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Reno54

Gross Receipts Sales Tax - Allowable Cost?

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First I apologize as I may not have all of the facts that might be needed as I am researching for a coworker but if additional information is needed I can get it. The basic question is - Does anyone know if Gross Receipts Sales Tax is an allowable cost? Have a price proposal on an A/E design task order where one of the subcontractors has this cost as a separately priced item in their breakdown. Thanks for any help.

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Depends on the state.

For example, New Mexico Gross Receipts Taxes are allowable.

Hope this helps.

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First I apologize as I may not have all of the facts that might be needed as I am researching for a coworker but if additional information is needed I can get it. The basic question is - Does anyone know if Gross Receipts Sales Tax is an allowable cost? Have a price proposal on an A/E design task order where one of the subcontractors has this cost as a separately priced item in their breakdown. Thanks for any help.

Have the read the applicable FAR provisions -- Part 29 and the cost principle at FAR 31.205-41, mentioned by policyguy?

If not, why not? Why are you asking before you've read them?

If you have read them, are you asking the question because you don't understand the FAR provisions? If so, please be specific about what you do not understand.

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Yes I did read the applicable FAR provisions in 29 and the cost principle at FAR 31.205-41 before asking the question. The provision states that Federal, State and local taxes are allowable and a Gross Receipts Sales Tax is obviously a State tax so I would assume it is an allowable cost.

The term Gross Receipt Sales Tax is not a term normally encountered in our price breakdowns. Also in reading part 29 the question came up as to why is there only one specific clause that mentions gross receipts and why is it unique to New Mexico.

I ask the question because I do not feel 100% confident that I have made the correct interpretation.

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The tax would not be an allowable cost if an exemption were available, yes? So your question becomes, are Federal contractors exempt from GRTs? If so, how? If not, where and why not?

Fun stuff, right?

H2H

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Reno, this came up in a thread in the Forum a year or two ago. I don't remember what this specific tax applies to for an A-e contract but it is applicable to construction contracts. There are a few states that charge a gross receipts tax in lieu of sales tax on construction materials. You can look up father specifics as I recall. I'm not going to do the research for you on this phone this weekend as I am out of town and busy. But I think you can research it or call the applicable State office to find out if it is a legit tax that the firm has to pay on your contract.

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First I apologize as I may not have all of the facts that might be needed as I am researching for a coworker but if additional information is needed I can get it. The basic question is - Does anyone know if Gross Receipts Sales Tax is an allowable cost? Have a price proposal on an A/E design task order where one of the subcontractors has this cost as a separately priced item in their breakdown. Thanks for any help.

This morning, I did a quick GOOGLE search. I did not find an NM "Gross Receipts Sales Tax". There is a "Gross Receipts Tax". And there may be an exemption that a firm may apply for under a contract for design services performed on a construction project that will be subject to the NM Gross Receipts Tax. I suggest that, in addition to finding out what the tax is and what exemptions may apply, you should request that the prime have the proposed subcontractor fully justify why it would be subject to such a tax and why it cannot obtain an exemption. We don't know what the subcontract is for anyway, where the contract or subcontract will be performed or where the project to be designed is located.

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Questions regarding the NM Gross Receipts Tax have arisen in the WIFCON Forum at least twice within the past two years. I am surprised that there aren't any readers here that are familiar with it who could provide information or advice to questions.

Of course, in this instance, the OP asked for answers without providing any detail as to what the subcontract is for, where the project is located, where the questioner is from, etc. Even if an exemption is available, nobody here would be able to know that based upon the level of detail provided in the initial post.

"Reno54" may be in Nevada, the project could be anywhere and - perhaps the sub is from New Mexico and is subject to the tax...

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For cost-reimbursement contracts issued by agencies listed in FAR 29.401-4( c ), the question on the allowability of the new Mexico Gross Receipts tax is answered explicitly in paragraph ( b ) of the contract clause at FAR 52.229-10, State of New Mexico Gross Receipots and Compensating Tax.

Otherwise, Vern and policyguy already pointed you to FAR 31.205-41.

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