FAR 29.401—Domestic contracts.

Indefinite-delivery contracts for leased equipment.

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.

Construction contracts performed in North Carolina.

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.

Federal, State, and local taxes.

FAR 29.401-3 tells contracting officers when to include the tax clause for fixed-price contracts performed in the United States or its outlying areas. It covers the standard clause at 52.229-3, Federal, State, and Local Taxes, and a limited alternative clause at 52.229-4, Federal, State, and Local Taxes (State and Local Adjustments). The section applies only when a fixed-price contract is contemplated and the expected value exceeds the simplified acquisition threshold. In practice, this rule is about allocating the risk of federal, state, and local tax changes in the contract price and making sure the solicitation and contract use the right clause. It also recognizes that in some noncompetitive awards, a price may otherwise include an unnecessary contingency for future state or local tax changes, so the contracting officer may use the adjustment clause instead. For contractors, this section affects how they build tax assumptions into pricing; for contracting officers, it affects clause selection and price realism in fixed-price acquisitions.

New Mexico gross receipts and compensating tax.

FAR 29.401-4 explains when the New Mexico gross receipts and compensating tax rules matter in federal contracting and when the special New Mexico clause must be used. It covers the New Mexico definition of "services," including activities performed for consideration, services performed for members or shareholders, construction activities, and tangible personal property that becomes an ingredient or component part of a construction project. It also explains the limited circumstances in which the contracting officer must insert FAR 52.229-10, State of New Mexico Gross Receipts and Compensating Tax: only for certain agency contracts, only when the contract is cost-reimbursement, only when the contractor is authorized to acquire tangible personal property as a direct cost with title passing directly to the United States on delivery, and only when the services will be performed in whole or in part in New Mexico. Finally, it identifies the agencies that have an agreement with New Mexico to avoid double taxation and notes that other agencies should seek a similar agreement if they expect to award cost-reimbursement contracts in New Mexico. In practice, this section is about preventing unnecessary state tax burden on qualifying government purchases while making sure the clause is used only in the specific situations the regulation covers.