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In the first half of 2025, news in the United States and around the world was filled with stories regarding new and retaliatory tariffs imposed by various national governments. A number of such tariffs, such as those regarding imported steel and aluminum, are likely to have a substantial effect on construction, whether projects currently in progress or those expected to enter construction in the coming years.
This article addresses how standard construction contracts in widespread use in the United States address the changing landscape of tariffs.
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What are Tariffs?
Black’s Law Dictionary, Tenth Edition (2014) defines the following:
“tariff, n.(16C) 1. A schedule or system of duties imposed by a government on imported or exported goods. In the United States, tariffs are imposed on imported goods only. – Also termed tariff schedule; tariff system. 2. A duty imposed on imported or exported goods under such a schedule or system. See DUTY (4)… ad valorem tariff. (1856) A tariff set as a percentage of the imported goods’ value. This is the primary method used to calculate customs duties… retaliatory tariff. (1833) A tariff imposed to pressure another country into removing its own tariffs or making trade concessions… revenue tariff. (1827) A tariff enacted solely or primarily to raise revenue.
“duty. (13C) 1. A legal obligation that is owed or due to another and that needs to be satisfied; that which one is bound to do, and for which somebody else has a corresponding right… ad valorem duty. (18C) A tax calculated as a percentage of an imported product’s value… customs duty. (18C) A tax levied on an imported or exported commodity; esp., the federal tax levied on goods shipped into the United States… import duty. (17C) A tax on the importation of a product... (18C) A tax calculated on an import’s weight, volume, or item count.
“tax, n. (14C) A charge, usu. monetary, imposed by the government on persons, entities, transactions, or property to yield public revenue. Most broadly, the term embraces all governmental impositions on the person, property, privileges, occupations, and enjoyment of the people, and includes duties, imposts, and excises… sales tax. (1921) A tax imposed on the sale of goods and services, usu. measured as a percentage of their price.—Also termed retail sales tax… use tax (1910) A tax imposed on the use of certain goods that are bought outside the taxing authority’s jurisdiction. Use taxes are designed to discourage the purchase of products that are not subject to the sales tax.”
Thus, tariffs are duties imposed on imported goods, and an import duty is a type of tax.
Contractual Requirements Relative to Tariffs
MasterFormat—2020, by the Construction Specifications Institute, does not assign a specific document number and title for provisions on taxes, tariffs, and similar matters, although MasterFormat’s guidance language suggests that “01 29 00 Payment Procedures” may include a required sales tax form. By extension, some developers of Division 01 specifications may potentially address tax-related issues under “01 29 00”.
Obligations to pay taxes associated with the work are established in widely used standard general conditions, such as those published by the American Institute of Architects (AIA), Engineer’s Joint Contract Documents Committee (EJCDC), Design-Build Institute of America (DBIA), and others.
AIA A201—2017, Standard General Conditions of the Contract for Construction, does not directly address tariffs, but includes the following:
Ҥ 3.6 Taxes
The Contractor shall pay sales, consumer, use, and similar taxes for the Work provided by the Contractor that are legally enacted when bids are received or negotiations concluded, whether or not yet effective or merely scheduled to go into effect.”
AIA A503—2017/2019, Guide for Supplementary Conditions, includes guidance concerning A201 Section 3.6, regarding an owner’s potential exemption from sales and use taxes applicable to the work, but does not present any suggested example language. Tax exemptions for public owners, such as municipalities, school districts, utility authorities, and other non-profit organizations, vary considerably by jurisdiction, thus making it difficult to develop “one-size-fits-all” language regarding tax exemptions applicable to the construction.
EJCDC C-700—2018, Standard General Conditions of the Construction Contract, addresses taxes as follows:
“7.10 Taxes.
“A. Contractor shall pay all sales, consumer, use, and other similar taxes required to be paid by Contractor in accordance with the Laws and Regulations of the place of the Project which are applicable during the performance of the Work.”
Also relevant is the following definition in C-700—2018 Paragraph 1.01.A:
“25. Laws and Regulations; Laws or Regulations—Any and all applicable laws, statutes, rules, regulations, ordinances, codes, and binding decrees, resolutions, and orders of any and all governmental bodies, agencies, authorities, and courts having jurisdiction.”
Therefore, the term “Laws and Regulations” includes applicable tariffs enacted by a Presidential executive order.
C-700 Paragraph 7.11 (“Laws and Regulations”) is also relevant to the changing landscape of taxes and tariffs, as follows:
“C. Owner or Contractor may give written notice to the other party of any changes after the submission of Contractor’s Bid (or after the date when Contractor became bound under a negotiated contract) in Laws or Regulations having an effect on the cost or time of performance of the Work, including but not limited to changes in Laws or Regulations having an effect on procuring permits and on sales, use, value-added, consumption, and other similar taxes. If Owner and Contractor are unable to agree on entitlement to or on the amount or extent, if any, of any adjustment in Contract Price or Contract Times resulting from such changes, then within 30 days of such written notice, Contractor may submit a Change Proposal, or Owner may initiate a Claim.”
EJCDC C-800—2018, Supplementary Conditions of the Construction Contract, includes guidance and suggested example language, at Paragraph SC-7.10, regarding potential exemptions from taxes due on the work, although EJCDC’s suggested example language addresses only exemptions from sales and use taxes, with guidance language clearly indicating that the suggested language was modeled on New York State law relative to municipalities, and needs to be edited for applicable statutory requirements in the jurisdiction of the project.
Therefore, both AIA and EJCDC documents for design-bid-build project delivery expressly obligate the contractor to pay taxes applicable to the work, which, by implication, includes tariffs. Both AIA and EJCDC documents further provide for an increase in the contractor’s compensation in the event taxes change after the date the parties agreed upon pricing for the work. Both AIA A201 and EJCDC C-700 establish procedures and associated time limits for the parties to submit demands for a change in compensation, contract times, or other relief under the contract, although such procedures are not addressed in this article.
Conclusions
Tariffs are an important and powerful means for national governments to raise revenue, protect their domestic sources of production, and bolster trade negotiating positions. Tariffs are essentially a form of taxation on imported goods. In the first half of 2025, the United States started relying heavily on tariffs as an instrument of geopolitical trade policy. It is quite possible that many of the new tariffs will have an effect on current and future construction projects. Many new tariffs are substantial and are likely to prompt contractors affected thereby to pursue additional compensation from the project owner. Widely used standard construction contracts, such as those that include AIA A201 or EJCDC C-700 as their general conditions, not only expressly obligate the contractor to pay taxes on the work, which includes tariffs, but also allow the contractor additional compensation when such taxes increase after the parties agreed upon the contract price.
Original text Copyright 2025 by Kevin O’Beirne
The content of this blog post is by the author alone and should not be attributed to any other individual or entity.
The author of this blog post is not an attorney, and nothing in this blog post constitutes legal advice. Readers in need of legal advice should consult with a qualified, experienced attorney.
Kevin O’Beirne, PE, FCSI, CCS, CCCA is a professional engineer licensed in NY and PA with over 35 years of experience designing and constructing water and wastewater infrastructure for public and private clients. He is the engineering specifications manager for a global engineering and architecture design firm. He has been a member of various CSI national committees and is the certification chair of CSI’s Buffalo-Western New York Chapter. He is an ACEC voting delegate in the Engineers Joint Contract Documents Committee (EJCDC) and lives and works in the Buffalo, NY area. Kevin O’Beirne’s LinkedIn page.