CHAPTER 22State and Local Taxes
A common misconception held by sellers is the belief that any products or services sold in connection with a federal government contract are exempt from state or local sales or use taxes. While the United States Government is immune from such taxes, a prime contractor, sub-contractor, or lower tier subcontractor may not be exempt. New Mexico’s Gross Receipt Tax (NMGRT) and sales and use taxes in the Commonwealth of Virginia are good examples of non-exempt taxation of federal government contractors.
RISKS
If the contract does not specify either a disclaimer that buyer assumes responsibility for any and all state and local sales and use taxes relating to the contract, or seller has not priced in the amount for these ...
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