Ga. Comp. R. & Regs. R. 560-12-2-.106 - United States Government Defense Contractors
(1) Purpose. The purpose of this Rule is to
provide guidance regarding the direct consumable supplies and overhead
materials exempt from Georgia sales and use tax in accordance with O.C.G.A.
§
48-8-3(58).
(2) Definitions. For the purposes of
qualifying for the exemption provided for by O.C.G.A. §
48-8-3(58), and as used in this Rule, the following definitions and explanation of terms
shall apply:
(a) "Appropriate title passing
clauses" means those title passing clauses whereby title to overhead materials
or direct consumable supplies purchased for use in fulfilling a government
contract passes to the United States Department of Defense or the National
Aeronautics and Space Administration before the government contractor uses the
property.
(b) "Direct consumable
supplies" means supplies, tools, or equipment used or consumed in the
performance of a government contract which are specifically identified to the
government contract and the actual cost of which is charged as a direct item of
cost to the specific contract. Direct consumable supplies include, but are not
limited to, property used to repair items of capital equipment when a portion
of the contractor's use is properly allocable to government contracts,
notwithstanding the fact that title to the property being repaired remains with
the government contractor. The term "direct consumable supplies" does not
include tangible personal property that is incorporated into real
property.
(c) "Government contract"
means a contract directly between the United States Department of Defense or
the National Aeronautics and Space Administration and a government contractor,
for the purpose of national defense, to sell services or tangible personal
property which contain the appropriate title passing clauses for overhead
materials and direct consumable supplies. The term "government contract" does
not include any contract providing for the construction, improvement,
maintenance, or repair of or to real property, or to the purchase of tangible
personal property for use in fulfilling such contracts.
(d) "Government contractor" means any person
who enters into a government contract, for the purpose of national defense,
directly with the United States Department of Defense or the National
Aeronautics and Space Administration to sell services or tangible personal
property. This can include a manufacturer, modifier, assembler or repairer of
tangible personal property, or seller of services. The term "government
contractor" also includes a subcontractor who enters into a contract directly
with a government contractor as defined in the first sentence of this paragraph
and who incorporates the appropriate title passing clauses. The term
"government contractor" does not include any person who enters into a contract
to construct, improve, maintain, or make repairs on or to real property, or
make purchases of tangible personal property for use in fulfilling such
contracts.
(e) "Overhead materials"
means any tangible personal property used or consumed in the performance of a
contract between the United States Department of Defense or the National
Aeronautics and Space Administration and a government contractor, the cost of
which is charged to an expense account and allocated to various United States
government contracts based upon generally accepted accounting principles, and
consistent with government contract accounting standards. The term "overhead
materials" does not include tangible personal property which is incorporated
into real property.
(3)
Application of Exemption.
(a) Direct
Consumable Supplies, Tools or Equipment. Sales to a government contractor of
direct consumable supplies, tools or equipment, are considered to be sales for
resale to the United States Department of Defense or the National Aeronautics
and Space Administration if used in a government contract containing the
appropriate title passing clauses. The exemption will apply to these sales even
though the tangible personal property does not become a component part of the
tangible personal property or the services provided by the government
contractor. The government contractor may purchase direct consumable supplies,
tools or equipment without payment of the tax by issuing a properly executed
Certificate of Exemption, Form ST-5, to the appropriate vendor. If the
government contractor uses the tangible personal property prior to title
passing to the United States Department of Defense or the National Aeronautics
and Space Administration, the tax will apply to the sales or use by the
government contractor.
(b) Overhead
Materials. Sales to a government contractor of overhead materials used
exclusively in a government contract containing the appropriate title passing
clauses for overhead materials shall qualify for exemption by issuing a
properly executed Certificate of Exemption, Form ST-5, to the appropriate
vendor. The exemption from sales and use tax for overhead materials shall stand
repealed for transactions beginning January 1, 2011, and thereafter.
(c) Sales to a government contractor of
direct consumable supplies, tools, equipment or overhead materials for use in a
government contract which do not contain the appropriate title passing clauses,
or any other use, shall not qualify for exemption from sales or use tax. The
appropriate title passing clauses contained in the government contract will
determine if title to the direct consumable supplies and overhead materials
passes to the government, and the time at which title does pass. In the absence
of the appropriate title passing clauses, the tax will apply to either the sale
or use by a government contractor of such direct consumable supplies and
overhead materials. In a case where the cost of direct consumable supplies or
overhead materials are charged to an expense account which is then allocated to
various locations, cost centers or contracts, some of which are engaged in
non-government contracts, it will be considered that title did not pass prior
to use of the property, and tax will apply with respect to the purchase or use
of the property charged to the expense account. If the item is specifically
accounted for as being charged to a specific government contract containing the
appropriate title passing clauses the tax will not apply. Property will be
considered charged to a specific government contract when it is allocated
pursuant to the Cost Accounting Standard Disclosure Statement, generally
accepted accounting principles, or accounting standards promulgated by the Cost
Accounting Standards Board. The government contractor shall be responsible for
maintaining adequate records to substantiate the exemption provided for in this
Rule. Any government contractor who fails to maintain sufficient documentation
shall pay the amount of tax that would have been imposed on the sales or use of
such tangible personal property.
Notes
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