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Business Taxes Law Guide—Revision 2024
Sales and Use Tax Annotations
A B C D E F G H I J L M N O P R S T U V W X
U
565.0000 United States Contractors
Annotation 565.1301
(e) Title-Passage Clauses
565.1301 Intent to Pass Title—FAR 52.232–32. A United States contractor enters into a government supply contract using the Federal Acquisition Regulation (FAR) 52.232–32 title passage clause instead of FAR 52.232–16. The difference between these two clauses is that the first is a "performance-based payments clause" and the second is a "progress payments clause."
These two clauses are similar but they are not interchangeable as they have different vestiture periods. Under FAR 52.232–16, title to direct consumable supplies and overhead materials passes to the U.S. government immediately upon the date of the contract for property acquired or produced before that date. Under FAR 52.232–32, title to the property passes to the U.S. government immediately upon the date of the first performance-based payment under the contract for property acquired or produced before that date. Assuming that the date of the first performance-based payment will be some time after the date of the contract, FAR 52.232–32 may make U.S. government supply contractors more susceptible to use tax liability. This is because of the lag time between the contract date and the first progress payment date. During this lag time, the contractor has an increased chance of using the property before title is vested in the U.S. government. 4/2/03. (2004–1).