Tax Compliance

West Vandenberg Hall, Room 121H
502 Meadow Brook Road
Rochester, MI 48309-4452
(location map)
(248) 370-2296
Fax: (248) 370-2554

Frequently Asked Questions

Independent Contractors

 Who should be listed on the "Employee Versus Independent Contractor Classification Checklist"?
The Independent Contractor laws are not applicable to companies with assigned Employer Identification Numbers; therefore, a checklist is not required when payment is made to a corporation or organization with a separate tax ID.  Checklists are only necessary when payments are made to "individuals."

Why is the Checklist necessary?
The IRS, in order to ensure the collection of all employer related taxes (i.e. employer matching social security and medicare; umemployment taxes;worker's compensation; and general withholdings) and to ensure that individuals are not taken advantage of by being hired as independent contractors without benefits, as opposed to employees with benefits, has developed several factors to determine whether an individual may be hired as an Independent Contractor or should be hired as an employee.  Substantial fines and criminal penalties exist to penalize hiring entities who classify individuals as Independent Contractors when they are actually de facto employees.  It is, therefore, important to be sure that the correct classification is made.

Unrelated Business Income Tax

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.  The 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 universities on the same playing field as for-profit businesses engaged in the same business activity that pay federal corporate tax.

Why is understanding UBIT important?
It is important that all unrelated business activities of Oakland University be reported on the Federal tax return.  The IRS can and will assess costly penalties and interest charges for underpayment of taxes.

Can the costs associated with running unrelated business activities be deducted when calculating UBIT?
Yes, many direct costs such as salaries and wages and depreciation related to the operation of unrelated business activities may be deducted against revenues.  Allowable deductions cannot be directly connected with excluded income.  When expenses are attributable both to the unrelated activity and to the University's other activities, an allocation may be made on a reasonable basis.

What are the University's procedures for accounting and documenting for UBIT activities and the income they generate?
The Tax Compliance section of the Controller's Office maintains a list of potential unrelated business activities.  The Tax Compliance accountant works with departments to account for and document unrelated business income.

What should I do if I believe there may be unrelated business activity in my department?
If you believe there may be unrelated business activity in your department you should contact the Tax Compliance section of the Controller's Office at extension 2296 or e-mail Joyce Liebergen at  The Tax Compliance section of the Controller's Office works with departments to account for and document unrelated business income.

Sales Tax

 When I am charging students, faculty, staff or the general public for goods and services provided by the University, 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 OU department or another tax-exempt organization, you will not collect sales tax.  For tax exempt organizations outside of OU you will need to request a copy of their exemption certificate before the sale is completed.