Tax Services provides services in foreign visitor payments and taxation, employee and independent contractor relationships, personal taxability, scholarship compensation and more. Refer to the tabs for further resources.
Employee fringe benefits
There are a few ASU employee-related transactions or activities that result in additional compensation to the employee beyond the routine wage payment process. When these situations occur, ASU is required, as a withholding agent, to deduct applicable taxes and to report and submit these taxes to the proper authorities. Such transactions are handled through the Payroll system, where the amount of the additional compensation is added to the normal pay and taxed appropriately.
ASU has established policies and procedures on four such activities, although there may be other situations that result in payments being made that accrue more than an incidental personal benefit to an employee and that should be handled as taxable transactions.
Departments making third-party payments on behalf of employees should be sensitive to possible payroll tax implications and contact the tax unit of Financial Services for assistance in making appropriate taxability determinations.
Information about education tax benefits is in IRS Publication 970, Tax Benefits for Education. For information about IRS Form 1098-T, Tuition Statement, visit Student Business Services. Review the tax-exempt financing status of ASU facilities sorted by existing facilities and potential facilities.
Forms and resources
Visit the Financial Services forms page for additional tax-related forms.
In accordance with Arizona state statute, ASU must pay sales or use tax on the majority of its purchases and collect sales tax on its commercial transactions with customers external to the university. FIN 108 covers sales tax in general.
Purchases of tangible personal property (goods, not services) are subject to state and city sales tax unless a specific exemption exists and a sales tax exemption claim has been properly completed and submitted to the vendor. The most common exemption claimed on ASU purchases is for machinery and equipment used in research and development. Additional information about how to claim the exemption and restrictions that apply is available in FIN 120.
ASU units that conduct sales activities must charge state sales tax and properly account for the sales and tax collected in accordance with arrangements made with Tax Services. For advice on sales-tax-related responsibilities or to report new retail activities, please contact Tax Services at 480-965-9890.
Use tax is paid on the cost of goods purchased from out-of-state vendors if the vendor does not collect Arizona state sales tax. P-Card purchases of out-of-state goods are also subject to use tax. Use tax is assessed based on information received from the P-Card database, which may or may not indicate whether state sales tax was already applied to the purchase. Departmental reviewers must contact Financial Services to reverse use tax assessments on purchases that also included a sales tax payment.
Review the stipend guide to determine whether to process a stipend payment through the financial management system, student financial system or payroll system.
All income received by the student or participant may be treated as taxable income regardless of stipend classification. However, amounts classified as scholarship stipends are eligible for potential exclusion from income under Internal Revenue Code Section 117 for amounts paid for tuition, required fees, course books and needed school supplies. Compensatory stipends are not eligible for potential exclusion.
Work authorization costs
In the process of hiring and retaining outstanding researchers and teachers, ASU occasionally uses outside legal services to obtain the necessary permanent work authorization. The International Students and Scholars Office (ISSO) provides permanent work authorization services. Because employment-based permanent residency benefits the employer and is not solely for the benefit of the international employee, employers must bear the associated costs, including legal fees and filing fees. Employees may not reimburse department for these costs, nor are the costs taxable to them.
However, if the employee includes family members in the permanent residency application, those costs directly allocable to the non-employee, including individual application fees, are not employment-based costs and taxable to the employee.
Departments that pay fees associated with non-employees and are working with ISSO on permanent work authorization must contact the tax unit of Financial Services, so the payments can be processed as taxable fringe benefits. All outside legal expenses must be approved for payment by the Office of General Counsel (OGC); thus, OGC is responsible for notifying the tax unit of Financial Services of the taxable benefit when such payments occur.