Clauses · FAR · Payment and financing
FAR 52.229-3 Federal, State, and Local Taxes
Does the regulation require it to flow down?
No
No subcontracts paragraph in the clause and nothing in FAR 29.401-3 reaching subcontracts — verified 2026-08-05. Primes flow it down back-to-back for a specific structural reason: the prime's own price is deemed to include all taxes in effect at its contract date, and the prime can only get an upward adjustment for an after-imposed FEDERAL tax it is 'required to pay or bear.' Mirroring the clause is how the prime pushes the same allocation down, so that a State sales tax increase on your material lands on you rather than on the prime's fixed price. Read every flow-down of this clause as the prime allocating tax risk, not as a regulator speaking
A clause can reach your subcontract without a mandate. Once it is in your document, it is a contract term all the same. The missing mandate is a fact about the regulation. It is not a ruling on your order.
Checked against acquisition.gov on 2026-08-05 · edition Feb 2013 (no alternates; page shows FAC 2026-01, effective 2026-03-13) · base v0.9.3 Read the text ↗
What it makes you produce
3 items for your checklist, slowest first.
Something you write2
Days to weeks, and nobody outside your company has to agree to it.
- FAR 52.229-3(c)
A written warranty that no amount for the newly imposed Federal excise tax, duty or rate increase was included in the price
Owed as the precondition of the increase at paragraph (c) — without the written warranty the price does not move, and paragraph (f) holds any adjustment to amounts over $250
Prompt notice of all matters relating to a Federal excise tax or duty that may reasonably be expected to move the price either way
FAR 52.229-3(g)
Nothing to send now
It does not hold the order. It decides what money moves later — what you can claim, what can be claimed from you, and what can be held back — and none of that changes after signature.
Nothing goes out now — paragraph (b) takes the price to include every applicable Federal, State and local tax and duty in effect on the contract date, and only a new or increased Federal excise tax or duty raises it under (c), and only where the adjustment clears the $250 floor at paragraph (f)
FAR 52.229-3(b), (c) and (f)
When it is used
FAR 29.401-3(a): insert 52.229-3 in solicitations and contracts if (1) the contract is to be performed wholly or partly in the United States or its outlying areas, (2) a fixed-price contract is contemplated, and (3) the contract is expected to exceed the simplified acquisition threshold ($350,000 since 2025-10-01). All three must hold. FAR 29.401-3(b) gives the contracting officer an option: in a NONCOMPETITIVE contract meeting all of (a), the CO may use 52.229-4, Federal, State, and Local Taxes (State and Local Adjustments), instead — which is the version that also adjusts for State and local tax changes. Cost-reimbursement work is outside this clause entirely (taxes are an allowability question under FAR 31.205-41). Commercial acquisitions use 52.212-4(k) instead.
Read closely
State and local increases get nothing under this clause; FAR 52.229-4 is the one that reaches them, and a contracting officer may substitute it in a noncompetitive award. Employment taxes are outside any adjustment, and the mechanism runs both directions — paragraphs (d) and (e) cut the price for a tax later relieved, refunded or drawn back, and it is cut anyway where you were the reason no refund was obtained. Where this clause arrives in a subcontract it is the prime allocating tax risk back-to-back, not a regulator speaking: nothing in FAR 29.401-3 reaches subcontracts.
The 4 templates that name it, with the line
Source: acquisition.gov, FAR 52.229-3 (definitions in (a), adjustment paragraphs, $250 floor, notification paragraph), FAR 29.401-3(a) and (b), FAR 52.212-4(k), and FAR 52.212-5(b)(56) (verified 2026-08-05)
This is research, not legal advice. It states what the regulation says about this clause and cites the paragraph behind it. It does not rule on your order, and it does not rule on whether a prime's markings are correct.