Collecting Sales Taxes
When a university department sells a taxable item or provides a taxable service, it is responsible for collecting the sales tax, unless a tax exemption certificate is obtained. Sales tax exemption certificates should be kept on file by the selling department. Currently, the University is registered to collect and remit sales tax in 35 states.
Sales tax must be separately stated from the sales price of an item on an invoice. As in a retail store setting, the customer is charged for the listed price of the goods sold along with a separately stated amount of related taxes. The amount of sales tax should be readily identifiable on the invoice.
Maintain copies of all sales tax invoices. Do not back into the sales tax calculation. In other words, do not include the sales tax in the selling price. Upon audit, the auditor will make the determination that the sales tax was not collected and assess the sales tax on the invoiced amount.
The University of Pennsylvania is exempt from Pennsylvania (PA) sales tax for most purchases directly related to our mission of education, research, and innovation. Our exemption to which we are entitled is limited and does not extend to all purchases made by the University.
Examples of taxable purchases
- Business–related purchases not paid with a University check or purchasing card
- Property used in the performance of an unrelated trade or business
- Materials, supplies, and equipment used and installed in the construction, reconstruction, remodeling, repair, and maintenance of real estate so as to become a permanent part thereof.
- Equipment used in the repair and maintenance of real estate
- Charges for hotel and motel occupancies
The University’s PA sales tax exemption is not transferable to another person. Therefore, staff/faculty that make purchases with their own funds on behalf of the University and are charged sales tax will not be reimbursed for the sales tax. Only payments made with University funds related to the tax-exempt mission would be exempt from sales tax. The vendor should be provided with our PA exemption certificate before the purchase is made. A request for an exemption certificate can be requested from Purchasing.