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

The responses I am getting on and off list have been so helpful. I am grateful to have so many generous peers. I am particularly interested in knowing if anyone has worked with their finance office and successfully determined that library materials (print or electronic), could legally be exempt from this process.

Thank you.

Julie

From: acqnet-request_at_lists.ala.org <acqnet-request_at_lists.ala.org> On Behalf Of Cooke, Rivkah Arielle Tanya-Marie
Sent: Thursday, February 7, 2019 1:17 PM
To: acqnet_at_lists.ala.org
Subject: 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
racooke_at_indiana.edu<mailto:racooke_at_indiana.edu>

From: acqnet-request_at_lists.ala.org<mailto:acqnet-request_at_lists.ala.org> <acqnet-request_at_lists.ala.org<mailto: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<mailto: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)