RE: [ALCTS-acqnet] Question about taxes - foreign vendors

Hi Julie,

 

I am not currently working with Indiana University Libraries, but we faced a
similar situation there. In our case the method of payment was not a factor.
Our tax office determined that copyright payments, payments for electronic
resource access (whether perpetual or temporary), and payments for the use
of software qualify as royalties. There is a federal withholding tax of 30%
on royalty payments to foreign vendors. The purchaser, rather than the
vendor, is responsible for reporting and remitting the tax to the U.S.
government.

 

When it came to payments, we had two options. First, we could pay 70% to the
vendor and pay 30% as taxes. However, many contracts do include clauses that
the purchaser is responsible for any taxes and that the vendor has to
receive the amount originally billed. In that case you end up paying ~43%
more than the actual charge because of the gross-up, as Carol explained in
her email. Even where a contract doesn't dictate that you are responsible
for taxes, you have to consider how it will impact your relationship with a
vendor to insist that you are going to start taking 30% out of their
payment.  

 

One factor that ended up saving us a good deal of money is that many
countries have treaties with the United States that either eliminate or
reduce the tax. When I was last involved, there was no withholding for
Germany and the withholding for royalty payments to China was 10%. The only
catch is that the vendor has to claim treaty benefits on their tax forms. I
recommend asking your Finance folks if they are able to apply treaty
benefits.

 

I hope this helps.

 

All the best,

 

Rivkah Cooke
Business Manager
Division of Student Affairs 
Indiana University Bloomington
 <mailto:racooke_at_indiana.edu> racooke_at_indiana.edu

 

From: acqnet-request_at_lists.ala.org <acqnet-request_at_lists.ala.org> On Behalf
Of "Loder, Julie L"
Sent: Wednesday, February 6, 2019 5:46 PM
To: acqnet_at_lists.ala.org
Subject: [ALCTS-acqnet] Question about taxes - foreign vendors

 

Hello,

 

Our university is now paying foreign vendors without a U.S. Bank via WIRE
only. As part of this process, someone in Finance is calculating
"international tax" withholding. In all the years I have worked in
Acquisitions, I have never heard of this happening for library materials. I
am trying to find out more about this process and have a meeting setup with
that department, but would like to know if anyone in the community has
experienced this situation.

 

Thank you

 

Julie

 

Julie Loder

Director, Acquisitions & Eresources

Vanderbilt University

Jean & Alexander Heard Library

110 21st Avenue South

Suite 700 Baker Bldg

Nashville, TN 37203

julie.loder_at_vanderbilt.edu <mailto:julie.loder_at_vanderbilt.edu> 

615-343-5879 (voice)

615-343-8834(fax)