Certain expenditures or payments for events create taxable incidents for which Arch must comply. Also, certain revenues generated by events or contracts create tax liabilities. Any taxable event requires Arch to prepare tax reports and to pay the appropriate taxes. The types of tax reporting are identified herein.

1. SALES AND USE TAX

Unlike the University of Georgia, the Arch Foundation for the University of Georgia, Inc. is not exempt from sales and use taxes. It is the responsibility of the person requesting the expenditure or reimbursement to include applicable sales tax and inform the vendor that Arch is not exempt from such taxes. Any expenditure paid directly to the vendor by Arch must include applicable sales taxes. Any individual who incurs a business expense to be reimbursed by Arch must be sure to pay applicable sales or use tax. Check requests submitted to Arch with invoices that do not include sales tax will be returned for correction for all in-state (Georgia) vendors. For out-of-state vendors or web purchases, the applicable county use tax rate will be added and expensed to the appropriate Arch fund. Sales tax is applied to any “sale”. Sale means any transfer of title or possession, transfer of title and possession, exchange, barter, lease or rental, conditional or otherwise, in any manner or by any means of any kind of tangible personal property for a consideration and includes fabrication, furnishing, repairing, or servicing tangible personal property and transfer of possession without transfer of title [per State of Georgia Department of Revenue O.C.G.A. 48-8-2(8)].

Use tax is applied to any “use” meaning the exercise of any right or power over tangible personal property incident to the ownership of the property. Use tax includes the use, consumption, distribution, and storage of tangible personal property [per State of Georgia Department of Revenue O.C.G.A. 48-8-2(12) & (13)].

Arch must file sales and use tax returns and remit payment to the Georgia Department of Revenue on a quarterly basis. This report and payment is due by the 20th day following the end of the calendar quarter. On this report, Arch includes all sales and use tax due on any income received subject to sales and use taxes and any expenditure that was paid without applicable sales and use taxes. The expense of the sales and use taxes will be charged to the Arch account receiving the income or incurring the expense.

Items sold at auction are essentially a purchase, and as such will trigger state sales tax. Per Georgia state law, the applicable sales tax for each item sold at auction will be charged back to the appropriate Arch fund and remitted to the state. Please note that Arch funds cannot be used to purchase items for auctions; such items must be donated or purchased by other means.

More information on applicable sales and use taxes on income or expenses can be found at the Georgia Department of Revenue homepage. Please contact the Expenditure Control Department within the Arch Office for questions.

2. IRS FORM 1099

The Arch Foundation for the University of Georgia, Inc. follows the Internal Revenue Service's guidelines for issuance of 1099 Miscellaneous Income Forms to individuals/corporations who receive payment for rents, contract services, honoraria, legal fees, consulting fees, prizes or awards, reimbursable expenses for which original receipts are not provided, and other income payments during the course of a calendar year. For definitive examples of reportable income and the minimums that apply each year, consult the IRS's website at www.irs.gov . Social security numbers and taxpayer identification numbers are required on any check requests submitted for payment of these type expenditures. For this reason, an IRS W-9 form is required for all vendors, companies and individuals who are non-UGA employees.

Arch's Integrated Financial and Administrative Solution (IFAS) system generates a report after the end of each calendar year that identifies vendor ids coded for 1099 MISC Income reporting. The 1099 MISC Income coding is taken from the vendor’s W-9 form submitted. Arch also includes any payments made during the calendar year that are considered taxable income reported on a 1099 MISC Form and were not included on the system's report. Payments not included in the system report are usually reimbursement to an individual for previous payment to a business or person for a service. This type of reimbursement is considered a third party payment. Most vendors will bill directly either before or after the event. If a vendor will not bill directly and a third party payment is the only means of conducting University business, then the Arch will require an IRS W-9 form completed for this vendor. Arch has established this guideline in order to comply with IRS rules and regulations regarding miscellaneous income.

Form 1099-MISC are completed and mailed to recipients by January 31 for the previous calendar year. Arch efiles this information to the Internal Revenue Service (IRS) by March 31st via the FIRE (Filing Information Returns Electronically) system.

3. UNRELATED BUSINESS INCOME TAX

As a 501(c) (3) organization, The Arch Foundation for the University of Georgia, Inc. is subject to unrelated business income tax (UBIT). As a general rule, Arch does not engage in activities which would be considered as unrelated business income because such activities are not considered part of our tax-exempt purpose by the Internal Revenue Service, and they can result in an additional cost of paying unrelated business income tax (UBIT). Even if an unrelated business activity yields no profit, it must be reported to the Internal Revenue Service.

It is Arch's policy that we must consult with legal counsel and our tax preparation professionals before any transaction which has elements of unrelated business income is considered. Arch will not accept any income deposits that could have been generated from an unrelated business activity that has not been approved by the Director of Finance for Arch. The following is included to better help the reader understand UBIT. Please contact the Financial Services Office for further information.

The Unrelated Business Income Tax as set forth in the Internal Revenue Code applies to income derived from activities that are not in the furtherance of an entity's tax-exempt purpose. The income derived from an unrelated business is referred to as "unrelated business taxable income" (UBTI) and the taxes imposed on UBTI are commonly referred to as "unrelated business income tax" (UBIT). The Internal Revenue Code defines unrelated business income using three basic criteria:

(1) Activity must constitute a trade or business (typically an activity that is carried on with the motive or intent of producing income)

(2) Activity must be carried on regularly (frequency and continuity of the activity can be compared with the amount of time that a taxable entity would spend on the activity)

(3) Activity is not substantially related to (contributes importantly to the accomplishment of) the organizations' exempt purpose The Internal Revenue Code also gives some general exclusions from unrelated business income that include investment income, royalties, rents from real property not debt-financed, and gain/loss on sale or exchange of property.

Certain types of income are commonly considered to be taxable under UBIT and include advertising income, sale of merchandise, and service income disguised as royalties. Some categories of income that are commonly scrutinized by the IRS include travel tours, corporate sponsorships, and sale of mailing lists.

Please contact the Office of Financial Services Other Income Department before considering any revenue generating activities involving the use of Arch funds or the deposit to an Arch fund. Any contracts involving these revenue-generating activities must be reviewed by the Arch Office and be approved and executed by the Executive Director of Arch.