The Controller’s Office ensures that RIT is in compliance with federal, state and local tax laws, and to develop and enforce appropriate policies and procedures in order to meet its compliance requirements and protect the university’s tax-exempt status.
Please note that The Controller’s Office staff cannot give personal income tax advice to students or employees.
The following links are a resource for you in managing university business with respect to tax matters.
Companies doing business with RIT that will be paying RIT request this form:
RIT is exempt from paying sales tax to vendors on some of its purchases in New York State and certain other states where it has an exemption certificate or letter. The rules vary by state. Even if RIT has a sales tax exemption for a particular state, not all purchases may be exempt in that state. Also, a purchase considered sales tax exempt in one state may not be sales tax exempt in another state.
Sales tax exemption forms should be provided to the vendor at the time of purchase. In addition, purchases are required to be made from RIT’s funds (i.e. check or p-card). RIT sales tax exemptions cannot be used for personal purchases.
Sales Tax Collection and Recordkeeping Responsibilities on Sales in New York State
Although RIT is exempt from paying sales tax on qualified goods and services it purchases for its educational operations, the university’s exempt status does not eliminate its obligation to collect sales tax on sales made to other groups, businesses or individuals (i.e. students, employees, or other vendors).
Departments/business units that sell taxable goods or services must collect sales tax from their customers, segregating the gross cash receipts between revenue and sales tax collected and recording the sales tax collected in the sales tax liability object code 32000. The Controller’s Tax Office will review each department’s sales tax liability account and then remit the total tax collected to NYS as part of the RIT’s regular monthly tax filing.
RIT is not currently registered to collect and remit sales tax to other states outside of New York. The Controller’s Tax Office continues to monitor state requirements related to individual state sales tax filings. If you have a particular question, regarding sales or services delivered or performed in states outside of New York, please reach out to firstname.lastname@example.org.
If your department sells taxable goods or services, contact the Accounting Operations Office @ email@example.com 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:
GL Account 01.63200.59000.00.00000.00000
$ 92.59 (revenue)
GL Account 01.63200.32000.00.00000.00000
$7.41 sales tax liability @8%)
Total cash collected and deposited:
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.”
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.
Rochester Institute of Technology (RIT) is an exempt organization under IRS Section 501(c)(3) of the Internal Revenue Code, and is not required to pay Federal income tax on income related to its exempt purposes of education and research.
RIT may engage in other activities that do not directly relate to its exempt purposes, however, this income, known as Unrelated Business Income (UBI), is subject to unrelated business income tax (UBIT).
The university must identify and report unrelated business income on its annual tax return, IRS Form 990-T, and remit any tax due in compliance with federal, state, and local tax laws and regulations.
Any income that does not directly further the university's tax exempt purpose, i.e. education and research, has the potential to become unrelated business income. Income from an activity is subject to unrelated business income tax (UBIT) if the following three criteria are present:
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 Exceptions and Exclusions
Even if an activity is considered to generate UBI based on the above three criteria, there are a number of statutory exceptions modifications to income that are available under the UBIT regulations.
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.
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.
If you have questions about this information or identified potential UBI or require assistance, contact the Controller’s Office via email at firstname.lastname@example.org.
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: email@example.com
Other Tax Information
State and Local laws and Regulations
To ensure compliance with state and local laws and regulations, RIT faculty and staff who conduct University business activity outside of New York State are asked to contact the Controller’s Office prior to engaging in such activities. Business activities may include, but are not limited to, delivering training workshops, setting up a booth to sell services and/or products, and/or other activities that may or may not generate revenue for the University. Due to complexity of state and local rules and regulations, further review of specific state regulations including registering with the Secretary of State, registering as a non-profit, state, payroll registrations, etc., may be required by the Controller’s Office, Treasury and Financial Reporting and University tax counsel.
If you have questions about this information or require assistance, please email firstname.lastname@example.org.