RIT’s Sales Tax Collection and Recordkeeping Responsibilities

RIT’s Sales Tax Collection and Recordkeeping Responsibilities

 

The purpose of this document is to familiarize RIT departments with the university’s sales tax collection and recordkeeping responsibilities including handling of tax-exempt sales.

 

If you have any questions regarding these procedures, sales tax rates, or RIT’s responsibility for sales tax collection in general, please email salestax@rit.edu or contact Susanne Scheg in the Controller’s Tax Office at ext. 5-5301.

 

Table of Contents

 

  1. Department Sales Tax Collection Responsibilities
  2. Most Common Taxable Sales
  3. How to Account for Taxable Sales
  4. Recordkeeping Requirements
  5. Sales to Tax Exempt Entities
  6. Recordkeeping Requirements for Sales to Tax Exempt Entities  
  7. NYS Fundraising Sales Tax Exemption
  8. Sales to Customers Outside of NYS

 

 

  1. Department Sales Tax Collection Responsibilities                 

     Rochester Institute of Technology (RIT) is a tax-exempt corporation organized in

                 New York State (NYS). RIT is also registered in NYS for sales tax purposes and

                 is therefore considered to be a trustee of NYS with responsibility to collect the

                 proper amount of sales tax from its customers and to remit the sales tax with its

                 monthly sales tax returns.

 

                 Important: RIT’s tax-exempt status does not eliminate its obligation to collect sales

                 tax on sales to non-exempt purchasers of the university’s goods and services.

 

  1. Most Common Taxable Campus Sales

     Examples of the  most common taxable sales on campus include:

 

  • Food or candy sales in various dining establishments (other than board plans)
  • Taxable services provided with Fieldhouse, Polisseni Center, and Alumni House rentals
  • College of Engineering pizza sales to students
  • Digital Den apparel sales to faculty, staff, and students @ the 4% sales tax rate (refer to Section C.5. below for more information about sales tax on clothing).

 

                Departments who regularly collect sales tax (e.g., Dining Services, Digital Den)

                have processes in place to include sales tax in the payments received from their

                customers. Other RIT business units/departments that sell goods or services also

                must collect sales tax from their customers.  Gross cash receipts must be

                segregated between revenue and sales taxes collected that is due to NYS (refer

                to Section C.2. for examples of how to calculate the sales tax amount due).   

 

  1. How to Account for Taxable Sales
  1. 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. 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.

 

  1. For example, let’s assume you are selling T-shirts with your departmental logo on them to students, faculty or staff for $10.00 each. This is a taxable sale since the purchaser is typically not entitled to a sales tax exemption. Here’s what you must do:

 

  • Contact the Accounting Office at acct@rit.edu, ext. 5-2237, or 5-4086 and ask them to establish a general ledger account to record the sales tax collections (if one has not already been created).
  • Include an allowance for sales taxes in the price of your product (in this case at the 4% rate for clothing in Monroe County). The price can be quoted with or without tax.

                   You can sell the shirts for:

  • $10.40 ($10 plus $.40 for the 4% tax) ($10.00 sales x .04 = .40) or,
  • $10.00 including tax ($9.62 plus $.38 for the 4% tax). In this case, your department will receive only $9.62 in revenue from the sale. To calculate the amount of the revenue, divide the $10.00 sales price by 1.04 = $9.62 in revenue. To calculate the 4% sales tax, subtract the $9.62 in revenue from the $10.00 sales price = $.38 sales tax.

 

  1. When you deposit the funds, separate 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 shirts to

       students at $10.00 each, including sales. Complete the Deposit ID form to

       record the sales revenue and sales tax as follows:

  • GL Account 01.63200.59000.00.00000.00000    $  96.20 (revenue)
  • GL Account 01.63200.32000.00.00000.00000    $    3.80 (sales tax liability @4%)

      Total cash collected and deposited:   $100.00

      Indicate “Clothing Sales” on the Deposit Slip.

 

  1. The Controller’s Tax Office will remit the sales taxes collected to NYS each month with its Sales Tax Return.

 

  1. Clothing Sales – 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, NYS will grant exemption for their 4% share of tax; however, Monroe County does not. In other words, for clothing, footwear, and certain other items sold in Monroe County for less than $110 each, 4% sales tax is due to NYS (for the Monroe County portion of sales tax due).

                     Note: Indicate “Clothing Sales” when completing the ‘RIT Deposit ID Form

                     in the first 23 digits of the description (only the first 23 digits on the

                     description appear on the Oracle sales tax report). This notation provides the

                     Controller’s Tax Office with the information required to properly record the

                     4% clothing sales tax on the NYS Sales Tax Return.

 

  1. Recordkeeping Requirements
  1. RIT departments are required to maintain detailed records of all sales that are subject to sales or use tax. These detailed records of the business operations help the Controller’s Tax Office staff to prepare accurate and complete sales tax returns. Sales tax returns include gross sales, taxable sales, purchases subject to sales or use tax, sales and use taxes due for the specific locality in which the items or services were delivered to their customers, and other information. Detailed records also serve as documentation of the accuracy of the returns in the event of an audit by NYS.

 

  1. 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. These records must be made available to the NYS Tax Department upon request. All point-of-sale (POS) systems, related inventory systems, and electronic records must be maintained and also made available upon request. See TB-ST-770 Recordkeeping Requirements for Sales Tax Vendors for additional details.

 

  1. 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 or 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.

 

  1. Sales to Tax Exempt Entities
  1. 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.

 

  1. 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.

 

  1. Note: 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.

 

  1. Exemption certificates show why you did not collect tax on the sale to which the exemption certificate relates. If RIT is audited by the NYS Tax Department, the certificate will show that you did not collect sales tax because the purchaser certified that the transaction was not subject to tax. You must retain a copy of the exemption certificate with the invoice or other evidence of the sale (that associates the certificate with that sale).

 

  1. Note: An IRS Determination Letter verifying an organization’s 501(c)(3) tax exemption status does not qualify as a NYS sales tax exemption certificate.

 

  1. If you are doing business with an exempt organization customer that needs to apply for NYS sales tax exemption status, including exempt organizations outside of NYS, please refer them to NYS Form ST-119.2, Application for an Exempt Organization Certificate.

 

  1. Note: In the ST-119.2 instructions, Line 10, if the customer attaches a copy of their federal determination letter confirming their IRC Section 501(c)(3) exemption, they are not required to attach the organizing documents.

 

  1. Recordkeeping Requirements for Sales to Tax Exempt Entities
  1. When an RIT department sells goods or services to another tax exempt entity, a copy of the organizations Sales Tax Exemption form must be maintained with each sales record. Recording the entity’s tax exempt number is not sufficient to support a tax exempt sale.
  • Attach the customer’s sales tax exemption certificate to the record of the sale.
  • Maintain scanned copies of all customer sales tax exemption certificates in a central location in your department. In the electronic file naming convention, include the state, name of the purchaser_Form number of sales tax exemption certificate_date issued: (i.e. NY_Pee Wee Hockey Club_NYS ST-119-1_01012018).
  • Retain Sales Tax Exemption certificates for at least three years from the date of sale.
  • Obtain updated Sales Tax Exemption Certificates from the customer at least every three years.

 

   G. NYS Fundraising Sales Tax Exemption

  1. 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 event 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.

 

  1. Example of fundraising event that qualified for the NYS Fundraising Sales Tax Exemption:
  • Tigers for Tigers at RIT (T4T@RIT) held a T-shirt fundraiser during Brick City Homecoming Week and Tiger Awareness Week to help fund various tiger conservation organizations and the local zoo.
  • RIT Athletics purchased the T-shirts using RIT funds, therefore, T4T@RIT had proper title to the T-shirts at the time they were sold. This meets Criteria 1.
  • The T-shirts were sold at tables at the Men’s Hockey Game and other events, sales were not made by shop or store or by remote means. This meets Criteria 2.
  • T4T@RIT only holds this fundraiser once a year, sales are not made with a degree of regularity, frequency, and continuity. This meets Criteria 3.

 

  1. Departments must ensure that the fact pattern in each of the fundraisers is adhered to in order to protect RIT’s sales tax exempt status. If you feel that your department’s fundraising activity meets the criteria for the NYS Fundraising Sales Tax Exemption,  document the fact pattern of your sales as they adhere to each of the three criteria above and forward the information to the Controller’s Tax Office at salestax@rit.edu prior to the sale (to confirm that it qualifies).

 

  1. If your department’s fundraising event does qualify for the NYS Fundraising Sales Tax Exemption, please be sure to indicate “(Name of) Fundraiser” (i.e. T-shirt Fundraiser” or “Candy Fundraiser”) on the ‘RIT Deposit ID Form’ within the first 23 digits so that your transaction does not reject for sales tax omission when it reaches the Tax Department.

 

  1. Sales to Customers outside of NYS
  1. 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 recent state developments and 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 salestax@rit.edu

 

  1. If your department sells good or services to a tax-exempt organizations outside of NYS, refer to Section F, Recordkeeping Requirements for Sales to Tax Exempt Entities, for the correct procedure to follow regarding sales tax exemption certificates.