P-card Transaction Entry - Sales & Use Tax

New Procurement Card Process
Ian P. Da Costa, Manager
UCLA/UCOP/UCM Accounts Payable
Understanding System Logic
Navigating the System
PAN Notice
Processing Credits
System Generated E-mails
Common Vendors
Sales & Use Tax Rules
• Data feed from bank pre-populates a CatBuy cart
• Banking system responsible for income tax
• Process will temporarily exempt vendors from the
upcoming 3% withholding requirement for a certain
time period
• Expenses hit the ledger in a timely manner
• Not subject to the $500 reimbursement limit
• Immediate accruals of use tax
• Sampling methodology for auditing
• Expand program without additional staffing
• Cardholder or preparer allocates the transactions
in CatBuy
• Cardholder or preparer is responsible for
identifying taxable and non-taxable components of
a transaction
• Department managers are encouraged to ensure
that tax reporting is accurate
• Central units will perform sample audits for
• Department is responsible for assessments
Ship To and Tax Rate Information for UC Merced
On January 5, 2009, Shipping & Receiving for all UC Merced deliveries for Merced
and Atwater were relocated to the following address on the main campus:
UC Merced
Facilities Services Building A
5200 North Lake Road
Merced, CA 95343
The tax rate for this location is currently 8.25%. Our campus is located outside of
the city limits, and therefore, not subject to the additional tax required within the city
of Merced.
Confirmation may be obtained by visiting the State Board of Equalization website or
by entering the University address (5200 N Lake Rd) at this website:
(This link will validate that our address is not within the city limits.)
Please update your database/files with the correct tax rate. Also, reference
Purchase Order Numbers on all shipments to ensure delivery to the right location.
8.25% Tax
8.75% Tax Rate
Current as of 3/1/11 only.
Understanding System Logic
• For Taxable Transactions (i.e. if goods are taxable)
Use tax accrued = taxable amount* times default tax rate
minus tax paid to vendor plus tax due on handling or
other taxable components (only if goods are taxable)
* Taxable amount = total minus non-taxable amount
Taxable components
▫ Dry Ice
▫ Packing
▫ Hazardous Material Charge
▫ Heat Surcharge
▫ Ice Surcharge
▫ Fuel Surcharge
▫ P&H
Understanding System Logic
• For Taxable Transactions (i.e. if goods are taxable)
Non-taxable components
▫ E-waste
▫ Recycling Fee
▫ Insurance
▫ Delivery
▫ FedEx
Combined shipping and handling
▫ System treats 20% of the combined charge as taxable
Navigating the System
•Select PCard Transactions
Navigating the System
• Defaults to user’s department code
• Searchable by:
▫ Dept Code, Order Number
▫ Cardholder Name, Cardholder UID
▫ Manager Name, Manager UID, Merchant Name
Navigating the System
• Limit search by:
▫ Invoice status ([new], [in-progress], [paid])
▫ Cart status ( [all] , [incomplete], [open], [no
status], [error during submit], [order created])
▫ Invoice type ( [all] , [debit], [credit]
▫ Date ranges ([Post/Invc Date to], [Post/Invc Date
from] and/or [Invc Due Date] to [Invc Due Date])
•Select cardholder using radio button on LHS
•Click options in middle of screen
[Create Cart] [Edit Cart] [Delete Cart] [Cancel Order]
Navigating the System
• Check preparer defaults
Requester Phone:
Tax Rate:
Dept Code:
Dept Contact Login:
Dept Contact Phone:
Navigating the System
• Change defaults as needed
Order Date: [today’s date] [calendar]
Override Reason:
CC Self:
Class of Order: Q
PAN Subject: PCD-000007,CAT, JANE
• Remember tax calculations are based on
defaults for preparer
• Change tax rate if creating orders for
cardholders in different districts (i.e. location
of where goods will be used)
Navigating the System
•Adjust FAU and enter correct object code
Navigating the System
Navigating the System
Typical Transactions*
• Enter Sales Tax Charged
• Enter Total Non-Taxable
• Enter Description &
Business Justification
Navigating the System
Others: Identify Taxable & Non-Taxable Components
For Taxable Goods
Enter into the Handling box
(taxable components):
•Dry Ice
•Hazardous Material Charge
•Heat Surcharge
•Ice Surcharge
•Fuel Surcharge
•P & H
Navigating the System
Others: Identify Taxable & Non-Taxable Components
For Taxable Goods
Enter into the Shipping/Freight box
(nontaxable components):
•Recycling Fee
Navigating the System
Others: Identify Taxable & Non-Taxable Components
For Non-Taxable Goods
•Enter amount in Non-Taxable Box
•Select Exempt Reason Code
Navigating the System
Exempt Reason Codes
Navigating the System
• Review the Transaction
•Click [Save] and then [Submit]
PAN Notice
Processing Credits
•Create a cart for the transaction being reviewed
•Enter the corresponding debit PO number for the original
charge and fill in the description/business justification
•Click [Load] and the [PO FAU] information will be populated
•Click [Save] and [Submit]
Local stores in same district should charge the correct rate
• Identify taxable transactions
▫ T (other variations)
• Identify non-taxable transactions
▫ N or F (other variations)
• Some vendors provide taxable
or non-taxable sub-totals
• Calculate the non-taxable
portion (note: maybe faster to
add taxable items and subtract
from the total)
Sample System Generated E-mails
• RE: Create Cart for Pcard debit transaction
U.S. Bank has transmitted a Visa credit card transaction to UCM for payment into
the Pcard Transaction Queue. Pcard procedures require the cardholder/preparer
to create a cart in the CatBuy system within three business days, or preferably
immediately upon receipt of this email. Please remember to provide sufficient
detail of the purchase for business justification on the order. Thank you.
• RE: Enter order for Pcard credit transaction
U.S. Bank has issued a credit in the amount shown in your Pcard Transaction
Queue. Go to your Pcard Transaction Queue, select the credit, and enter the
Order Number associated with the original debit charge within three business days
of receipt of this email. Thank you.
• RE: Debit applied with default FAU
The default FAU specified in your Pcard user profile was debited for a transaction
that did not have a "Q" class order created in your Pcard Transaction Queue. Pcard
controls require "Q" class orders to be created in CatBuy to validate appropriate
accounting information and provide business justification. Pcard Administration
will be contacting you shortly for follow-up action. Thank you.
Sample Vendors
(All cases are different)
Merchant Name
Accrue Use Tax
Sample Vendors
(All cases are different)
Merchant Name
Accrue Use Tax
Sales and Use Tax
Erica Fernandez, Tax Director
Sales and Use Tax
• Sales tax
▫ Imposed on every retailer (seller) for the
privilege of making retail sales of tangible
personal property (TPP) in CA
• Use tax
▫ Imposed on the purchaser for the storage, use or
consumption of TPP in CA
Tangible Personal Property
• TPP is personal property which can be
▫ Seen, weighed, measured, felt, touched etc.
• Non-TPP property includes
▫ Real property (land)
▫ Intangible property (e.g. goodwill)
▫ Property rights (e.g. licensing of trademarks or
software if no TPP is transferred)
Compliance as a Purchaser
• Determine and pay the proper amount of tax
due (use tax)
• Essentials for good tax decisions
▫ What is UCM’s sales and use tax obligation?
▫ What is the item being purchased and for what
▫ What are the available exemptions?
▫ What is the taxable sales price?
Sales and Use Tax Obligation
California vs. Out-of-State Vendor
• Two classifications of sellers:
▫ CA retailers (generally SALES tax)
 Sellers of TPP with business locations in CA
▫ Out-of-state retailers (generally USE tax)
 Sellers physically located outside CA
 May be registered to collect CA tax based on nexus
with CA (physical presence through employees,
warehouse, etc.)
 If out-of-state vendor charges tax, confirm CA seller’s
permit number
Sales and Use Tax Obligation
California vs. Out-of-State Vendor (cont)
• The purchase of TPP from a retailer (not registered to
collect CA taxes) for use in CA is subject to use tax
• Identifying use tax transactions:
• Vendor has non-CA address
• Invoice is for tangible property
• Charge for shipping indicating something was shipped
• Note – purchases from other states or their
instrumentalities, including state universities are not
subject to sales and use tax.
Common Scenarios
• Example #1: UCM and Vendor are in same State
▫ What tax is applicable?
▫ Who has the obligation to report?
• Example #2: UCM and Vendor are in different
▫ What tax is applicable?
▫ Who has the obligation to report?
• Example #3: Property shipped to a different
state (e.g. New Mexico)
▫ Is CA tax applicable?
▫ If yes, what tax and who has the obligation?
▫ Is NM tax applicable?
Property Being Purchased
• Keys to accurate tax decisions include:
▫ What is the item being purchased?
▫ How will the item be used (e.g. will it be resold?)
▫ Does the purchase include services (e.g. repair or
Taxable Gross Receipts (Sales Price)
• General rule – sales price (gross receipts) is subject to
tax unless an exemption applies
• “Gross receipts” exclude:
▫ Cash discounts, amounts charged for returned
merchandise (Note that the value of a trade-in does not
reduce the sales price)
▫ Price for labor and services for installing property
▫ Separately stated charges for transportation (retailer to
▫ Some taxes (federal retailer or consumer tax, local sales
and use tax)
▫ Intangible property under a technology transfer
• Common exemptions include
Property shipped outside CA
Purchase for resale
Services and labor unrelated to the sale of TPP
Freight / Shipping
Software delivered electronically
Original works of art
Occasional sales
Newspapers and periodicals
Printed sales messages
Prescription medicines
Common Exemptions – Property Shipped
Outside CA
• Property purchased for use outside CA is not subject to
CA use tax
• Keys to identifying property for use outside CA
▫ “Shipped To” location on invoice is outside CA
▫ Information on purchase order
• A copy of the shipping documents or other support
should be retained to document out-of-state shipment
Common Exemptions – Purchases for Resale
• Property purchased for resale is excluded from
the definition of retail sale and is therefore
• A resale certificate should be issued to the
vendor. This transfers the liability for the
collection and remittance of sales tax from the
vendor to UCM
• Resale certificates are issued by Tax Services
Common Exemptions – Services / Labor
• Services where no TPP is transferred, or where
the transfer of TPP is incidental, are exempt
▫ Professional services such as accounting,
medical, legal etc.
• Labor unrelated to the sale of TPP is exempt
▫ Repairs
▫ Installation
• Labor related to the sale of TPP is taxable
▫ Fabrication - creating TPP
▫ Assembly - charges for assembling new products
Common Exemptions – Shipping / Freight
• Shipping / freight charges are exempt if:
▫ Separately stated on the invoice
▫ Delivery is by common carrier
• Note that handling charges are taxable (unless the
transaction is exempt)
• If shipping and handling charges are combined, the
combined charge is taxable. However, if the vendor has
not assessed tax, and UCM needs to accrue it:
▫ 80% of the combined charge can be allocated to shipping
and 20% to handling
▫ Use tax should be accrued on the 20% allocated to
Common Exemptions – Software
• Canned (off-the shelf) software is exempt if it is
delivered electronically and no tangible property is
▫ Shipping / handling charges on the invoice indicate
that TPP (such as a DVD) was shipped
• Custom software (developed specifically for the
▫ More than 50% custom – exempt
▫ Less than 50% custom – partially exempt
Common Exemptions – Newspapers and
• Newspapers and periodicals are exempt if the
publications are:
▫ Regularly issued at stated intervals - more than 3
times but less than 60 times per year and are
▫ Distributed without charge
• An exemption certificate should be issued to
the vendor – See Tax Services
Common Exemptions – Occasional Sales
• A sale by (and purchase from) a person who is
not engaged in business and not required to
hold a CA seller’s permit, is exempt
▫ Seller makes less than 3 sales of TPP in a 12month period
• An affidavit signed by the seller and approved
by Tax Services is required
Common Exemptions – Printed Sales
• Printed sales messages are exempt if the printed
▫ Advertises a good or service
▫ Is delivered directly to the user by the vendor or
mailing house, by common carrier or mail, at no cost
to the user
• Examples are Med Center pamphlets regarding
medical services or UNEX postcards regarding
course announcements.
• An exemption certificate should be issued to the
vendor – contact Tax Services
Common Exemptions – Original Works of Art
• An original work of art purchased for display in
a museum or public place
▫ Must be TPP which is created as a unique object
▫ Includes visual arts, crafts and mixed media
▫ Must be purchased for display in a museum or
other place which is open to the public without
charge for at least 20 hours per week, and for at
least 35 weeks of the calendar year
• Example – original artwork purchased by the
Fowler Museum for display
Maintenance Contracts
• Hardware – parts / materials / services etc.
▫ Mandatory contract (required to purchase as a
condition of sale of the property)
 Taxable
▫ Optional (not required to purchase as a condition of
sale of the property)
 Exempt
 Charge must be separately stated
• Canned software - updates / upgrades / fixes etc.
▫ Mandatory – exempt only if both original software
and maintenance is delivered electronically
▫ Optional
 50% exempt if with TPP
 100% exempt if no TPP
• Exempt “medicine” means any substance or
preparation intended for use by external or
internal application to the human body
▫ Must be used for the diagnosis, cure, mitigation,
treatment or prevention of disease
▫ Commonly recognized as intended for that use
▫ Must be prescribed or
▫ Furnished by a health care facility
Medicine (cont.)
• Exempt medicine
▫ Prescription medicine
▫ Implants
▫ Medical gases (used for patient treatment)
• Medical laboratory items - taxable
▫ Animals for research
▫ Liquids
▫ Gases
• Vitamins (supplements)
▫ Generally taxable unless furnished under
qualifying criteria
District Taxes – UCM Purchases
• Generally vendors are required to collect district
taxes only in districts where they do business
• If TPP is purchased from a California vendor who is
not required to collect LA County district tax and
charges the 8.25% state-wide rate
• Accrue the 1.5% difference (9.75% minus 8.25%)
• If TPP is purchased at a lower district rate (e.g. in
San Bernadino where the combined rate is 8.75%) for
use at UCM
 Accrue the 1% difference (9.75% minus 8.75%)
Miscellaneous Fees and Charges
• Fully taxable, partially taxable or exempt depending
on the taxability of the item(s) purchased
▫ Dry ice
Hazardous material charge
Heat surcharge
Ice surcharge
Fuel surcharge
Packaging and handling
• Not Taxable
▫ E-waste recycling fee
▫ Insurance
▫ UPS and Fed Ex delivery charges
Where To Go For Help
Tax Services Portal - http://www.tax.ucla.edu
 Sales and Use Tax at UCLA http://map.ais.ucla.edu/go/1004447
 UC Sales & Use Tax Manual
 UC AMC T-182-73
UCLA Tax Contacts
o Accounts Payable transactions:
 Campus – Renee Roth– [email protected], x 48778
o All other transactions:
 Scott Monatlik – [email protected], x 46724
 Upma Budhraja – [email protected] .ucla.edu x 49868
State Board of Equalization (SBE) Web Site
o http://www.boe.ca.gov
Sales and Use Tax Case Studies
Case Study 1
The Math Department received the following invoice from
Computer Corporation in Kansas:
Notebook computer
Consulting services
Shipping and Handling
CA sales tax
1. What is the total non-taxable amount (before shipping and
2. Does an exemption apply? If so, which one?
3. What amounts should be entered on the P-card screen and
4. What is the tax due on this invoice?
Solution to Case Study 1
1. The total non-taxable amount before shipping and
handling is $200 (for consulting services)
2. The exemption for services where no TPP is
provided, applies
3. Entries on P-Card screen:
Enter $20 in the box labeled “Enter shipping /
handling charge if it is combined”
Enter $200 in the box labeled “Enter Total NonTaxable Amount”
Select the code for exempt services from the dropdown list in the box labeled “Exempt Reason”
Solution to Case Study 1 (cont.)
4. The tax due is calculated as follows:
Notebook computer
$ 996
Consulting services
Shipping and Handling (20%)
Total subject to tax
Tax rate
Total tax
$ 97.50
Case Study 2
The Events Office purchased canned (off-the-shelf) software from
a vendor in Texas to track the number of film permits issued
annually. The software was delivered via CD and installed on the
Department’s server. The purchase includes mandatory
maintenance (i.e. upgrades, updates and fixes) to be delivered
electronically over the period of the contract. The following
invoice was received:
Maintenance (1/1/11 – 12/31/11)
CA sales tax
$ 1,010
1. What is the total non-taxable amount (before shipping and
2. Does an exemption apply? If so, which one?
3. What is the tax due on this invoice?
4. How would your answers to questions 1-3 change if the software
was delivered electronically?
Solution to Case Study 2
1. The total non-taxable amount (before shipping and
handling) is $0
2. No exemption applies to the software since it was
delivered via media (CD). Although the maintenance is
delivered electronically, no exemption applies because
the original software is taxable (mandatory maintenance
is considered to be a part of the sale of the original
software. If the software is taxable, the mandatory
maintenance is taxable)
3. The taxable amount is $1,000 ($800 + $200) and the tax
due is $97.50 ($1,000 X 9.75%)
4. If both the software and the mandatory maintenance are
delivered electronically, both are exempt. The total
non-taxable amount (before shipping and handling)
would be $1,000. No tax would be due.

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