Tax Assessment

The University of Southern California must comply with all local, state and federal tax regulations.

The university cannot extend tax advice. If you have questions regarding tax regulations please consult a tax professional.

Sales and use tax

The university is not sales tax exempt. The California Department of Tax and Fee Administration (CDTFA) requires that the university pay sales tax to California merchants and accrue use tax for out-of-state merchants on all taxable transactions.

If the tax amount stated on an invoice is not correct and the supplier does not have a presence in California, use tax will be accrued for the difference and submitted to the state. Use tax is not accrued for California suppliers. California suppliers are responsible for charging accurate sales tax.

Invoice review process for applicable sales tax (Effective October 1, 2017)

Invoices Dated	Sales Tax Rate	Partial Sales Tax Rate*
10/1/2017 – current date	9.50%	5.5625%
7/1/2017 – 9/30/2017	9.25%	5.3125%
1/1/2017 – 6/30/2017	8.75%	4.8125%
1/1/2013 – 12/31/2016	9.00%	4.8125%

California income tax withholding

The Franchise Tax Board requires the university to withhold income tax on payments to non-California resident service providers.

For tax purposes, a non-California resident is defined as a payee that has no permanent residence or place of business in California and is not registered with the Secretary of State to do business in California.

Non-California residents subject to withholding include:

• Corporations
• Limited liability companies (LLCs)
• Partnerships
• Individuals

Types of income subject to withholding include but are not limited to:

• Payments for services (consultants, speakers, designers, etc.) performed in California
• Payments of royalties, leases, and rents, for property (real or personal) located in California

Payments made to non-California residents are exempt from this tax withholding by USC if ANY of the following criteria apply:

• The relevant services are performed outside of California;
• Total payments are less than $1500 in a calendar year; or
• The non-California resident provides a Form 590: California Withholding Exemption Certificate. To obtain a copy of the current year’s form:
  • Go to Forms and publications on the Franchise Tax Board’s website;
  • Click the Online button;
  • Select the desired Tax Year from the drop-down list;
  • Type “590” in the Form Number and/or Keywords field; and
  • Click the Get Forms button.

Payment to Non-California Residents for relevant services performed INSIDE California

	ALL suppliers with a physical California presence	Non-resident suppliers that DO NOT have a physical California presence
Are you eligible for a full exemption from the nonresident 7% withholding?	Supplier qualifies as a CA resident	No, I am not exempt	Yes, full exemption
Type of payments exempt	Payments for goods and services	Payments for goods and relevant services performed OUTSIDE of California	Payments for goods and services
Is the form 590 required?	NO	NO	YES
Supplier Portal Application Requirements	Select No, I or my business qualifies as a CA resident under the Tax Information tab and a California address must be added under the Addresses tab.	Select No, I am not exempt under the Tax Information tab and indicate on each invoice the percentage of services performed within California.	Select the Yes, full exemption under the Tax Information tab and upload the Form 590.

1099 reporting

Payment Services issues a Form 1099-NEC to U.S. payees according to current Internal Revenue Service (IRS) nonemployee compensation guidelines.

Types of income subject to 1099-NEC reporting include but are not limited to payments for services (consultants, speakers, designers, etc.).

In addition, Payment Services issues a Form 1099-MISC to U.S. payees according to current Internal Revenue Service (IRS) miscellaneous income guidelines.

Types of income subject to 1099-MISC reporting include but are not limited to:

• Payments of royalties, rents, prizes and awards
• Payments to an attorney

In general, royalty payments totaling less than $10 and all other types of payments totaling less than $600 in a calendar year are not 1099 reportable. Please send questions regarding 1099 reporting to aphelp@usc.edu (include 1099 in the subject of the email).

Additional information for foreign payees

The following information applies to foreign payees performing work in the U.S. Foreign payees subject to withholding include:

• Foreign corporations/partnerships
• Foreign individuals

Federal income tax withholding

The IRS requires the university to withhold 30% income tax on United States (U.S.) source income payments to foreign payees, regardless of amount.

Types of income subject to withholding include but are not limited to:

• Payments for services (consultants, speakers, designers, etc.) performed in the U.S.
• Payments of royalties, leases, and rents, for property (real or personal) located in the U.S.

Payments made to foreign payees are exempt from this tax withholding by USC if ANY of the following criteria apply:

• The relevant services are performed outside the U.S.; or
• Payee is a resident of a country that has a tax treaty with the U.S. (payee must provide appropriate tax forms prior to processing payment).

1042 reporting

Payment Services issues a Form 1042-S to foreign payees subject to 1042 reporting according to current IRS guidelines.

Please submit questions regarding 1042 reporting to (include 1042 in subject of the email):

• Foreign corporations/partnerships: aphelp@usc.edu
• Foreign individuals: payroll@usc.edu

Form delivery

The table below describes the mailing deadlines for tax withholding forms. Please wait for ten (10) business days before contacting USC in the event that you do not receive your form.

Form	Mailing Deadline (from USC)
1099 NEC	February 1
1099 MISC	March 1
1042	March 15