Taxes on Supplier PaymentsHeather Vinograd and Susselys Virgil

March 26, 2014

Taxes on Supplier Payments

Tax Services & Advisory Team Who are we and what do we do?Provide support to campus customers and internal process partners on most areas of non-payroll related taxes.

What do we believe in? Quality work product delivered with the highest level of

professionalism

Providing accurate and reliable information

Customer Service

• Developing an efficient process, responding in a timely manner, removing the “red tape” and demonstrating that we care about our customers (YOU!) and the people they transact with.

Building and maintaining relationships

Taxes on Supplier Payments

Agenda Sales & Use tax basics

Nontaxable items

Sales & Use tax adjustment

Resale Certificate

Excise taxes

California non-resident withholding

Federal non-resident withholding

Questions and problem solving

Taxes on Supplier Payments

Taxes on Supplier Payments

WHAT ABOUT SERVICES?Generally, not taxable but it depends on the true object of

the transaction. What is the end goal?

Taxes on Supplier Payments

QUESTION OF THE DAY…

Taxes on Supplier Payments

SUPPLIER

How does this work?

Invoice subtotal: $100.00Shipping: 5.95Sales tax (8.0%): 8.00Total due: $113.95

Supplier remits this amount to the State Board of Equalization!

Taxes on Supplier Payments

Invoice subtotal: $100.00Shipping: 5.95Sales tax : -Total due: $113.95

UC San Diego has to calculate and pay use tax to

the State Board of

Equalization!

Taxes on Supplier Payments

NON-TAXABLE ITEMS

Remote internet access

Advertising

Consulting Services

Installation Services

Training Services

Repair Labor

Computer software received electronically

Items owned by the Federal Government

Gimme a break!

Shipping

Taxes on Supplier Payments

RESALE

What does UC San Diego sell?!?

Taxes on Supplier Payments

RESALE CERTIFICATE

BFSupport < Buying Goods & Services <Taxes on Goods & Services

P.O. Number (if you have one)

Department name, requestor name and address (your info!)

Supplier name and address

Description of property being purchased and which condition applies

Used when selling items to outside parties OR buying tangible property that will be owned by the government before its first use.

Taxes on Supplier Payments

EXCISE TAXESExcise taxes are imposed generally on manufacturers, producers, importers, and retailers for the privilege of marketing certain commodities. Manufacturers and sellers are responsible for collecting excise tax.

Exemptions:• Retail Excise Taxes

• Diesel Fuels• Special Motor Fuels

• Manufacturers Excise Tax• Gasoline and Diesel Fuel• Tire

• Communication Services Excise Tax• Heavy Highway Motor Vehicle Excise Tax• Medical Device Excise Tax

Taxes on Supplier Payments

NEXT TOPICS… Nonresident Tax Withholdings (California and Federal)

Taxes on Supplier Payments

CALIFORNIA NONRESIDENTWITHHOLDING

Non-wage payments are subject to 7% withholding on services provided in CA if total payments during a calendar > $1,500

California nonresidents include:• Individuals who do not have a permanent residence in

California• Business entities that are not registered with the

California Secretary of State to do business in California

Taxes on Supplier Payments

CALIFORNIA NONRESIDENT WITHHOLDING

Payments subject to withholding include:• Payments to independent contractors/consultants who provide

services in California• Other non-wage payments of California source income such as

honoraria, rents, royalties and prizes

Exemptions from Withholding• Individual or business entities who are

residents of California• Tax-exempt entities• Form 590, Withholding Exemption

Certificate should be completed by the payee to certify exemption

Waived or Reduced Withholding: Payees should start the process of applying for a waiver or a reduction well in advance of providing a service

Taxes on Supplier Payments

FEDERAL NONRESIDENT WITHHOLDING

General rule: A withholding agent (UC San Diego) is required to withhold federal income tax from all payments made to or on the behalf of a nonresident alien

What income is taxable? Stipends, consulting fees, honoraria, guest speaker fees, royalties, performance fees, prizes and awards

What is this “beneficial owner” business? According to the IRS, the beneficial owner of income is the person who is required under U.S. tax regulations to include the income in gross income on a tax return. A person is not a beneficial owner of income to the extent that person is receiving the income as a nominee, agent, or custodian. This means we have to identify the beneficial owner and withhold based on their circumstances!

Taxes on Supplier Payments

FEDERAL NONRESIDENT WITHHOLDING

Things we need to know to determine the applicable withholding tax rate:

Beneficial Owner The beneficial owner’s U.S. Tax Residency Status Visa type Country of citizenship Country of tax residence Type of income being paid Type of services provided Location of services provided

GLACIER RECORD (For individuals only!)Glacier is a secure web-based nonresident alien tax compliance system that the University of California uses to collect tax-related information from foreign visitors.

Taxes on Supplier Payments

HELP US HELP YOU!• Goods

• Account code• Point of delivery, delivery method, make note of intangible goods• Taxable indicator, title vests (non-taxable), trade-in detail (taxable)

• Services• Identify the beneficial owner• Confirm visa type eligibility• Obtain the residency status at the very beginning of the transaction (CA

and US)• List the location where services are going to be performed (P.O.) – ask the

service provider to do the same (invoice)• Forward all tax-related documentation received from the payee (include

P.O. #)

• Engage with us, communicate, and support the process

We can do this!

Taxes on Supplier Payments

WHAT ELSE?!?

What other questions do you have and we can we do better?

Taxes on Supplier Payments

Updated Glacier Request Form for Supplier Payments

New Blink Pages – Fed w/h, excise taxes, visa restrictions

Knowledge Base Articles in BFSupport to complement Blink pages

More trainings, more outreach, metrics

Visibility to status of tax review (?)