Expertise Beyond the Numbers

Sales Tax Implications Government Contractors Need to Consider When Pricing Federal Contracts [Podcast]

The proper application of sales and use tax to federal government contract cost elements can have major implications on the profitability of a federal contractor. These taxes may apply to direct and indirect contract costs. Proper application is often misunderstood because government contractors frequently believe they are not subject to state sales and use taxes due to the federal government’s immunity from state taxation.

The reality is that sales and use tax often applies to federal government contract costs, and government contractors need to understand their proper application when they negotiate contracts with federal agencies.

In addition, the taxation of federal government contract costs varies from state to state. If related tax law is misunderstood, significant liabilities may be asserted on audit. If this happens, government contractors often have to pay these taxes out of their own pockets, which can have a devastating impact on their profit margins.

These are some issues discussed in a recent SC&H Group podcast with Ed Ben, a Director with SC&H Group, who recently led a panel on this topic at the IPT 2014 Sales & Use Tax Symposium in Washington, D.C.