Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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Annotation 565.1375


565.1375 Overhead Materials—DFARS Title Clause. DFARS 52.217–7006 title clause in a U.S. Government contract provides that title to any contractor-furnished materials passed to the government as to all property "to be incorporated in the vessel in the performance of a job order, when that property is delivered to the dock. Overhead materials are not intended to be incorporated in, or placed on, any vessel." Therefore, the DFARS clause does not cover overhead materials at all. Also, at the completion of the job, title to "all contractor-furnished materials and equipment not incorporated in, or placed on any vessel" shall revert to the contractor unless the government has already reimbursed the contractor for its cost. The "materials and equipment" to which the last phrase of DFARS 252.217–7006(b) refers are the "materials and equipment to be incorporated in a vessel" title to which passed to the United States upon delivery to the dock and to which it wishes to retain title because it has already paid the taxpayer for the cost thereof.

Thus, DFARS 52.217–7006 clause does not pass title to overhead items because (1) overhead items are not intended to be incorporated into a vessel, and (2) the government does not acquire title indirectly to property not covered by a specific title clause. That the government bears a financial burden of the purchase of the property does not mean that title to it passes to the United States (United States v. New Mexico (1972) 450 U.S. 720). 12/13/95.