Payments to Businesses
Vanderbilt uses both domestic and international companies for vendor services. There are specific tax rules related to payments to international companies just as there are to transactions with international persons.
Please note that this article relates only to services; it does not relate to the purchase of goods, (supplies or other tangible property). There is no tax withholding requirement for goods shipped from abroad because ownership of the item simply passes to Vanderbilt.
For a discussion on what are goods and what are services please read our Goods & Services: What Are Goods? What Are Services? article.
Work or Services Performed Outside the USA:
If the company is physically located outside the USA and all services provided are performed outside the USA, then this is considered non-taxable, foreign source income for the company. The vendor simply needs to complete the Statement of Services or Educational Activity Performed Outside the USA form on our website.
Work or Services Performed Inside the USA:
If the international company provides services for Vanderbilt inside the USA, there are reporting and possibly tax withholding requirements. Foreign companies may perform a variety of services in the USA. If Vanderbilt purchases the right to use an article, photo or other resource in the USA, the foreign company retains all proprietary rights but Vanderbilt has a right of use.
"Right of use" (also called "copyright royalty," "film royalty") is taxable. If there is a tax treaty between the USA and the international vendor's country for which the vendor qualifies, Vanderbilt will apply any tax exemption or reduction benefits allowable.