When possible, purchases of software should be made from US companies. Payments for purchases of software licenses from foreign companies are often subject to 30% withholding under Internal Revenue Code Section 1441.
To determine the vendor’s US tax status as well as the nature of the transaction, complete the Foreign Entity Information Request form available on the Financial Services website and submit it and any required attachments to TaxDepartment@wustl.edu. Providing this information before the purchase is made will allow the determination of tax liability to be made prior to the purchases. In the event that the purchases is determined to be taxable, the department will have the opportunity to budget accordingly for the 42.86% markup and/or alert the vendor that the withholding could be applied to their payment.
When withholding is not possible because full payment has already been made, the original payment must be grossed up to collect the tax liability, often by 42.86%. In these cases, the department that purchased the software will be responsible for the additional charges.