Lawrence Berkeley National Laboratory

Sales & Use Tax Guidelines

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Sales & Use Tax GuidelinesGeneral Overview

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Federal Income Tax

LBNL is :

• An Internal Revenue Code (IRC) Section 115 organization, and

Under the Regents of the UC :

• An IRC Section 501 (c)(3) organization

State Income Tax – CA Reg 23772(a)(1)(E)

Sales and Use Tax

LBNL is subject to tax for certain purchases made on behalf of certain sponsors/funding sources

LBNL’s Tax Status

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TAX EXEMPT

Is LBNL exempt from tax?Answer: It depends on the type of tax, sponsor and category of purchase

TAX EXEMPT

The focus of this briefing is sales and use tax compliance at LBNL.

Table of Contents

General Overview1. Sales Tax vs. Use Tax

2. Determining Taxable Transactions

• Sponsors & Funding Sources Subject to Tax

• Tangible Personal Properly

3. LBNL Tax Payment Mechanism

Roles & Responsibilities• Requisitioner Roles & Responsibilities

• Resource Analyst Roles & Responsibilities

• Budget Office Roles & Responsibilities

• Procurement Office Roles & Responsibilities

• Accounts Payable Roles & Responsibilities

• Tax Accountant Roles & Responsibilities

AttachmentsI. Listing of Materials, Fixtures, Machinery & Equipment

II. Sales and Use Tax Guidelines - Review Questions

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Sales Tax vs. Use Tax

Sales Tax

Is charged on invoice by the vendor

Rate is determined by the point of delivery

Payment is collected and forwarded to the State of California Board of Equalization by the vendor or retailer

Use Tax

Is accrued by the purchaser if no sales tax charged on invoice; however, the purchase is subject to sales/use tax regulations

Rate is determined by the final destination where the good will be consumed or utilized

Payment is forwarded to the State of California Board of Equalization by the purchaser

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Generally speaking, LBNL fulfills its tax responsibilities via the use tax process.

Determining What Transactions areSubject to Sales and Use Tax

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No

Is the purchase

for a sponsor or

funding source that is subject

to tax?

Is the purchase tangible personal property?

Yes

No

Yes

No sales/use tax due

No sales/use tax due

Sales/use tax due

STEP 1 STEP 2

Step 1: Is the Purchase for a Sponsor or Funding Source that is Subject to Tax?

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Non-Taxable TaxableDOE Operating WFO Non-Feds & CRADAs

WFO- Fed – Award types of F1, F3, F4 or F9 WFO-Fed - Award types of F2, F5, F6, F7 or F8

NIH – Award type of N1 NIH – Award Types of N2, N3, or N4

Royalties Contractor Sponsored Research (CSRs)

Construction – Purchases of Machinery and Equipment

• Including labor related to fabrication or assembly on equipment where title passes to DOE

Construction – Purchases of Fixtures and Materials

Rental Leases – for all rental leases regardless of funding source; but does NOT include real property or lease to own

Gifts

A listing of Materials, Fixtures, Machinery & Equipment can be found in Attachment I.

Step 2: Is the Purchase Tangible Personal Property?

Tangible Personal Property (TPP) can be:

Seen

Weighed

Measured

Felt or Touched

Perceptible to the senses

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Examples of TPP include: Books Computers Equipment Furniture Office Supplies Machinery Materials

LBNL Taxable Transactions

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Is the purchase

for a sponsor

or funding source that is

subject to tax?

Is the purchase tangible personal property?

Yes Yes Sales/use tax

due

STEP 1 STEP 2

Taxable Sponsors/Funding Sources

WFO Non-Feds & CRADAs

WFO-Fed - Award types of F2, F5, F6, F7 or F8

NIH – Award Types of N2, N3, or N4

Contractor Sponsored Research (CSRs)

Construction – Purchases of Fixtures and Materials

Rental Leases – for all rental leases regardless of funding source; but does NOT include real property or lease to own

Gifts

Tangible Personal Property can be:

Seen

Weighed

Measured

Felt or Touched

Perceptible to the Senses

LBNL Tax Payment Mechanism

Because the majority of LBNL’s purchases are not subject to sales tax, the Laboratory presents our resale certificate to vendors for most transactions.

To properly collect and remit tax due on LBNL taxable transactions, the STX burden rate has been established in the system. The STX burden is applied to the project id for the taxable sponsors/funding sources identified on slide 7 for the following TPP resource categories:

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LBNL Tax Payment Mechanism

Rental Contracts

• The contract will include articles/clauses requiring the vendor to bill LBNL for use tax on the invoice.

• STX burden will not be applied to rental project ids.

Construction Contracts

• The contract will include articles/clauses addressing that the vendor will charge sales/use tax on materials and fixtures, and accept LBNL’s resale certificate to exempt sales/use tax on equipment and machinery, since title on equipment and machinery pass to the U.S. DOE.

• Generally, the sales tax will be included in the construction contract pricing or on the invoice, not by STX burden code.

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“In this world nothing can be said to be certain, except death and taxes.”

Benjamin Franklin

Questions?Please contact the Controller’s Office Tax Accountant, Yvonne Deshayes at x6280.

Sales & Use Tax GuidelinesRoles & Responsibilities

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Roles & Responsibilities

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Process Participant

Role Sales & Use Tax Responsibility

Requisitioner • Appropriately identify sponsor and funding source• Utilize the appropriate item and resource category during the requisition process• Raise concerns or issues to your Resource Analyst or the Controller’s Office Tax

Accountant

Resource Analyst • Collaborate with Requisitioner to appropriately identify sponsor and funding source• Collaborate with the Requisitioner to utilize the appropriate resource category and

type during the requisition process• Ensure that project id set up supports sales and use tax compliance efforts• Raise concerns or issues to the Controller’s Office Tax Accountant

Budget Office • Validate and approve project id set up• Collaborate with Controller’s Office Tax Accountant when changes to the burden

code matrix, which effect sales tax, occur

Procurement • Ensure proper use of Resale Certificate • Validate item category and correct as needed• Ensure contract contains appropriate clauses/articles for sales and use tax purposes

The Procurement Department plays a pivotal role in the Laboratory’s sales and use tax compliance efforts and as such, it is critical that staff members have a complete understanding of the Laboratory’s approach to sales and use tax compliance.

As it relates to the PCard program, Procurement is responsible for accumulation of the documentation required for sales tax recovery.

Roles & Responsibilities

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Process Participant

Role Sales & Use Tax Responsibility

Accounts Payable • Be familiar with vendors that supply operating leases, if an invoice does not have sales tax, question it

• Be familiar with vendors that perform construction contract work and their methodology for billing sales tax

• As most of the Laboratory’s tax compliance efforts will be through the use tax process, if there is an invoice with sales tax on it, question it

• Raise concerns or issues to the A/P Lead Accountant or the Controller’s Office Tax Accountant

The Accounts Payable Team plays a pivotal role in the Laboratory’s sales and use tax compliance efforts and as such, it is critical that staff members have a complete understanding of the Laboratory’s approach to sales and use tax compliance.

Tax Accountant • Assist Accounts Payable, Procurement and other process participants with concerns or issues

• File monthly use tax prepayments and quarterly use tax returns• Monitor sales and use tax compliance through ongoing assessments and reviews• Serves as the primary interface between the Laboratory and the State when

inquiries or questions arise

The Tax Accountant is the Laboratory’s subject matter expert on tax compliance and provides assistance and oversight to the varied process participants who share responsibility for sales and use tax compliance.

Sales & Use Tax GuidelinesAttachments

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Attachment I: Materials, Fixtures, Machinery and Equipment

Items usually regarded as materials:AsphaltBricksBuilders’ HardwareCaulking materialCementConduitDoorsDuctsElectric wiring and connectionsFlooring GlassGravelInsulationLathLeadLimeLinoleumLumberMacadamMillworkMortarOilPaintPaperPiping, valves, and pipe fittingsPlasterPower poles, towers and linesPuttyReinforcing meshRoofingSandSheetmetal SteelStoneStuccoTile Wall coping WallboardWallpaperWall-to-wall carpeting (when affixed to the floor)Weather strippingWindowsWindow screensWire netting and screenWood preserver

Items usually regarded as machinery and equipment:

Air conditioning unitsAwningsBurglar alarm and fire alarm fixturesCabinets, counters, and locks (prefabricated)Electric generators (affixed to and accessory to a building, structure or fixed works)Elevators, hoists, and conveying unitsFurnaces, boilers, and heating unitsLighting fixturesPlumbing fixturesRefrigeration unitsSignsTelephone switchboards and instrumentsTelevision antennasTransformers and switchgearVault doors and equipmentVenetian blindsFixtures and materials as defined in Regulation 1521Wiring, piping, etc., used as a source of power, water, etc. for machinery and

equipmentRadio transmission antennasLarge tanks (i.e., over 500 barrel capacity)Fire alarm systemsStreet light standardsCooling towers other than small prefabricated cooling units.

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Items usually regarded as fixtures:

Drill presses

Electric generators (unaffixed, or, if affixed, which meet the requirements of Regulation 1521)LathesMachine toolsMoving parts of cranesPrinting presses

Attachment II: Sales and Use Tax Guidelines - Review Questions

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Question Answer Choices

1. LBNL is exempt from sales and use tax. True or False

2. Rental contracts (i.e. copiers) are subject to use tax. True or False

3. Gifts is a non-taxable category for sales/use tax. True or False

4. All NIH grants are taxable. True or False

5. Currently, MATRL, MATRB and PROCD are the only resource types subject to sales and use tax, for sponsors and funding sources subject to sales/use tax.

True or False

6. LBNL wants to purchase a piece of equipment using DOE Operating funds. From the choices provided, which is most appropriate response.

a) Procurement creates contract, presents resale certificate to vendor, vendor does not charge sales tax, AP pays invoice, title passes to DOE, no tax due.

b) Procurement creates contract, does not present resale certificate, vendor charges tax, AP pays tax, title passes to DOE, tax is due.

c) Procurement creates contract, presents resale certificate to vendor, vendor charges sales tax, AP pays sales tax, tax is due.