University Food Purchases

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Guidelines and Procedures
General Guidelines for the Purchase of Food from University Funds

The following guidelines do not apply to candidate meals or meals associated with travel. Refer to Travel Policy or Section B.25 of the University Handbook.

University funds may be used to purchase food per the University Hospitality Policy. However, food provided to employees is generally considered taxable income as defined by the Internal Revenue Service unless certain conditions are met. (Reference IRS Publication 15-B and IRS Publication 463.)

Examples of activities that are allowable without tax consequences include:

Official business of the Board of Trustees
Official University-wide functions
University-wide training or recognition
Events with the primary purpose of student recruitment, recognition, or attendance
Extended Services courses, where the cost of the course includes a factor for hospitality
Meals when employees are required to work through a normal meal hour without an opportunity to have the meal at an alternate time
Meetings or events with members of the community or other non-employees to conduct official University business or represent USI
Meetings with representatives from multiple departments if the cost per person is less than $50
Formal employee training, recognition, and celebrations are conducted away from the place where the employees’ work is normally performed if the cost per person is less than $50
Meals are provided to the spouse of an employee when the spouse is representing the University and his or her attendance is required or expected

Examples of activities that are allowable, but taxable include:

Food to encourage or recognize effort or achievement of employees other than University-wide events to honor employees
Meetings with representatives from multiple departments if the cost per person is $50 or more
Formal employee training, recognition, and celebrations are conducted away from the place where the employees’ work is normally performed if the cost per person is $50 or more

Examples of activities that are not allowable and will not be paid or reimbursed by the University include:

Alcoholic beverages*
Hospitality related to fundraising where the revenue is deposited into the USI Foundation*
Departmental staff meetings
Meals or entertainment expenses of elected officials or government employees who are not guests at a University-wide event
Office parties (birthday, retirement, etc.)

*Alternative funding sources, such as the USI Foundation, may be available for certain expenses not allowed from University funds. Departments should coordinate the payment of such expenses in advance with the Foundation.

Gifts, Prizes, Awards, and Giveaways

Payments to individuals for services, appreciation, recognition, prizes, and awards are considered taxable income to the recipient. The amount of the payment will be subject to tax withholding and included on Form W-2 for employees or reported on Form 1099-MISC if the recipient is not an employee of the University.

These types of payments must only be made directly to the individual from the University (via Accounts Payable or Payroll by check or direct deposit) to ensure compliance with Internal Revenue Service requirements. Payments made by third parties to individuals by cash or check for services, prizes, awards, gifts, or giveaways are not permitted and will not be reimbursed by the University.

Cash Equivalents

The IRS specifically defines gift certificates, gift cards, and any financial instruments redeemable for cash as cash equivalents and states that the value of these items is considered taxable income to the recipient regardless of dollar value. (Reference IRS Publication 15-B and Internal Revenue Code 274 (e)(3)(B).)

For the University to comply with tax reporting regulations, it is required that a completed Form W-9 (Request for Taxpayer Identification Number and Certification) must be submitted to the Accounts Payable Department for any cash equivalent provided by the University to non-employees. The University ID number must be provided in place of Form W-9 for employees receiving cash equivalents.

If a cash equivalent is distributed to an ineligible recipient or Form W-9 is not provided to the Accounts Payable Department for non-employee recipients, the purchase will be considered to be a gift from the individual, and therefore it cannot be purchased or reimbursed by the University. (Reference University Handbook item F.26.)

Non-Cash Awards

Non-cash gifts, awards, prizes, and giveaways are also considered to be taxable income and reported at their fair market value. The requirement listed above for a completed Form W-9 for non-employees or University ID number for employees also applies to these purchases. If the unit cost of an item is less than $50, then it will be considered de minimis and excluded from reporting.

University of Southern Indiana Bookstore gift certificates are classified as non-cash awards. They are considered tangible goods since the recipient receives a good such as University logo apparel. The requirement listed above for a completed Form W-9 for non-employees or University ID number for employees also applies to these purchases. For non-employees, if the certificate is less than $75, then it will be considered de minimis and excluded from reporting. Certificates for employees or above $75 require reporting.

The below chart summarizes the University’s tax reporting requirements and information required for such purchases:

*Note: Form W-9 may only be submitted by a U.S. citizen or other U.S. person as defined by the IRS. If an individual does not meet that criterion, then he or she should not fill out Form W-9 and must not receive any cash equivalent from the University until tax ramifications have been researched and the disbursement has been approved by the accounts payable and payroll departments.

** Recipient information is not required for the purchase of plaques because they cannot be easily converted or otherwise used to benefit the individuals in a material or quantifiable way.