Government Contracts DFARS Rule Would Combine Tax Clauses
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Friday, October 11, 2019

DFARS Rule Would Combine Tax Clauses

By Government Contracts Editorial Staff

The Department of Defense is proposing to amend the Defense Federal Acquisition Regulation Supplement to modify the clause at DFARS 252.229-7001, Tax Relief, to incorporate the information included in the clause at DFARS 252.229-7000, Invoices Exclusive of Taxes or Duties. FAR 52.229-6 and FAR 52.229-8 are used in solicitations and contracts when a fixed-price or cost-reimbursement contract is contemplated and the contract will be performed wholly or in part in a foreign country. The clauses advise that, as a result of treaties or agreements with foreign governments, contract prices may not include taxes and duties that do not apply to the United States government. The additional information required by DFARS 252.229-7001 assists contracting officers in verifying that all applicable duties and taxes are excluded from proposed prices prior to contract award and helps DoD and the contractor verify that all taxes and duties, from which relief is available under the contract, are excluded from the invoiced prices.

Unnecessary Clause. DoD includes DFARS 252.229-7000 in fixed-price solicitations and contracts that will be awarded to a foreign concern. The clause prohibits the contractor from including taxes or duties, for which relief is available, in invoices submitted for payment under the contract. Certain duties and taxes are commonly included in the price of an item and can be inadvertently overlooked during the invoicing and payment process. DoD created the clause to reinforce the prohibition on including such taxes or duties when preparing an invoice that contains fixed-price items. However, the separate DFARS 252.229-7000 clause is no longer necessary because the FAR clauses and DFARS 252.229-7001 are included in all contracts under which the government may obtain foreign tax and duty relief. DFARS 252.229-7000 and DFARS 252.229-7001 can be combined and still convey the same message and reach the same community of contractors. The rule would modify DFARS 252.229-7001 to include the text of DFARS 252.229-7000, and remove DFARS 252.229-7000 and its prescription at DFARS 229.402-1. DoD is proposing to combine the DFARS tax clauses pursuant to a recommendation from the DoD Regulatory Reform Task Force. Comments on the proposed rule referencing DFARS Case 2018-D049 are due November 12, 2019. For the text of the rule, see ¶70,020.440.

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