There are generally no restrictions on the use of facilities by the University Hospitals. Such use is considered to support the overall mission of Stanford.

Services to faculty, staff, students and patients are usually protected from tax by the so-called “convenience exception” in the Internal Revenue Code. The exemption was created to allow organizations like Stanford to provide services locally to individuals in this category, rather than have them drive long distances to obtain the same service on the outside. However, such is not a blanket protection, particularly in cases where there is a ready market for this service in the surrounding community. The exemption therefore does not apply to services performed off campus. On campus services, if truly provided for the convenience of faculty, staff and students, and to clearly further Stanford’s mission and not merely to generate additional funds, will be allowed for this category.

Services provided to affiliated organizations in the context of establishing and maintaining their physical presence on campus will be permitted (e.g. utilities, communications, maintenance, etc.). In the case of other services, there should be a showing that the provision of the services enhances the mission of Stanford or that obtaining similar services from an outside provider would create a logistical hardship for the entity.

Entities whose presence on campus is solely to provide services under contract to Stanford may draw only those services that would be considered essential to support their presence on campus, and then only in the context of serving Stanford. Such entities must not use Stanford resources to further the interests of other clients. The for-profit operator of a lunch room could use Stanford space to house her Stanford inventory. She would not be allowed to use that space for inventory used in a private catering business.

Clearly independent entities are extremely limited in their use of Stanford facilities. Such use is governed by protocols such as Research Participation Agreements, where such external use provides a meaningful enhancement of the Stanford’s mission (other than financial gain), is not in conflict with Stanford’s regular use and where the facility is unique within a 50 mile radius of Stanford and the using entity.

In fiscal year 2012, the University Tax Officer, the Dean of Research and the Office of Research Financial Compliance and Services approved the following policy revisions addressing the UBIT 15% limitation on service center external users:

The following categories of external users are excluded from the UBIT 15% service center external user limitation as their activity is deemed to further the University’s mission of education, research and public service:

The required approvals, as described in a. and b. below, are essentially the same for both academic and administrative service centers.  

For all service centers, prior approval is not required for the following external/inter-company/affiliated user transactions:

• Cash sales to faculty, staff, and students.
• Sales to the following external/affiliated organizations: Stanford Hospital and Clinics (SHC), Lucille Packard Children’s Hospital (LPCH), the Stanford Credit Union, Alumni Association, Eating Clubs, and Stanford Fraternities and Sororities.  

For sales to all other external users, the following approval process must be followed by both academic and administrative centers.

The minimum rate charged to external users includes the rate charged to internal users, plus sales tax, where appropriate as determined by the University Accounting Officer (Controller's Office), plus the appropriate Facilities and Administrative (indirect) cost rate. A service center may charge an external user a premium rate above that charged to internal users for the same type of service if this is included in the center's proposal. Written approval must be obtained from both the University Accounting Officer and RAPC if the decision to charge a premium rate is made after the blanket proposal has been approved. This premium may be used to offset service center costs.

One of several different state and county sales tax rates may apply. Any tax imposed will be a cost passed on to the service center user. Any sales tax collected becomes a University liability. Sales tax is assessed on cost of goods sold, the service center charge (mark-up) and applicable Facilities and Administrative cost. Refer to Fingate. Sales and Use Tax or contact the Accounting Officer, Controller's Office for assistance. Sales tax is not applicable if there is no exchange of tangible personal property, i.e. only services are involved. Note that photocopy charges for personal use by students, faculty, or staff are subject to sales tax.

Unless waived by the Budget Office in writing, a Facilities and Administrative (F&A) rate is applicable to all sales to external users for both administrative and academic service centers. Administrative service centers shall charge external users an administrative F&A rate. Academic service centers shall charge external users the full organized research F&A rate. Service center managers should contact RAPC if they have questions regarding these rates. Any F&A costs collected are retained by the University as general funds.

Service center sales to external users (excluding cash sales) are recorded in receivable accounts (generally in award range ARxxx - AVxxx) or possibly in the SHC or LPCH hospital PTAs, with the income recorded to an external or misc. income revenue object codes. (See the document in "related items" below.)

Direct cost transactions less than $1,000, or less than $2,500 in annual aggregate single-user transactions, may be treated as cash sales. (See the following section.)

All billings to external users for direct cost transactions greater than $1,000, or more than $2,500 in annual aggregate single-user transactions, (except those transactions covered by the RPA policy) shall be sent out as invoices issued by the Receivables Accounting department in the Controller's Office.

Depending on circumstances, a service center may petition General Receivables Accounting in the Controller's Office for relief from this transaction threshold or to establish alternate methods for external user billings. A few service centers have approved alternative billing practices currently in place.

Receivables Accounting will establish a unique receivable PTA in the award range ARxxx - AVxxx for each outside user. However, under certain circumstances (such as having many low-volume outside users), one receivable account in this range may be established for all external sales with approval from Receivables Accounting and RAPC.  

The amounts to be billed are entered by service centers via their allocation journals which charge the receivable PTA and credit the service center account. The Receivables Accounting department then submits the bill to the outside user and processes payment once it is received. Accounts Receivable will attempt to collect any unpaid amounts. However, unpaid amounts ultimately become the responsibility of the service center's parent department. Uncollected amounts will be transferred to the center's guarantee account (academic centers) or to an unrestricted account (administrative centers). Uncollected amounts cannot be charged back to the service center account

Accounts Receivable assigns specific receivable PTA to each external user so that consolidated statements and invoices can be prepared on a monthly basis. The journals completed prior to each month-end accounting close are itemized in each service center's monthly statements and on-line files, just as they are for internal billings.

Service center cash sales represent University income and must be properly credited to an income object code. Direct cost transactions less than $1,000, or less than $2,500 in annual aggregate single-user transactions, may be treated as cash sales. Cash receipts should be deposited at the University Cashier Office in a timely manner. Cash sales for tangible personal property are subject to the sales tax and F&A policies discussed in B.2. through B.4. above. If the cash sale is for services only, sales tax is not applicable. Departmental service centers that have recurring cash sales may want to include a cash sale rate in their annual rate proposal. Contact RAPC when assistance is needed to determine the appropriate F&A rate, and the University Tax Officer (Controller's Office) to determine whether sales tax should be charged, and the appropriate rate.

External use of administrative service centers should be approved by the Provost in writing. The service center should submit the following to the Provost for each external user request.

• Reason(s) why Stanford should provide the service/product to the potential external user.
• Type of service to be provided, including as much detail as possible regarding the unique nature of the service.  
• Anticipated users of the service.
• Names of any external businesses or entities that provide similar services. (Stanford may not compete with external providers of similar services).
• Anticipated amount of external income at the service center's approved, nondiscriminatory rates; and any additional income expected for providing the service.
• The location where the service is to be performed (for property tax considerations).

The Provost will review the request with regard to the following, seeking assistance from Legal Counsel, the Controller's Office, RAPC, and other offices as necessary:

• intellectual property rights
• faculty conflict of interest
• whether this is a one time request or a request to provide a continuing service to an outside user
• academic benefits
• unrelated business income tax applicability
• unfair pricing practices
• liability
• appropriateness of indirect cost recovery15
• appropriateness of sales tax

If granted, a copy of the written approval will be provided to the service center and to RAPC. The service center must retain this documentation for as long as the service is provided to the outside user. When the service to that specific outside user ends, the service center should follow the instructions outlined in Section V.J. as to records retention.

Note: The Provost may, in rare cases, waive application of F&A costs to external users, where this is deemed to be appropriate and in the best interests of the University.

The University has a Research Participation Agreement (RPA) policy. This policy defines the procedures for the establishment of agreements to make Stanford personnel, academic facilities and/or laboratory equipment available to non-Stanford entities. The RPA policy is applicable for all academic service center sales to external entities (except for entities and individuals specifically mentioned in Section VIII. B. above).

The RPA policy is included in the Research Policy Handbook, section 12.5. Check the RPH for any updates.

In general, the policy requires that academic service centers prepare a proposal and RPA routing sheet. The proposal is reviewed by the Department Administrator and Dean who must sign the routing sheet to indicate their approval for the proposed agreement. The proposal and routing sheet is then sent to the Office of Risk Management, CMA, PMO, the University Accounting Officer, and OSR for review and approval. Blanket approvals may be granted for up to ten individual RPA agreements. More detailed instructions regarding the RPA implementation process and required accounting treatment are included in the RPA Implementation Guidelines (see RPH: Research Participation Agreements).

Please contact RAPC as soon as a center anticipates submitting an RPA proposal and submit the list of capital assets’ SU property tag numbers for review by PMO.