risk, and later disputes if the clause is omitted.
Key Rules
Use clause for leased equipment
Insert FAR 52.229-1, State and Local Taxes, in solicitations and contracts for leased equipment when the rule’s conditions are met. This is a mandatory clause prescription, not a discretionary one, once the stated circumstances exist.
Fixed-price ID contract required
The prescription applies only when a fixed-price indefinite-delivery contract is contemplated. If the acquisition is not fixed-price or not indefinite-delivery, this specific section does not govern clause insertion.
Performance must involve U.S. locations
The contract must be performed wholly or partly in the United States or its outlying areas. If performance is entirely outside those areas, this section does not require the clause.
Delivery locations must be unknown
The place or places of delivery must be unknown at the time of contracting. The uncertainty about delivery points is what creates the need for the state and local tax clause in leased equipment acquisitions.
Applies at solicitation and contract stage
The clause must be inserted in both solicitations and contracts. This ensures offerors price the work with the tax provision in mind and the final contract carries the same allocation of tax responsibility.
Responsibilities
Contracting Officer
Determine whether the acquisition is for leased equipment and whether the three triggering conditions are present. If they are, include FAR 52.229-1 in the solicitation and contract and ensure the requirement is reflected in the pricing and administration approach.
Contractor
Review the clause and account for potential state and local tax exposure in the proposal and performance plan. The contractor must understand that tax treatment may vary by delivery location and should price and administer the contract accordingly.
Agency
Support acquisition planning by identifying whether the requirement is for leased equipment, whether delivery locations are uncertain, and whether performance will occur in the United States or its outlying areas. The agency should provide enough acquisition detail for the contracting officer to apply the clause correctly.
Practical Implications
This section matters most when leased equipment may be delivered to multiple or unknown locations, because state and local tax obligations can change by jurisdiction.
A common pitfall is forgetting that the clause is tied to fixed-price indefinite-delivery contracts; applying it outside that context can create unnecessary confusion.
Another frequent mistake is omitting the clause when delivery points are not yet known, which can leave tax responsibility unclear and lead to disputes later.
Contractors should treat the clause as a pricing issue as well as a compliance issue, since unknown delivery locations can affect total cost.
Contracting officers should verify the three conditions early in acquisition planning so the solicitation, pricing, and contract administration all align with the tax clause requirement.
Official Regulatory Text
Insert the clause at 52.229-1 , State and Local Taxes, in solicitations and contracts for leased equipment when- (a) A fixed-price indefinite-delivery contract is contemplated; (b) The contract will be performed wholly or partly in the United States or its outlying areas; and (c) The place or places of delivery are not known at the time of contracting.