Principles of Federal Appropriations Law - US Government ...

Chapter 4
Availability of Appropriations: Purpose
(1988). This does not prevent states from taxing private parties who use
federal property, even when the private parties are providing goods to the
United States. United States v. Nye County, 178 F.3d 1080, 1084 (9 th Cir.
1999).
The United States can be required to pay a state tax obligation imposed on
its contractor when the federal government assumes responsibility for the
tax by contract. United States v. Department of Revenue of State of
Illinois, 202 F. Supp. 757, 760 (N.D. Ill.), aff’d per curiam, 371 U.S. 21
(1962). The typical language in government contracts for the purchase of
goods or services recites that the offered price includes all applicable state
and local taxes. (See the Federal Acquisition Regulation (FAR) provisions
on state and local taxes at 48 C.F.R. subpt. 29.3, and its prescribed contract
clauses at 48 C.F.R. § 52.229.) Shifting the burden of determining which
taxes apply to the contractor is premised on the belief that contractors are
in a better position to know what taxes are applicable. B-251628, Apr. 2,
1993; B-242303, Mar. 21, 1991; B-209430, Jan. 25, 1983. Unless otherwise
specified in the contract, the government cannot be required to pay any
additional amount for taxes (B162667, Dec. 19, 1967; B-134347, Mar. 1,
1966), even when the taxes were first imposed during contract
performance. B-160129, Dec. 7, 1966. In such circumstances it is irrelevant
that the tax involved is a valid vendor tax from which the United States is
not immune; there can be no liability unless the contract so provides.
45 Comp. Gen. 192 (1965); 23 Comp. Gen. 957 (1944). Note however, that a
contract can include a contingency clause for after-imposed state and local
taxes. The failure to include such a clause is regarded as the contractors
business decision so that the government will not be liable for any
additional taxes. Cannon Structures, Inc., ICBA No. 3968-98, 99-1 B.C.A.
30,236 (1999); Midcon of New Mexico, Inc., ASBCA No. 37249,
90-1 B.C.A. 22,621 (1990).
Other contract language, of course, may dictate different results. A
contract that provides for the payment of “the actual direct costs” includes
reimbursement of state taxes paid by a contractor. 72 Comp. Gen. 107
(1993). Similarly, a contract for the “actual costs” justifies reimbursement
to a contractor of back taxes and interest assessed against him when a
court found that the contractor was not exempt from taxation. B-147316-
O.M., Jan. 9, 1962. The same result would apply in the case of a contract for
a cost plus fixed fee, such as the contract in Alabama v. King & Boozer,
supra. 35 Comp. Gen. 378 (1955). Likewise, a contract to pay 50 percent of
any new tax imposed by a state would include the obligation to pay half of
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