Special Considerations regarding external (non-WUSTL) Customers
If services/products will be provided to external (non-WUSTL) customers, it is important that you understand and consider all of the issues described below.
External customers are individuals, groups, or organizations that are not part of the WUSTL community and typically purchase services/products for reasons of convenience or uniqueness of the products/services offered. Some examples of external customers include students, faculty or staff acting in a personal capacity, other universities, and for-profit corporations.
- Overhead Rates for External Customers: If applicable, school overhead charges should be built into the service/product rates for external customers. Seek advice from your school administration for the applicable policies. The School of Medicine policy is provided below. Rates quoted and billed to outside entities should be inclusive of the overhead charge if one is applied. There is no need to detail the components of a service/product rate to the external customer.
The School of Medicine
Dean’s Office charges overhead on external income. For unrestricted funds (ledger 1) note that all overhead rates are on revenues, and are taken at the time the revenue is received. The School of Medicine policy for overhead and facilities and administrative (F&A) rates is managed by the Finance Office and the most current information can be found on the Finance Office web site.
- Additional/Administrative Fees: In addition to overhead that may be recovered by the university and/or school, departments should determine what other costs need to be covered to provide the service/product to external customers. Such costs may include shipping, administrative fee, etc. Departments should comply with school specific policies. Per University policy document, “Recharge centers may provide services to users outside the University community at higher, market based rates".
- Subsidies: If subsidies are applied to groups of internal users, consider whether the funding source wants to extend subsidies to external users. For example, an NIH P30 funded RC may want to foster collaboration with peer institutions but would not want to subsidize for-profit users. Institution or departmental aggregate subsidies are normally intended for only internal users.
- Billings and Receivables
Billing Process: A standard and consistent billing process should be established for issuing external customer invoices. As with internal customers, external customers should receive a detailed bill in a timely manner after services are performed or products delivered. (See the Billings and Receivables section for a detailed list of information recommended to be included on invoices.)
Payments Received: For payments received from external customers, payment amounts in excess of the rate charged to internal customers should be deposited in a separate account. By accounting for these funds separately, they will not be part of the annual analysis to develop breakeven rates over a defined period of time. The additional fees recovered should be used to support the expenses built into the external rate (e.g. product shipping).
- Private Use: Coming soon!
- UBIT: Transacting business with external customers can trigger an unrelated business income tax (UBIT). It is the responsibility of each individual department to appropriately manage any unrelated business income (UBI).
Although the University is a tax-exempt organization, if it becomes involved in a business activity unrelated to our exempt educational and charitable missions, the net income (gross income less deductible expenses) from the activity may be subject to federal and state income tax at normal corporate tax rates. This tax is defined as “unrelated business income tax”. For additional information and clarification, see Unrelated Business Income.
If you have any questions concerning this policy contact the Tax Department at 314.935.8335 (Tax Manager) or 314.935.4562 (Director of External Reporting).