FAR 29.401-2—Construction contracts performed in North Carolina.
Plain-English Summary
FAR 29.401-2 tells contracting officers when to include the North Carolina State and Local Sales and Use Tax clause in construction-related solicitations and contracts. It applies specifically to construction work performed in North Carolina, and it also addresses the special case of vessel repair performed in North Carolina by requiring use of the clause’s Alternate I. The section exists to ensure the contract includes the correct tax-related terms for work performed in that state, so the Government and contractor understand how North Carolina sales and use tax issues will be handled. In practice, this is a mandatory clause-insertion rule tied to the place of performance and the type of work, not a discretionary provision. It matters because using the wrong clause, or omitting it, can create pricing, invoicing, and compliance problems during performance and closeout.
Key Rules
Insert the North Carolina tax clause
For solicitations and contracts for construction to be performed in North Carolina, the contracting officer must include FAR 52.229-2, North Carolina State and Local Sales and Use Tax. This is a required clause, not an optional one, whenever the contract meets the location and work-type trigger.
Use Alternate I for vessel repair
If the requirement is for vessel repair to be performed in North Carolina, the contracting officer must use the clause with Alternate I. The alternate is required because vessel repair is treated differently from ordinary construction for purposes of this tax clause.
Apply based on place of performance
The trigger is performance in North Carolina, so the clause decision depends on where the construction or vessel repair work will actually be done. Contracting officers should confirm the place of performance before award and ensure the solicitation and contract match that location.
Include in both solicitation and contract
The rule covers both solicitations and contracts, meaning the clause should be present before award and carried into the final contract. This helps bidders price the work correctly and ensures the tax terms govern performance from the start.
Responsibilities
Contracting Officer
Determine whether the requirement is for construction or vessel repair to be performed in North Carolina, insert FAR 52.229-2 in the solicitation and contract, and use Alternate I when the requirement is vessel repair in North Carolina.
Contractor
Review the solicitation and contract for the applicable North Carolina sales and use tax clause, price the work accordingly, and comply with the contract’s tax-related requirements during performance.
Agency
Support accurate acquisition planning and contract administration so the correct clause is used for North Carolina performance and the contract file reflects the basis for the clause selection.
Practical Implications
This clause affects pricing because contractors may need to account for North Carolina sales and use tax in their bids or proposals.
A common mistake is using the standard clause for vessel repair instead of Alternate I, which can create contract administration issues.
Another pitfall is overlooking the clause when work is performed in North Carolina but the solicitation was drafted using a generic construction template.
Contracting officers should verify the actual place of performance early, especially when work locations may change or when a project includes multiple sites.
Contractors should check whether the clause is included and whether the alternate applies, since tax treatment can affect invoicing, cost recovery, and compliance.
Official Regulatory Text
The contracting officer shall insert the clause at 52.229-2 , North Carolina State and Local Sales and Use Tax, in solicitations and contracts for construction to be performed in North Carolina. If the requirement is for vessel repair to be performed in North Carolina, the clause shall be used with its AlternateI.