In plain English
FAR 52.229-1, State and Local Taxes, is a contract clause prescribed at FAR 29.401-1, most recently dated Apr 1984. The complete official text is reproduced below, verbatim, from GSA's published FAR source files.
Its text contains no sentence requiring insertion into subcontracts; see the flowdown section below for what that does and does not mean.
Does it flow down to subcontracts?
No flowdown mandate found in the clause text
We scanned the full clause text and found no sentence directing the contractor to insert this clause into subcontracts. That is a statement about the text, not legal advice: a prime contractor may still flow terms down contractually, an agency supplement (DFARS, VAAR, …) may add requirements, and clauses listed below (if any) may order this clause into subcontracts from the outside.
Where it's prescribed
As prescribed in 29.401-1 , insert the following clause:
Prescribing reference: FAR 29.401-1.
The official text, verbatim
As prescribed in 29.401-1 , insert the following clause:
State and Local Taxes (Apr 1984)
Notwithstanding the terms of the Federal, State, and Local Taxes clause, the contract price excludes all State and local taxes levied on or measured by the contract or sales price of the services or completed supplies furnished under this contract. The Contractor shall state separately on its invoices taxes excluded from the contract price, and the Government agrees either to pay the amount of the taxes to the Contractor or provide evidence necessary to sustain an exemption.
(End of clause)