Section 29.401-3 - Federal, State, and local taxes(a) Except as provided in paragraph (b) of this section, insert the clause at 52.229-3, Federal, State, and Local Taxes, 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.(b) In a noncompetitive contract that meets all the conditions in paragraph (a) of this section, the contracting officer may insert the clause at 52.229-4, Federal, State, and Local Taxes (State and Local Adjustments), instead of the clause at 52.229-3, if the price would otherwise include an inappropriate contingency for potential postaward change(s) in State or local taxes.68 FR 13205, Mar. 18, 2003, as amended at 68 FR 28083, May 22, 2003