Taxes

If your department sells taxable goods or services, contact the Accounting Operations Office @ acctg@rit.edu to establish a general ledger account into which you can deposit sales tax collections.

Promptly following the sales, deposit the funds, separating the total sales into “sales revenue” and “sales tax liability” and credit each general ledger account for the appropriate amount.

For example, a department in the College of Engineering sold 10 reusable water bottles to students at $10.00 each, including sales tax. Complete the Deposit ID form to record the sales revenue and sales tax as follows:

Indicate “Water Bottle Sales” on the Deposit Slip.

NOTE: To calculate the amount of the revenue, divide the $100.00 sales price by 1.08 = $92.59 in revenue. To calculate the 8% sales tax, subtract the $92.59 in revenue from the $100.00 sales price = $7.41 sales tax.

RIT should not charge any sales tax on sales of clothing and footwear sold for less than $110 per item in Monroe County.

The NYS 8% sales tax rate consists of two different components: 4% NYS Sales tax and 4% Monroe County Local Sales tax. For clothing and footwear that sells for less than $110 per item or pair, plus certain other items included in NYS Pub 718-C Sales and Use Tax Rates on Clothing and Footwear, both NYS and Monroe County grant exemption for their respective 4% share of tax (beginning March 1, 2023), therefore, for clothing, footwear, and certain other items sold in Monroe County for less than $110 each, there is no longer any sales tax due to NYS for those items. Indicate “Clothing<$110each” in the first 24 digits in the description when completing the related “RIT Deposit ID Form.”

RIT departments are required to maintain detailed records of all sales that are subject to sales or use tax.

What sales records to keep:

• Departments must keep records of every sale, the amount of the sale, and the sales tax on the sale. You must retain an electronic copy of the supporting documentation.
• If no written document is provided to the purchaser, departments must maintain a detailed daily record of all cash and credit sales.
• If a department sells both taxable and nontaxable goods and services, they must identify which items that are subject to sales tax and those that are not (on the invoice or receipt).
• If departments deliver the product or service to a place other than RIT, they must maintain records that prove where delivery took place.

RIT must keep sales tax records for a minimum of three years from the due date of the return to which they relate, or the date the return is filed, if later.

• Departments are not required to collect sales tax from a purchaser who provides a properly completed Sales Tax Exemption Certificate that you accept in good faith within 90 days of the delivery of property or rendition of a service. Accepting an exemption certificate in good faith means you have no prior knowledge that the document is falsely or fraudulently issued. You must exercise ordinary care when accepting a certificate.
• The purchaser may give you an exemption certificate for a single sale, or a blanket exemption certificate that may be used for the current sale as well as for subsequent sales made to that purchaser for additional sales of the same general type.
• The exempt organization must be the direct purchaser and payer of record. Any bill, invoice, or receipt you provide must show the organization as the purchaser. Payment must be from the funds of the exempt organization. Payment may not be made from the funds of individual members of the organization, even if they will be reimbursed.
• Exemption certificates show why you did not collect tax on the sale to which the exemption certificate relates. You must retain a copy of the exemption certificate for at least three years from the date of sale with the invoice or other evidence of the sale (that associates the certificate with that sale).
• Obtain updated Sales Tax Exemption Certificates from the customer at least every three years.
• An IRS Determination Letter verifying an organization’s 501(c)(3) tax exemption status does not qualify as a NYS sales tax exemption certificate.

Certain fundraising sales may meet the criteria for the NYS Fundraising Sales Tax Exemption shown in NYS Publication 843, Pages 20-21, meaning that you may not need to collect sales tax on items sold in your fundraising event. Each of the following criteria listed below must be met in order to qualify for this exemption:

• Criteria 1: RIT purchases the merchandise from a vendor (has title to the products) before it is sold to customers.
• Criteria 2: Sales are not made by a shop or store or by remote means (i.e. these products aren’t being sold by a shop or store, not made over the phone, mail order, email, over the internet, or by similar methods).
• Criteria 3: Sales are not made with a degree of regularity, frequency, and continuity (i.e. annual or semi-annual events would qualify).

If any fact pattern fails any of the criteria listed above, the event does not qualify for the NYS fundraising sales tax exemption; sales tax must be collected from the customer and remitted to NYS.

The first criteria in determining whether an activity is taxable is to determine whether the activity is "substantially unrelated" to the exempt purpose of the university. Conversely, to be considered related to nontaxable income, there must be a substantial causal relationship between the activity that generates revenue and the exempt purpose of the organization (i.e., the activity must contribute importantly to the accomplishment of the exempt purpose other than the university's need to produce income).

Activities cannot be considered taxable unless they are deemed to be a "trade or business". A trade or business includes any activity carried on for the production of income from selling goods or performing services.

Whether a trade or business is “regularly carried on” is determined by reference to the frequency and continuity of the activity and the manner in which it is pursued. Relevant factors include the typical time span of activities and whether the activities are engaged in only discontinuously or periodically without the competitive and promotional efforts typical of commercial endeavors. However, year round activities are regular even if they are conducted only one day a week. Further, seasonal activities may be regularly carried on even though they are conducted only for a short period each year.

UBI does not include income from any trade or business in which substantially all the work is performed without compensation; or which is the selling of merchandise substantially all of which has been received as gifts or contributions; or which is carried on, in the case of a university, primarily for the convenience of its students, officers or employees.

Dividends, interest, payments with respect to securities, loans, annuities, and other substantially similar income for routine and ordinary investments are excluded from UBI.

Royalties and all deductions connected with royalties are excluded from UBI except in the case of debt-financed income and receipts from controlled organizations. Generally, a royalty is a payment for the use of a valuable right such as a trademark, trade name, service mark, or copyright, regardless of whether the property represented by the right is used. If the payment for such rights is coupled with a duty to perform services by the grantor, however, it is not treated as a royalty for tax purposes. But, if a licensor retains quality control rights with respect to the licensed product, it does not cause payments to the licensor to lose their character as royalties.

Except in the case of debt-financed income and receipts from controlled organization, rents from real property and incidental rents from personal property leased with real property are excluded from UBI. Rents from personal property are “incidental” only if they do not exceed 10% of the total rents from all the property leased. However, if rents from personal property exceed 50% of the total rents, all rents (including the rent from real property) are UBI. Furthermore, rent loses its characterization as passive and excluded income if the organization provides substantial services to occupants.

Income from research is excluded from UBI in the following situations: income derived from research for (a) the United States, or any of its agencies or instrumentalities, or (b) any state or political subdivision thereof; in the case of a university, income derived from research performed for any person. Note that ordinary testing or inspection of products may not qualify as research for purposes of the UBI determination.

UBI is income from a trade or business not substantially related to an organization’s exempt purpose.

Certain income generating activities at RIT meet the three elements of UBI listed (all 3 must exist).

1. The activity is a trade or business
2. The activity is regularly carried on
3. The income is not substantially related to the organization’s exempt purpose

• Corporate sponsorships (i.e., Coke pouring rights)
• Ice arena activities (i.e., corporate advertising)
• Investment partnerships (i.e., investments in the university’s endowment)
• Special events (i.e., high school graduations held at RIT)

• IRS Publication 598, Tax on Unrelated Business Income of Exempt Organizations
• RIT’s UBI is reported on its Federal Form 990-T, Exempt Organization Business Income Tax Return
• UBI exceeding $1,000 is taxable at corporate rates, provided by Internal Revenue Code Section 1(e)

Yes, here is a partial list including, but not limited to, the following activities:

• Interest, dividends, capital gains, and other portfolio income
• Revenues from royalties
• Revenues from research activities
• Rental income from real estate
• Corporate sponsorships, if properly structured
• Services performed by volunteers
• Businesses operated for convenience of students or employees (i.e., bookstores, dining services, etc.)

Staff in the RIT Tax Office, a business unit within the Controller’s Office’s Treasury & Financial Reporting Services department, perform an annual review of revenue recorded on the general ledger. If they find activities that may be considered UBI, they reach out to the department to gather more information and then make a determination regarding next steps.

If you have questions about this information or require assistance, contact the Controller’s Office at (585) 475-2383 or email: taxdept@rit.edu