22.8 Collect and Report Sales and Use Tax

Policy Statement

Units must collect and report all applicable sales and use taxes from taxable sales made to non-exempt customers external to the University of Illinois System (including students, faculty, and staff).

Reason for the Policy

To ensure compliance with the various sales and use tax regulations enacted by the State of Illinois, as well as other states and Canada.

Applicability of the Policy

All units that generate sales revenue from taxable sales.

Procedure

A taxable sale is typically defined as a sale of tangible personal property to non-exempt customers who are external to the University of Illinois System, where the customer makes the purchase for use or consumption (as opposed to resale purposes). If the customer purchases the tangible personal property for resale purposes, this is not a taxable sale, as the sales and use tax will be collected from the final customer (not the reseller).

Sales of tangible personal property to other University of Illinois System departments (including grant funds) are not taxable sales, as those are internal sales. However, sales of tangible personal property to customers external to the system (including sales to faculty, staff, and students) are taxable sales, assuming the customer is not making the purchase for resale purposes.

While taxable sales primarily occur in self-supporting funds, such activity may also arise in other fund types. Other examples include sales of tangible personal property for a fundraising effort in a gift fund or goods sold for use outside a medical facility in a service plan fund.

To ensure proper collection and reporting of sales and use taxes, refer to the procedural steps outlined below.

1. Obtain an understanding of sales and use taxes as outlined in Section 18.6 – Sales and Use Tax.
2. Determine the appropriate tax rate by identifying the location of the sales activity:
   • If the sale is processed in Illinois and the customer makes the purchase in person, then use the tax rate of the seller's location. Consult the Illinois Department of Revenue (IDOR) Tax Rate Finder for the applicable tax rate.
   • If the sale is processed in Illinois and shipped to an Illinois address, then use the tax rate of the seller's location. Consult the IDOR Tax Rate Finder for the applicable tax rate.
   • If the sale is processed in Illinois and shipped to an address outside of Illinois, consult "Sales to Clients in Other States and Canada" in Section 18.6 – Sales and Use Tax for the applicable tax rate.
   • If the sale is processed outside of Illinois (for example, selling goods at a conference held in another state), consult "Sales to Clients in Other States and Canada" in Section 18.6 – Sales and Use Tax for the applicable tax rate. If the state where the sale was processed is not listed, contact the Tax Office for further guidance.
3. Calculate the required amount of tax to collect, using one of the following methods:
   • Method 1: Collect the sales price plus the calculated tax amount from the customer.
     Example:
     If the sales price is $10 and the applicable tax rate is 9%, you will collect a total of $10.90 from the customer ($10 in sales plus $0.90 in tax).
   • Method 2: Include the tax in the sales price charged the customer. To use this method, you must disclose that the tax is included in the sales price.
     Example:
     If the sales price is $10, the applicable tax rate is 9%, and you have properly disclosed that the sales price includes tax (such as a sign at the checkout counter), then you will collect a total of $10.00 ($9.17 in sales calculated by $10/1.09 plus $0.83 in tax).
4. To ensure proper recording of both the sales revenue and the tax collected, follow the applicable method below:

   Self-Supporting or Service Plan Fund:

   For taxable sales associated with a self-supporting or service plan fund, record the sales revenue and the tax collected to the appropriate account code in the applicable fund of the selling unit. The recommended practice is to use the appropriate revenue account code to record the sales revenue and account code 61200 "Sales Tax Payable" to record the tax liability.

   Gift Fund:

   For taxable sales taking place within a gift fund (such as the sale of tangible personal property [donated or purchased] sold as part of a fundraiser), complete the applicable University of Illinois Foundation (UIF) Gift Transmittal Form and enter the exact amount of sales tax calculated in the “Comments” field.

   Note: Sales of tangible personal property (donated or purchased) at a live, silent, or online auction are typically exempt from sales tax. See Section 18.6 for further details.

   The UIF will sweep the sales revenue to account code 303242 “UIF Fundraising/Non-Gift Revenue” of the related gift fund. The UIF will also sweep the sales tax to account code 303247 “Non-Gift Sales Tax Revenue” of the related gift fund.

5. Download the most recent copy of the University of Illinois System Sales Tax Reporting Form each month, as changes to the form occur frequently.
6. Submit the completed form for the previous month's sales to UAFRTAX@uillinois.edu as outlined within the procedures on the form.
7. UAFR collects and reports all sales from every applicable system unit on the appropriate sales and use tax returns and remits the collected taxes to the appropriate governmental bodies.
8. UAFR completes journal vouchers to reclassify the sales and use tax from the unit's fund to the applicable custodial fund from which the tax was paid.