Taxes

• Take advantage of the NDSU’s state sales tax exemption on all purchases, as appropriate
• Be aware of potential situations where state sales taxes should be charged to customers, collected and reported
• Consult Accounting Office regarding questions
• Coordinate collection and reporting with Accounting Office
• Be aware of potential situations where unrelated business income taxes apply and notify the Accounting Office
• Make sure that an appropriate tax acknowledge letter is sent to donors when tax exempt donations exceeding $250 per year are received by the department

Departments should not pay state and local sales taxes to vendors. If a vendor includes these taxes on an invoice, the taxes should be deducted from the amount paid to the vendor. The amount of sales tax deducted and NDSU’s tax-exempt number should be noted on the Accounts Payable Voucher or receiving report, if paying a vendor using one of these forms.NDSU’s state sales tax exemption number is E-5411. It is proper for a department to inform a vendor of this number if requested. A copy of the actual certificate is shown on the Accounting Office web site.The University is exempt from sales tax only when a University check is issued directly to the vendor applying the tax. Reimbursement may be made to employees or other for sales taxes paid while incurring an expense on behalf of the University. The sales tax cannot be charged to a grant funding source.

Certain NDSU sales to customers are subject to North Dakota sales tax collection and reporting. Taxable sales by departments must be reported to the Accounting Office on a monthly basis for inclusion in the University’s sales tax report. Questions regarding NDSU’s sales tax filing and payment procedures should be directed to the Accounting Office. Questions about whether sales tax should be collected on a particular sale may be directed to the North Dakota Office of State Tax Commissioner in Bismarck. Their telephone number is (701) 328-3470 and their e-mail address is salestax@nd.gov. Information may also be obtain from their web site www.nd.gov/tax .

In regards to donations, NDSU is a tax-exempt organization under Section 170 of the Internal Revenue Code. Donations made directly to the University are tax deductible.

Any department directly receiving a donation in excess of $250 must notifiy the Accounting Office so a tax acknowledgement letter can be sent to the donor.

Internal Revenue Service regulations require that donations greater than $250, and made directly to NDSU, be followed up with a letter from NDSU to the donor acknowledging the tax-exempt contribution. The NDSU Development Foundation will take care of the tax acknowledgement letter in the more common case where a donation is made out to the Foundation.

Even though NDSU is exempt from Federal income tax under section 115 of the Internal Revenue Code as an instrumentality of the state of ND, NDSU must pay income taxes on any income generated from activities that are not substantially related to the exempt purpose of the university. As a Land-Grant institution NDSU was created to serve three basic functions: resident education, research and extension.In order for an activity to be considered unrelated business income (UBI), the following elements must exist:

• The activity is a trade or business that is conducted with a profit motive – The activity is priced above cost and is operated to generate income.
• The trade or business is regularly carried on – The activity is conducted on a regular basis and is not a one-time event.
• The conduct of the activity is unrelated to the tax exempt purpose of education, research and extension.

NDSU currently engages in a number of activities that are treated as unrelated and tax is paid on the net income from these activities. Tax expenses are billed back to the department generating the income.Examples of potential UBI activities include:

• Operation of a parking lot for private events
• Operation of a fitness center for the general public
• Advertising to the general public
• Sales of excess utilities
• Rental of space to the general public
• Sales of goods/services to the general public
• Operation of a cafeteria for catering to the general public

Departments should be on the alert for any revenue generating activities, unrelated to the mission of the University, that are currently proceeding or planned, and contact the Accounting Office for a ruling as to whether the activity should be reported to the IRS.

Vendor W-9
We are required to collect a W-9 for all vendors, regardless if it is a taxable or non-taxable event. This is an IRS requirement to have a W-9 on hand for every payment we make, other than refund payments. In the case of a non-taxable event, the form is used only for informational purposes and must be on hand if ever requested during an IRS audit. The form is used to certify the following: name on W-9 matches who we are paying, they are a U.S. citizen, they are not subject to backup withholding, and they are exempt from FATCA reporting. Even though we are collecting the form for these types of events (non-taxable events), we will not be reporting it as taxable income. By not collecting a W-9 as required, subjects NDSU to fines and penalties by the IRS.

NDSU W-9
Use if NDSU's W-9 form is requested from a vendor.

Other Tax Forms
The University central financial offices are responsible for generating and distributing all required tax forms to its customers. Examples include: W-2 forms (issued by the Payroll Office to all employees), 1099-misc forms (issued by the University System to independent contractors and certain other vendors), 1098-T forms (issued by Customer Account Services to students for purposes of claiming Educational Tax Credits such as the Hope and Lifetime Learning Tax Credit).

IRS 1099-MISC forms are issued to contractors and other vendors that provide services or contracts.