Presentation on theme: "New Procurement Card Process"— Presentation transcript:
1 New Procurement Card Process Ian P. Da Costa, ManagerUCLA/UCOP/UCM Accounts Payable
2 Agenda Introduction Responsibilities Understanding System Logic Navigating the SystemPAN NoticeProcessing CreditsExampleSystem Generated sCommon VendorsSales & Use Tax RulesQ & A
3 Introduction Data feed from bank pre-populates a CatBuy cart Banking system responsible for income tax reportingProcess will temporarily exempt vendors from the upcoming 3% withholding requirement for a certain time periodExpenses hit the ledger in a timely mannerNot subject to the $500 reimbursement limitImmediate accruals of use taxSampling methodology for auditingExpand program without additional staffing
4 ResponsibilitiesCardholder or preparer allocates the transactions in CatBuyCardholder or preparer is responsible for identifying taxable and non-taxable components of a transactionDepartment managers are encouraged to ensure that tax reporting is accurateCentral units will perform sample audits for complianceDepartment is responsible for assessments
5 Ship To and Tax Rate Information for UC Merced On January 5, 2009, Shipping & Receiving for all UC Merced deliveries for Merced and Atwater were relocated to the following address on the main campus:UC MercedFacilities Services Building A5200 North Lake RoadMerced, CA 95343The tax rate for this location is currently 8.25%. Our campus is located outside of the city limits, and therefore, not subject to the additional tax required within the city of Merced.Confirmation may be obtained by visiting the State Board of Equalization website or by entering the University address (5200 N Lake Rd) at this website:(This link will validate that our address is not within the city limits.)Please update your database/files with the correct tax rate. Also, reference Purchase Order Numbers on all shipments to ensure delivery to the right location.
6 8.25% Tax Rate8.75% Tax RateCurrent as of 3/1/11 only.
7 Understanding System Logic For Taxable Transactions (i.e. if goods are taxable)Use tax accrued = taxable amount* times default tax rate minus tax paid to vendor plus tax due on handling or other taxable components (only if goods are taxable)* Taxable amount = total minus non-taxable amountTaxable componentsDry IcePackingHazardous Material ChargeHeat SurchargeIce SurchargeFuel SurchargeP & H
8 Understanding System Logic For Taxable Transactions (i.e. if goods are taxable)Non-taxable componentsE-wasteRecycling FeeInsuranceDeliveryUPSFedExCombined shipping and handlingSystem treats 20% of the combined charge as taxable
11 Navigating the System Defaults to user’s department code Searchable by:Dept Code, Order NumberCardholder Name, Cardholder UIDManager Name, Manager UID, Merchant Name
12 Navigating the System Limit search by: Invoice status ([new], [in-progress], [paid])Cart status ( [all] , [incomplete], [open], [no status], [error during submit], [order created])Invoice type ( [all] , [debit], [credit]Date ranges ([Post/Invc Date to], [Post/Invc Date from] and/or [Invc Due Date] to [Invc Due Date])
13 Select cardholder using radio button on LHS Click options in middle of screen[Create Cart] [Edit Cart] [Delete Cart] [Cancel Order]
15 Navigating the System Check preparer defaults Requester: Requester Phone:State:Tax Rate:Dept Code:Dept Contact Login:Dept Contact Phone:
16 Navigating the System Change defaults as needed Order Date: [today’s date] [calendar]Override Reason:CC Self:Class of Order: QPAN Subject: PCD ,CAT, JANERemember tax calculations are based on defaults for preparerChange tax rate if creating orders for cardholders in different districts (i.e. location of where goods will be used)
17 Navigating the System Adjust FAU and enter correct object code BRUIN, JOE
19 Navigating the System Typical Transactions* Enter Sales Tax Charged Enter Total Non-Taxable AmountEnter Description & Business Justification
20 Navigating the SystemOthers: Identify Taxable & Non-Taxable ComponentsFor Taxable GoodsEnter into the Handling box (taxable components):Dry IcePackingHazardous Material ChargeHeat SurchargeIce SurchargeFuel SurchargeP & H
21 Navigating the SystemOthers: Identify Taxable & Non-Taxable ComponentsFor Taxable GoodsEnter into the Shipping/Freight box (nontaxable components):E-wasteRecycling FeeInsuranceDeliveryUPSFedEx
22 Navigating the SystemOthers: Identify Taxable & Non-Taxable ComponentsFor Non-Taxable GoodsEnter amount in Non-Taxable BoxSelect Exempt Reason Code
26 Processing Credits Create a cart for the transaction being reviewed Enter the corresponding debit PO number for the original charge and fill in the description/business justificationClick [Load] and the [PO FAU] information will be populatedClick [Save] and [Submit]
27 Example Local stores in same district should charge the correct rate Identify taxable transactionsT (other variations)Identify non-taxable transactionsN or F (other variations)Some vendors provide taxableor non-taxable sub-totalsCalculate the non-taxableportion (note: maybe faster toadd taxable items and subtractfrom the total)
28 Sample System Generated E-mails RE: Create Cart for Pcard debit transaction U.S. Bank has transmitted a Visa credit card transaction to UCM for payment into the Pcard Transaction Queue. Pcard procedures require the cardholder/preparer to create a cart in the CatBuy system within three business days, or preferably immediately upon receipt of this . Please remember to provide sufficient detail of the purchase for business justification on the order. Thank you.RE: Enter order for Pcard credit transaction U.S. Bank has issued a credit in the amount shown in your Pcard Transaction Queue. Go to your Pcard Transaction Queue, select the credit, and enter the Order Number associated with the original debit charge within three business days of receipt of this . Thank you.RE: Debit applied with default FAU The default FAU specified in your Pcard user profile was debited for a transaction that did not have a "Q" class order created in your Pcard Transaction Queue. Pcard controls require "Q" class orders to be created in CatBuy to validate appropriate accounting information and provide business justification. Pcard Administration will be contacting you shortly for follow-up action. Thank you.
29 Sample Vendors (All cases are different) Merchant NameAccrue Use TaxAMAZON.COMYAMAZON MKTPLACE PMTSNPAYPALFACEBOOK.COM*ADSLOWES #01XXXX (i.e. LOCAL STORES ONLY)MCMASTER-CARRAPL*APPLE ONLINE STOREBIO RAD BEA5UCM BOOKSTORE (i.e. LOCAL STORES ONLY)IVG*INVITROGEN CORPORATHE HOME DEPOT 6XXXX (i.e. LOCAL STORES ONLY)
30 Sample Vendors (All cases are different) Merchant NameAccrue Use TaxCDW GOVERNMENTNBARNES&NOBLE*COMAMA PROFILESGODADDY.COMRICOH AMERICAS CORPB & H PHOTO-VIDEO.COMYBEST BUY XXX (i.e. LOCAL STORES ONLY)STAPLES DIRECTDELL SALES & SERVICEAT&T WIRELESSBUY.COMSEARS COM INTERNET
31 Erica Fernandez, Tax Director Sales and Use TaxErica Fernandez, Tax Director
32 Sales and Use Tax Sales tax Use tax Imposed on every retailer (seller) for the privilege of making retail sales of tangible personal property (TPP) in CAUse taxImposed on the purchaser for the storage, use or consumption of TPP in CA
33 Tangible Personal Property TPP is personal property which can beSeen, weighed, measured, felt, touched etc.Non-TPP property includesReal property (land)Intangible property (e.g. goodwill)Property rights (e.g. licensing of trademarks or software if no TPP is transferred)
34 Compliance as a Purchaser Determine and pay the proper amount of tax due (use tax)Essentials for good tax decisionsWhat is UCM’s sales and use tax obligation?What is the item being purchased and for what use?What are the available exemptions?What is the taxable sales price?
35 Sales and Use Tax Obligation California vs. Out-of-State Vendor Two classifications of sellers:CA retailers (generally SALES tax)Sellers of TPP with business locations in CAOut-of-state retailers (generally USE tax)Sellers physically located outside CAMay be registered to collect CA tax based on nexus with CA (physical presence through employees, warehouse, etc.)If out-of-state vendor charges tax, confirm CA seller’s permit number
36 Sales and Use Tax Obligation California vs. Out-of-State Vendor (cont) The purchase of TPP from a retailer (not registered to collect CA taxes) for use in CA is subject to use taxIdentifying use tax transactions:Vendor has non-CA addressInvoice is for tangible propertyCharge for shipping indicating something was shippedNote – purchases from other states or their instrumentalities, including state universities are not subject to sales and use tax.
37 Common Scenarios Example #1: UCM and Vendor are in same State What tax is applicable?Who has the obligation to report?Example #2: UCM and Vendor are in different statesExample #3: Property shipped to a different state (e.g. New Mexico)Is CA tax applicable?If yes, what tax and who has the obligation?Is NM tax applicable?
38 Property Being Purchased Keys to accurate tax decisions include:What is the item being purchased?How will the item be used (e.g. will it be resold?)Does the purchase include services (e.g. repair or installation)?
39 Determining the Taxable Gross Receipts (Sales Price) …………………..1…………… ……….Correct Amount of TaxGeneral rule – sales price (gross receipts) is subject to tax unless an exemption applies“Gross receipts” exclude:Cash discounts, amounts charged for returned merchandise (Note that the value of a trade-in does not reduce the sales price)Price for labor and services for installing propertySeparately stated charges for transportation (retailer to customer)Some taxes (federal retailer or consumer tax, local sales and use tax)Intangible property under a technology transfer agreement
40 Exemptions Common exemptions include Property shipped outside CA Purchase for resaleServices and labor unrelated to the sale of TPPFreight / ShippingSoftware delivered electronicallyOriginal works of artOccasional salesNewspapers and periodicalsPrinted sales messagesPrescription medicines
41 Common Exemptions – Property Shipped Outside CA Property purchased for use outside CA is not subject to CA use taxKeys to identifying property for use outside CA“Shipped To” location on invoice is outside CAInformation on purchase orderA copy of the shipping documents or other support should be retained to document out-of-state shipment
42 Common Exemptions – Purchases for Resale Property purchased for resale is excluded from the definition of retail sale and is therefore exemptA resale certificate should be issued to the vendor. This transfers the liability for the collection and remittance of sales tax from the vendor to UCMResale certificates are issued by Tax Services
43 Common Exemptions – Services / Labor Services where no TPP is transferred, or where the transfer of TPP is incidental, are exemptProfessional services such as accounting, medical, legal etc.Labor unrelated to the sale of TPP is exemptRepairsInstallationLabor related to the sale of TPP is taxableFabrication - creating TPPAssembly - charges for assembling new products
44 Common Exemptions – Shipping / Freight Shipping / freight charges are exempt if:Separately stated on the invoiceDelivery is by common carrierNote that handling charges are taxable (unless the transaction is exempt)If shipping and handling charges are combined, the combined charge is taxable. However, if the vendor has not assessed tax, and UCM needs to accrue it:80% of the combined charge can be allocated to shipping and 20% to handlingUse tax should be accrued on the 20% allocated to handling
45 Common Exemptions – Software Canned (off-the shelf) software is exempt if it is delivered electronically and no tangible property is shippedShipping / handling charges on the invoice indicate that TPP (such as a DVD) was shippedCustom software (developed specifically for the user)More than 50% custom – exemptLess than 50% custom – partially exempt
46 Common Exemptions – Newspapers and Periodicals Newspapers and periodicals are exempt if the publications are:Regularly issued at stated intervals - more than 3 times but less than 60 times per year and areDistributed without chargeAn exemption certificate should be issued to the vendor – See Tax Services
47 Common Exemptions – Occasional Sales A sale by (and purchase from) a person who is not engaged in business and not required to hold a CA seller’s permit, is exemptSeller makes less than 3 sales of TPP in a 12- month periodAn affidavit signed by the seller and approved by Tax Services is required
48 Common Exemptions – Printed Sales Messages Printed sales messages are exempt if the printed material:Advertises a good or serviceIs delivered directly to the user by the vendor or mailing house, by common carrier or mail, at no cost to the userExamples are Med Center pamphlets regarding medical services or UNEX postcards regarding course announcements.An exemption certificate should be issued to the vendor – contact Tax Services
49 Common Exemptions – Original Works of Art An original work of art purchased for display in a museum or public placeMust be TPP which is created as a unique objectIncludes visual arts, crafts and mixed mediaMust be purchased for display in a museum or other place which is open to the public without charge for at least 20 hours per week, and for at least 35 weeks of the calendar yearExample – original artwork purchased by the Fowler Museum for display
50 Maintenance Contracts Hardware – parts / materials / services etc.Mandatory contract (required to purchase as a condition of sale of the property)TaxableOptional (not required to purchase as a condition of sale of the property)ExemptCharge must be separately statedCanned software - updates / upgrades / fixes etc.Mandatory – exempt only if both original software and maintenance is delivered electronicallyOptional50% exempt if with TPP100% exempt if no TPP
51 MedicineExempt “medicine” means any substance or preparation intended for use by external or internal application to the human bodyMust be used for the diagnosis, cure, mitigation, treatment or prevention of diseaseCommonly recognized as intended for that useMust be prescribed orFurnished by a health care facility
52 Medicine (cont.) Exempt medicine Medical laboratory items - taxable Prescription medicineImplantsMedical gases (used for patient treatment)Medical laboratory items - taxableAnimals for researchLiquidsGasesVitamins (supplements)Generally taxable unless furnished under qualifying criteria
53 District Taxes – UCM Purchases Generally vendors are required to collect district taxes only in districts where they do businessIf TPP is purchased from a California vendor who is not required to collect LA County district tax and charges the 8.25% state-wide rateAccrue the 1.5% difference (9.75% minus 8.25%)If TPP is purchased at a lower district rate (e.g. in San Bernadino where the combined rate is 8.75%) for use at UCMAccrue the 1% difference (9.75% minus 8.75%)
54 Miscellaneous Fees and Charges Fully taxable, partially taxable or exempt depending on the taxability of the item(s) purchasedDry iceHazardous material chargeHeat surchargeIce surchargeFuel surchargePackaging and handlingNot TaxableE-waste recycling feeInsuranceUPS and Fed Ex delivery charges
55 Where To Go For Help Tax Services Portal - http://www.tax.ucla.edu Sales and Use Tax at UCLA -UC Sales & Use Tax ManualUC AMC TUCLA Tax ContactsAccounts Payable transactions:Campus – Renee Roth– x 48778All other transactions:Scott Monatlik – x 46724Upma Budhraja – .ucla.edu x 49868State Board of Equalization (SBE) Web Site
57 Case Study 1 Notebook computer $ 996 Consulting services 200 The Math Department received the following invoice from Computer Corporation in Kansas:Notebook computer $Consulting servicesShipping and HandlingCA sales taxTotal $ 1,216What is the total non-taxable amount (before shipping and handling)?Does an exemption apply? If so, which one?What amounts should be entered on the P-card screen and where?What is the tax due on this invoice?
58 Solution to Case Study 1The total non-taxable amount before shipping and handling is $200 (for consulting services)The exemption for services where no TPP is provided, appliesEntries on P-Card screen:Enter $20 in the box labeled “Enter shipping / handling charge if it is combined”Enter $200 in the box labeled “Enter Total Non-Taxable Amount”Select the code for exempt services from the drop-down list in the box labeled “Exempt Reason”
59 Solution to Case Study 1 (cont.) 4. The tax due is calculated as follows:Notebook computer $ 996Consulting servicesShipping and Handling (20%)Total subject to tax $1,000Tax rate %Total tax $ 97.50
60 Case Study 2The Events Office purchased canned (off-the-shelf) software from a vendor in Texas to track the number of film permits issued annually. The software was delivered via CD and installed on the Department’s server. The purchase includes mandatory maintenance (i.e. upgrades, updates and fixes) to be delivered electronically over the period of the contract. The following invoice was received:Software $Maintenance (1/1/11 – 12/31/11)ShippingCA sales taxTotal $ 1,010What is the total non-taxable amount (before shipping and handling)?Does an exemption apply? If so, which one?What is the tax due on this invoice?How would your answers to questions 1-3 change if the software was delivered electronically?
61 Solution to Case Study 2The total non-taxable amount (before shipping and handling) is $0No exemption applies to the software since it was delivered via media (CD). Although the maintenance is delivered electronically, no exemption applies because the original software is taxable (mandatory maintenance is considered to be a part of the sale of the original software. If the software is taxable, the mandatory maintenance is taxable)The taxable amount is $1,000 ($800 + $200) and the tax due is $97.50 ($1,000 X 9.75%)If both the software and the mandatory maintenance are delivered electronically, both are exempt. The total non-taxable amount (before shipping and handling) would be $1,000. No tax would be due.