Tax Laws & Regulations

To comply with tax regulations, appropriate personnel must be informed of tax requirements that apply to their operations. In general, taxes applicable to University operations include the following:

 Income Tax

On income-producing activities that constitute a regular trade or business not related to the promotion of educational activities. Employees who are engaged in such activities must:

  • Maintain documentation that supports whether or not a particular activity is subject to income tax.
  • Notify Finance of any income taxable activities and complete the various questionnaires and worksheets prescribed by the Office of Accounting Services.
  • Account for all taxable income earned in an income-producing fund approved by Finance. Finance is responsible for the actual completion of the Form 990-T Exempt Organization Business Income Tax Return. 

Income paid to payees outside the University (including payment of fees, commission, rents and royalties) or University employees (for prizes and awards) must be accumulated and reported as taxable income. In this process:

  • Units must provide Tax Identification Numbers (TINs) when processing these types of payment transactions.
  • The Office of Accounting Services is responsible for reporting this information to the payees via annual reporting forms such as the Forms 1099, W-2 or 1042S.
Sales and Use Taxes

On certain sale and purchase transactions as required by the California Board of Equalization. Purchases made for resale are generally exempt when the seller obtains evidence from the purchaser, such as a certificate of resale. Otherwise:

  • Units that conduct sales activities must charge sales tax and properly account for sales tax collected by coding related deposits against sales tax-payable account numbers designated by the Finance office. 

  • Units making purchases must include a provision for these taxes when making orders. Further, they must ensure that these payments have been included on their invoice payments or through other charging methods used by the Office of Accounting Services. The Office of Accounting Services is responsible for the actual filing and remitting of sales and use tax payments.

Federal and State Income Taxes

Assessed on University employee base salary and wages, supplemental pay, undocumented reimbursements and various allowances (such as car and housing) in accordance with state and federal tax code. In this process:

  • Payroll is responsible for withholding taxes on compensation based upon the individual's Form W-4 (Employees Withholding Allowance Certificate) on file. Payroll is also responsible for remitting the actual tax payments to the federal and state governments, completing the required quarterly tax returns and distributing Forms W-2 to employees.
  • Units on campus are responsible for submitting accurate and timely data to Payroll.
Property Taxes

The University is generally exempt from paying property taxes. When necessary, the Office of Accounting Services will file the exemption reports and claims to receive refunds of such taxes paid on leased property.