FAQs

Questions About UBIT

What is UBIT?
UBIT is the abbreviation for Unrelated Business Income Tax which is a federal income tax placed on non-profit organizations including state colleges and universities for conducting business activities that are regularly carried on, and not substantially related to their education mission. As colleges and universities became increasingly interested in maximizing revenue from trades or businesses unrelated to their educational mission, Congress passed the Unrelated Business Income Tax of 1950. Their primary purpose was to give the IRS a means to penalize a tax-exempt organization that conducts unrelated business income activities instead of revoking their tax-exempt status and to place colleges and universities on the same playing field as for-profit businesses engaged in the same business activity that pay federal corporate tax.
An activity must meet three tests in order to be classified as an unrelated trade or business.

It must be:
1) a trade or business,
2) regularly carried on, and
3) notsubstantially related to the institution's exempt educational or scientific research purposes.
Any net income from such an activity is subject to the unrelated business income tax, while losses from one unrelated business activity can offset income from other unrelated activities. All unrelated business income tax activities must be reported on the University’s or FIU Foundation’s income tax return (IRS FORM 990-T).
Why is understanding UBIT important?

FIU is required to report all unrelated business activities and withhold federal taxes where appropriate. The deans, directors, and department heads are responsible for reporting these activities to the Tax Section of the Controller’s Office on an annual basis. There are penalties and interest for not reporting these activities. If there are any penalty or interest assessments, they will ultimately affect the departmental budgets.

What kinds of activities may result in UBIT?
There are many different kinds of activities that qualify as UBIT. The Tax Section of the Controller’s Office sends out annually a listing of these activities in their General Guidelines for UBIT.

Please read the UBIT Guidelines (26 KB) document for more information.

Does it make a difference whether the activity is conducted by the University or the FIU Foundation?
Yes, it is important that departments keep accurate accounting records that delineate the different types of accounts (i.e. FIU Foundation or University). This will help departments when preparing financial statements since the revenues and expenses can be properly matched to the FIU Foundation or the University. The FIU Foundation and University prepare separate federal income tax returns since they are separate entities and have their own Employer Identification Numbers.

Can I deduct the costs of running these activities in calculating UBIT?
Yes, many direct costs related to the operation of unrelated business activities may be deducted against their revenues. Some examples include: compensation of directors, salaries and wages, repairs and maintenance, telecommunications, bad debts, interest, and depreciation. For more information contact the Tax Section of the Controller’s Office at 305-348-6764 or e-mail Eric Davidson at davidsoe@fiu.edu.

Are there any types of revenue that are exempt from UBIT?
Yes, revenue that does not meet the definition of unrelated business income as stated above in question #1. In addition, dividends, annuities, and other investment income are all excluded from UBI.

What are the University's procedures for accounting and documenting for UBIT activities and the income they generate?
Each department is responsible for accounting and documenting for unrelated business income. Each year the Tax Section of the Controller’s Office sends the department heads a letter requesting unrelated business income tax information. In addition, the department heads receive General Guidelines for UBIT which are published on the Tax Review Board’s website. Specific questions for UBIT should be sent to the Tax Section of the Controller’s Office or e-mail Eric Davidson at davidsoe@fiu.edu.

How long should I retain documents regarding UBIT activities?
The departments should keep documents for at least 5 years.

Questions About Sales Tax

What is the sales tax?
A tax imposed by the State of Florida on the sale of tangible personal property at retail.

When I am purchasing goods for the University (or Foundation), does the sales tax apply?
No. Sales tax does not apply for goods purchased for the University (or Foundation) since FIU and Foundation are tax-exempt organizations.

When I am charging students, faculty, staff or the public for goods and services provided by the University (or Foundation), do I have to charge sales tax?
Yes. Generally, you have to collect sales tax unless the goods are specifically exempted by law. However, sales tax is not collected on sales to tax-exempt organizations. Therefore, in most cases, if you are making a sale to another FIU department or another tax-exempt organization, you will not collect sales tax. For tax-exempt organizations outside of FIU you need to request a copy of their exemption certificate before the sale is completed. You will need to maintain the exemption certificate in your records, should there be a question concerning the transactions by the Florida Department of Revenue.

How can I find out which transactions require the collection of sales tax?
Generally, most transactions are taxable unless specifically exempted by law. For example, the following transactions require the collection of sales tax:

1. Sales of taxable items at retail.
2. Repairs or alterations of tangible personal property.
3. Rental or lease of personal property.
4. Rental or lease of real property.

For examples of taxable and non-taxable (exempt) transactions, please visit the FIU Tax Review Board website, and click the document titled “Sales Tax Guidelines”.

How much do I have to collect sales tax?
In Miami-Dade County, the current rate is 7%. The current rate in Broward County is 6%. (Link to FIU Tax Review Board Website).

Where can I find FIU policy and procedures regarding sales tax?
To be determined.

Once collected, where should sales tax proceeds be deposited or forwarded to?Sales tax proceeds should be deposited to the Cashier’s Office. However, when making the deposit, be sure to separate the amount on the deposit form using the correct account number and object code for the sales tax you collected.

The sales tax collection procedure for all departments is as follows:

1. The department collects revenue and sales tax.

2. The department, as frequently as possible, deposits said revenue and sales tax collected via a "NOTICE OF FUNDS RECEIVED" with the CASHIER’S OFFICE.

3. The department separates the revenue by whichever revenue object code it chooses into their respective account, AND MUST USE FIU'S SALES TAX COLLECTION ACCOUNT 72-10-000-00 AND SALES TAX COLLECTION OBJECT CODE 004030 FOR ALL SALES TAX COLLECTED.

4. The Controller's Office is responsible for transmitting monthly all sales tax collected.

As you know, the sales tax percentage is 7%. If you have any questions, please contact Eric Davidson at davidsoe@fiu.edu