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Please click here to return to the External Sales Policy.

Appendix A - Indicators for Gifts, Sponsored Projects, and External Sales

Appendix B - External Sales Action Form

Selling to External Customers, Financial Policy

Purpose: This form must be completed and approved prior to the commencement of any external sales activity. The purpose of this form is capture the essential information related to the pending business activity with external customers, identify potential risks and secure necessary approvals before the activity begins.

1. Activity type. Check category(s) that most closely characterizes the activity described in the request:

1. Describe the activity in detail:

Appendix C - Examples of Gifts, Sponsored Projects, and External Sales

Appendix D - Selling to External Customers: Institutional Risks

Institutional Risks - Risks associated with external sales that are University wide. Processes, relationships and outcomes reflecting the policy should seek to manage these risks to meet the mutual and balanced needs of the University, the collegiate unit conducting the activity and the external customer with whom the University is conducting business.

Activity consistency with University Mission:

Business Risks:

1. Economic viability of activity.
2. Conducting commercial activities in academic units. Managing these activities with adequate knowledge of impact on existing organization assets and activities.
3. Understanding relationship of market influences on the activities.
4. Distribution of product or services into commercial channels.
5. External sales financial planning, reporting, controls and accountability standards that are different from typical academic unit business transactions.
6. Venture capital availability and use.
7. Business development and performance issues, i.e. role of Office of General Counsel, Patents and Technology Marketing Office, and other resource offices to support development of new external sales in units.
8. Unique nature of activities demands different risk management than research, sponsored project, or gift activities, to achieve business results.
9. Generation of more than $50,000.00 annually in revenue.
10. Exclusive contract with a single vendor.
11. Noncompete commitment.
12. Pricing basis.
13. Market knowledge about a product or services, planning for competition, estimation of market value about product or services.
14. Market distribution management issues.

Legal Risks:

1. Legality of activity, in law and in University policy.
2. Contract between parties.
3. Commercial documents in use in lieu of contracts, when appropriate.
4. Business relationship documented.
5. Intellectual property asset protection and managing copyright, trademarks, patents, trade secrets and proprietary information, and publication rights.
6. Support for leading edge activities, i.e. internet commerce.
7. Use of the University name, logo and/or wordmark.
8. Compliance with licenses between the University and resource providers that may restrict University actions.

Tax:

1. State and local.
2. Federal, Unrelated Business Income Tax (UBIT) reporting to University Tax office.
3. Impact of activity on preexisting conditions, i.e. bond limits.
4. Institutional UBIT strategy.
5. Tax planning topics in the business relationship.

Insurance (See also Risk Management and Insurance website):

1. Liability issues for third parties on university premise; waiver issues on product sales.
2. Activities of employees, University or non-university employees working on campus.
3. Product or service warranties of performance.
4. Release or consent forms.
5. Intra and interstate insurance and liability coverage differences.

Regulatory, oversight and ethics compliance:

1. Agency rules and limits, i.e. use of federally funded equipment for external revenue generation.
2. Human and Animal Subjects IRB and IACUC oversight and approval.
3. Environmental Health and Safety oversight and compliance.
4. Knowledge and incorporation of outside agency audit standards into business plans and operating procedures.
5. Conflict of interest.
6. Individual involved in proprietary interest in company that may be affected by sales.
7. Relationship to individual consulting policy and activities.

Political and public relations:

1. Use or discrediting the University name or reputation.
2. Internal. Having an internal plan that supports the outcomes.
3. External. Unfair competition allegations.
4. Timeliness of planning and implementation to achieve results.

Administrative:

1. Classification and management of activity consistent with University policies and processes.
2. Approval of activities by department head and dean.
3. Financial resources management in departments.
4. Collegiate unit strategic planning of activities of research and external sales.
5. Appropriate administrative support to manage activity in the department.
6. Collaboration between collegiate and administrative areas to support accountability for emerging activities and relationships.
7. Financial reporting system in department to account for and manage activities.
8. Establishing processes in departments to demonstrate valid audit trails.

Appendix E - External Sales Annual Reporting Form

Selling to External Customers, Financial Policy

Purpose: To report the Department's annual business activity with external customers, identify characteristics regarding the business activity, and facilitate departmental and institutional accountability.

1. Briefly describe the activities that took place for current reporting cycle:
   
   
   
   
2. Who were the customers for the current reporting cycle:
   
   
   
   
3. Estimate (or report) the number of individual activities or contracts, or series of transactions that were processed in the current reporting cycle for this activities:
   
   
   
   
4. What month and year did these activities begin (or take place), and what is the duration of the activities (e.g. ongoing, one-time sale, ends after two months)?
   
   
   
   
5. Report the annual gross receipts and/or other consideration that were generated from these activities for the previous three fiscal years: Attach report if applicable.

   FY _ _	$
   FY _ _	$
   FY _ _	$

6. Signatures

   Contact Person:
   Signature:		Date:
   Typed:		Title:
   Fax:		Phone:
   Email:
   RRC Manager:
   Signature:		Date:
   Typed:		Fax:
   Email:		Phone:

Policy requires completion of this form for all External Sales. Mail to University External Sales Coordinator

Appendix F - Primary and Secondary Indicators Useful in Distinguishing Gifts/Sponsored Projects/External Sales

Appendix G - Unrelated Business Income Tax

Overview

"Unrelated business income" is defined as gross income derived by an organization, less certain deductions, from an activity which satisfies all of the following criteria:

• The activity must be a trade or business;
• The trade or business must not be substantially related to the organization's exempt purpose; and
• The trade or business must be carried on regularly.

A federal tax, and in some instances state tax, is imposed on an organization's unrelated business income; this tax is referred to as the "unrelated business income tax" (i.e., UBIT).

The treasury regulations indicate that "trade or business" means any activity which is carried on for the production of income and which presents a sufficient likelihood for unfair competition with for-profit business endeavors of a comparable nature. Actual competition need not be present for taxation of unrelated business income.

As a general rule, income received by an exempt organization from regularly carrying on a trade or business is not subject to UBIT if the business activity contributes importantly to the accomplishment of the organization's exempt purposes. This is known as the "substantially related test."

Another general rule provides that UBIT is only imposed on income from a trade or business (including activities carried on through a partnership) if the business is frequent, continuous, and pursued in a manner similar to commercial businesses. This is known as the "regularly carried on test."

The three criteria outlined above are applied on a collective basis. If a taxpayer can demonstrate that any one of the three does not apply to a particular activity, no UBIT will be assessed on that activity.

UBIT is not imposed in connection with income from activities that meet the following exceptions provided by statute:

1. The volunteer work exception, in which substantially all the work is performed without compensation;
2. The donated goods exception, in which the income is from the sale of merchandise substantially all of which was donated to the organization;
3. The convenience exception, in which the trade or business is conducted by the organization primarily for the convenience of its students, faculty, patients, officers, or employees; the convenience exception can be challenged by the IRS if sales appear to be substantially beyond "the convenience" of students, faculty, patients, officers, or employees.

In addition, specific additional exclusions from UBIT are provided for certain types of income. The excluded items primarily involve passive income sources and include royalties, dividends, interest, annuities, rents from real property, certain rents from personal property, securities loans, and capital gains. Passive income (except dividends) may still be subject to UBIT if received from a controlled organization, or if the income is received from debt-financed property.

Appendix H - External Sales Process - Central Support Perspective

Appendix I - External Sales Accounts Receivable Policy and Procedure

Accounts receivable represent balances owed to University departments for credit sales of goods or services to non-University customers. Student related accounts receivables are the responsibility of the Bursar's Office. Sponsored Programs related accounts receivable are the responsibility of Contracts and Grants Accounting. All other accounts receivable are the responsibility of the unit generating the initial credit sale. Departments are responsible for the following:

• Maintaining accounts receivable records including supporting documentation.
• Collecting all fees, dues, and other income.
• Reporting all outstanding receivables to the Associate Vice President for Finance who in turn prepares a consolidated report for UT System Office of General Council.
• Documenting policies and procedures for collecting overdue accounts, plus the dollar amounts and age of past due accounts to write-off.

Minimum documentation supporting accounts receivable includes:

• Record of individual charges reflecting invoice number, date, amount, customer name, address, and description of the charge.
• Record of justification for invoice adjustments. Policy for approving adjustments is documented.
• Record of cash received reflecting the date, amount, invoice number, and customer name.
• Monthly aged trial balance or the Aged Open Invoices Report and the reconciliation between aged open invoices to individual charges.

RETURNED CHECKS, BAD DEBT EXPENSES, UNCOLLECTABLE ACCOUNTS RECEIVABLE AND WRITE-OFFS

Uncollectable checks, because of non-sufficient funds or drawn on a closed account, are returned by the bank to the Bursar. The Bursar charges the departmental account for returned checks. Returned checks must be set up as an accounts receivable except for the following:

• Check was a gift of $25 or less;
• Sale of goods and/or services generating the funds was cancelled.

Departments are responsible for pursuing further collection efforts where warranted or reducing their recorded revenue. The Bursar's Office will provide information on collection options and relevant laws. All write-offs or cancellations of Uncollectable accounts receivable over $25 require the approval of the Dean or the Division head of the unit. Amounts under $25 are approved by unit manager or a person designated by the unit manager who is NOT affiliated with accounts receivable.

Please click here to return to the External Sales Policy.