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Paying Tax on ODCs - in general and Venue Rental


Ribkah

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We are a contractor renting a venue for a federal contract - do we have to cover the tax on this or is there a way to be exempt since we are renting on behalf of the federal government? 

 

In general, do contractors eat all taxes on ODCs? 

 

Thank you. 

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Your state or local taxing authority can answer your question.

Where sales taxes on supplies are seen as taxes paid by the customer, with the storefront merely collecting the tax and remitting it on the customer's behalf, the general understanding is that direct sales to the federal government are exempt from sales tax (because states and local governments do not tax the federal government).  But some states develop clever ways to circumvent this understanding.  Services are messier -- Are you renting a venue (1) for a federal agency customer, where the federal agency customer is the real customer; or (2) for yourself, so that you can perform your obligations under a federal contract?  (1) might not be taxable, but (2) will almost certainly be taxable.

But you haven't told if you're talking about sales taxes, or revenue taxes, or anything else.  In addition to reading the citation Vern recommended, you might also read FAR Subpart 29.3, State and Local Taxes.  Taxes are a matter between you and your local officials.  If you must pay taxes on a T&M or cost-reimbursement contract (you mentioned ODCs, so I am supposing your contract type is one of these), those costs might be allowable costs (see Vern's citation).  Whether they might be allowable as direct costs or indirect costs is something no one can answer based on the paucity of information in the original posting.

You did include the cost of the tax in your proposal for the contract ceiling or the contract's estimated cost, right?

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2 hours ago, Ribkah said:

In general, do contractors eat all taxes on ODCs? 

I interpreted that to ask whether the government would compensate the contractor for taxes that it must pay, which is why I answered the way I did.

Did I misunderstand the question?

Meanwhile, here is some worthwhile reading:

The Doctrine of Federal Exemption From State Taxationhttps://law.justia.com/constitution/us/article-6/08-federal-exemption-from-state-taxation.html

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23 hours ago, ji20874 said:

Where sales taxes on supplies are seen as taxes paid by the customer, with the storefront merely collecting the tax and remitting it on the customer's behalf, the general understanding is that direct sales to the federal government are exempt from sales tax

To provide a little bit of nuance to what ji wrote, an of boss of mine used to say it is who is hit by the tax that counts, not who is hurt by the tax.  By this he meant that if a sales tax is levied on the buyer which the seller collects, it generally could not be imposed on sales to the government because of the government's sovereign immunity unless congress consented to the tax.  Conversely, if the sales tax is imposed on the seller, there is no prohibition against the seller including that tax in its price to the government.

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