RFI Responses (Part 3).docx

RFIs and Responses

Interested Bidder’s Question:

“RFI responses provided for the above referenced project in amendments 1 and 2 both indicate that the project is tax exempt. As a contractor that continually performs federal work in the state of Tennessee for multiple agencies including the Department of Veterans Affairs, we are aware that state tax laws do NOT allow for tax exemption on federal projects unless the federal government purchases and pays for the materials and/or equipment DIRECTLY from the material and/or equipment provider. Materials and /or equipment that are purchased and paid for by the contractor and then incorporated into a federal project and reimbursed through contract payments are NOT exempt under current Tennessee tax laws. We ask that these RFI response be corrected by amendment so that all bidders will be providing pricing that includes sales tax in accordance with the state tax laws. I have provided the below and attached excerpts from the Tennessee Department of Revenue tax guide for your reference and awareness. For example, the only way that the sales tax on concrete and asphalt could be exempted would be if the government wrote a check directly to the asphalt producer. If a contractor purchases these items and then the government reimburses the contractor for the materials as is the case with this contract, then the asphalt and concrete are not tax exempt even though they are being incorporated on a federal project because they were not DIRECTLY purchased by the government.

With that said, we do understand that some states like IN and OH do allow for tax exemption on materials and equipment purchased indirectly by a contractor through a federal contract. However, many states (including TN) do not. If no amendment is issued correcting the previous answers provided, we will remove the sales tax from our bid per the governments current direction and will request a contract modification after award since we WILL be required to pay sales tax on the materials at time of purchase in accordance with the current sales and use tax laws for the state of TN.

Government’s Response:

As the Contracting Officer, I am retracting my responses regarding Tax Exemption for this project. Please refer to FAR Clause 52.229-3(1)(b) – Federal, State, and Local Taxes, which states “The contract price includes all applicable Federal, State, and local taxes and duties, except as provided in subparagraph (b)(2)(i) of this clause.” Interested Bidders shall include all applicable taxes as this contract may not exclude awardee from paying taxes on material and equipment. FAR 29.303 - Application of State and local taxes to Government contractors and subcontractors, section (b) states that when purchases are not made by the Government itself, but by a prime contractor or by a subcontractor under a prime contract, the right to an exemption of the transaction from a sales or use tax may not rest on the Government’s immunity from direct taxation by States and localities. It may rest instead on provisions of the particular State or local law involved, or, in some cases, the transaction may not in fact be expressly exempt from the tax. The Government’s interest shall be protected by using the procedures in 29.101.

The Government will not provide a Tax Exemption letter to awardee. It is the bidders responsibility to include taxes in the proposal. If the awardee is provided an exemption of taxes after award, the awardee shall inform the Contracting Officer so that the funds may be returned to the Government accordingly.