Business Operations
Forum
UNIVERSITY
CONTRACTS & TAXATION
January 20th, 2010
INTRODUCTION
~ John Fitzgibbon, Finance
~ Art Evjen, Business and Support Services
~ Michele Zollna, Accounting Office
~ Susan McFarlane, Administration Systems Management
Coming Soon
2/10/10 - Travel (Course Number: 000225, Session: 0027)
3/17/10 - TBD (Course Number: 000225, Session: 0028)
4/21/10 - TBD (Course Number: 000225, Session: 0029)
Service Agreements
Service Agreements
Contracts (including Purchase Orders)
MOUs
All require signed documents
Service Agreements
An email exchange IS NOT a valid agreement
An invoice and a Payment Authorization
DO NOT constitute a valid agreement
A verbal agreement IS NOT a valid agreement
Service Agreements
Examples of Activities that require a Service Agreement
Guest Speakers/Lecturers
Accompanists
Music Performers
Sign Language Interpreters
Video Recording Services
Sound Mixer Services
DJ Services
Sports Announcers
ANY Compensated Service performed by an external entity
Service Agreements
Examples of Activities that require a Service Agreement or
Contract
ANY Compensated Service performed by CSUMB
ANY CSUMB Resource made available that will generate
compensation or revenue
ANY Permit for external entity to enter property and work
Service Agreements
Internal Entities (Employees) shall not engage in
service agreements or contracts for CSUMB
Not Independent Contractors
Tax Implications
Conflict of Interest
Service Agreements
Risk Evaluation
Vendor Data Record (VDR / STD Form 204)
Vendor ID created – Unique Vendor ID #
Agreement / Contract (Signed by Dept and by BSS and Vendor)
Signed Purchase Requisition
Signed Purchase Order
Services are Performed
Invoice with PO stamp and signed by authorizing official
Cover Memo if Special Instructions are needed
Payments must be Vouchered – Checks cut on Thursdays
Service Agreements
Critical Elements
Dates, Duration, Termination
Scope of Work
Timeline and Deliverables
Compensation Terms and Payment Schedule
Payment and any Reimbursements
CSU General Provisions
Other Terms and Conditions
Service Agreements
Signatures (At least three)
Vendor should sign our agreement first
Signed by Department Authority
Check on Protocols for your Department
Signed by Director of Business Support Services
Delegation of Authority
Service Agreements
Fully Signed is Fully Executed
Initiating Department should receive an email with a
scanned pdf file of the signed document
Purchase Order will be held until a signed agreement is
obtained
A requested payment without an agreement will be
returned
Provost Reminders to Academic Affairs
Guests Compensated for Official Business
Prior to Arrival:
MOU with Scope of Work, Dates, Compensation $, Reimbursable $
Signed by Guest, Chair, Dean and CSUMB Business Manager
Travel and Lodging must be arranged by dept staff
Do Not personally pay expenses and then seek reimbursement
Consultant Work
Agreement must be approved by Provost prior to work
Budget and Funding source
Route the agreement at least 7 days prior to work starting
Any exceptions require written justification from the Dean
TAXATION
TAXATION ON GOODS & SERVICES
CSUMB is responsible for:
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Paying taxes on the purchase of tangible GOODS.
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Reporting SERVICES received to the Federal and State
and local government. Taxes may be withheld.
Sales Tax versus Use Tax
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SALES TAX is imposed on California vendors or out-ofstate vendors who have a business location in California.
NOTE: The invoice should reflect sales tax on tangible purchases
for goods. If not, then Accounts Payable will compute sales tax and
add to the amount paid on an invoice.
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USE TAX is accrued by Accounts Payable (AP) if sales
tax was not been paid on tangible goods. Mainly Use
Tax is accrued on out-of-state purchases where the
vendor does not have a business location in California
e.g. Amazon.com.
What is Sales Tax?
~ CSUMB is not exempt from sales tax, in most cases.
~ Sales tax is imposed on tangible personal property.
~ Sales tax rate is determined by the point of delivery.
~ Sales tax is paid to the vendor.
~ Sales tax is reported and paid to the BOE by the vendor.
BOE = State Board Of Equalization http://www.boe.ca.gov
What is Use Tax?
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CSUMB is responsible for accruing use tax on tangible
purchase of goods from vendor when sales tax has not
been charged on the invoice.
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Use tax accrued is reported and paid directly to the BOE
by CSUMB.
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Departments need to determine what is taxable and
budget for it.
Software Purchases, License & Maintenance Agreements
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Mandatory maintenance agreements are taxable.
Optional maintenance agreements are not taxable.
Custom software, license & maintenance agreements are not
taxable.
Canned software, license & maintenance agreements are
taxable if delivered via tangible media i.e. diskette, cd-rom.
Canned software, license & maintenance agreements are not
taxable if delivered electronically or loaded by the vendor.
Canned software optional maintenance agreements on
tangible media that is a lump-sum, all inclusive billing is
taxable.
Go to http://www.boe.ca.gov for more information
PLEASE HELP ACCOUNTS PAYABLE
AND PROCUREMENT
in determining if a purchase is taxable or not.
~ The invoice does not always provide
enough information for AP/Procurement to
make the determination.
~ Departments need to also understand the
tax laws.
Don’t forget
to include the
Description!!!
Please Check
Applicable
Boxes
Procurement Card Update - 12/16/2009
What’s Certain
~ Taxes
We are NOT Tax-Exempt!
• California Sales Tax
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Based on point of receipt/delivery (Seaside = 9.25%)
If delivered and charged less than 9.25%, we still pay the difference
(happens “behind the scenes”)
• Use Tax (happens “behind the scenes”)
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•
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Purchases made outside CA that would be taxed if in CA
Must still pay tax; full amount to appear on your financial reports
Based on Seaside rate (currently 9.25%)
Budget Accordingly !
SERVICES – Reporting & Taxation
EMPLOYEE VS NON-EMPLOYEE
EMPLOYEE – Is hired at HR, fills out a W4, receives a
payroll check. Salary earnings and tax withholding are
reported via W2 to the Federal Government and the
State. Fringe benefits are also reported by HR and
Accounts Payable, and included on the W2.
FRINGE BENEFIT or perks are defined as “something
additional to regular pay”, which an employee receives
from an employer.
FRINGE BENEFITS
Examples of areas susceptible to reportable
fringe benefits are:
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Some expense reimbursements i.e. meals less than 24 hours, nonreceipted lodging, state per diem, tips
Moving Relocation Expense
Moving Relocation Mileage Reimbursement
Overtime Meal Compensation
Uniforms
Professional/Nonprofessional Dues/Memberships
Gifts
Employee discounts
Non-cash services
EMPLOYEE VS NON-EMPLOYEE
NON-EMPLOYEE – Independent Contractor Services
including Honoraria, Guest Lecture Fees, Performing
Artist, and Professional Service Fees i.e. consultants,
lawyers, accountants, architects and doctors etc.
Need to set up a contract, complete required tax forms
and STD. 204 (Vendor Data Record) form.
INDEPENDENT CONTRACTOR
General Definition
An independent contractor is engaged in a distinct
profession and is in the business of providing services
related to the job being contracted. Independent
contractors have control over the work being performed,
set their own hours, pay for their own business
expenses, and provide their own equipment, liability
insurance, and office space.
Employee or Independent Contractor
IMPORTANT: A CSUMB employee cannot
also be hired as an independent contractor
by CSUMB (there may be exceptions-contact
HR).
Misclassification of a worker as an
independent contractor can result in
serious financial penalties in a State or
Federal Audit.
How to determine if Independent Contractor?
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Must determine prior to hiring if the individual can be
classified as an independent contractor.
Use 23 Determination Factors to help classify as an
independent contractor.
Contact Wes Scheibly or Art Evjen to help make this
determination.
Do not sign any contracts since you are not authorized
to execute any contractual agreements on behalf of the
University. Contact Art Evjen.
IMPORTANT
Must determine if California resident, non-resident or
foreign since need to verify residency status and/or
Visa status prior to hiring.
NON-EMPLOYEE
STATE TAX (FTB)
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Resident – no California tax withholding.
Non-Resident – California tax withholding (7% of all
payments that exceed $1,500 accumulative per calendar
year).
Non-Resident Alien (foreign) – California tax
withholding (same as non-resident).
RESOURCE: The World Theatre is an expert on
campus on processing independent contractors.
http://www.ftb.ca.gov
NON-EMPLOYEE
STATE TAX (FTB)
Non-resident business or non-profit, if granted a
waiver or reduction by the State (FTB), must provide us
with a copy of the Withholding Exemption Certificate
(Form 590).
A personal letter stating doing non-resident business or
is non-profits is not sufficient to waive the withholdings.
NON-EMPLOYEE
FEDERAL TAX (IRS)
US RESIDENT:
Reportable payments – Non-employee compensation
to US Residents, where payment is not to a
corporation, if paid $600 or more in a calendar year:
Must complete a STD. 204 form to know if 1099 reportable
http://www.irs.gov
NON-EMPLOYEE
FEDERAL TAX (IRS)
Examples of what is 1099 reportable:
~ Non-employee compensation
~ Commissions
~ Gross proceeds paid to attorneys
~ Rents
~ Royalties
~ Interest
~ Dividends
NON-EMPLOYEE
FEDERAL TAX (IRS)
Who does not get 1099-MISC?
~ Employees
~ Corporations except attorneys or medical/health care providers
~ Businesses purchased tangible goods
~ Payments of Rents to Real Estate Agents
~ Exempt Organizations IRC 501(c)(3)
NON-EMPLOYEE
FEDERAL TAX (IRS)
FOREIGN - Non-resident Alien (NRA)
Possible Federal Tax withholding (28% or partial)
depending on the Tax Treaty between the US and the
Country.
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Withholding determination
Case-by-case basis
VISA status
Country Tax Treaty
Contact Art Evjen if considering contracting a NRA
NON-EMPLOYEE
FEDERAL TAX (IRS)
Federal Income Tax Withheld of 28%
If individual does not furnish a TIN (taxpayer ID)
SSN – social security number XXX-XX-XXX
EIN - employer ID XX-XXXXXX
Must complete STD. 204
Who To Contact
TAX COMMITTEE
~ Chair, Michele Zollna
~ Co-Chair, Mickey McGuire
x4302
x4224
CONTRACTS
~ Art Evjen
x3394
Employee vs. Independent Contractor Determination
~ Payroll, Wes Scheibly
x3586
~ Procurement, Art Evjen
x3394
~ STD. 204 Form, Eva Salas
x3751