Goods or services should not be provided to external non-UC consumers except where such goods or services are unique/specialized or where such sales would not be in competition with commercial sources and their existence is primarily to support UC Santa Barbara. The primary reason recharge activities exist is to share resources and provide services for internal users. Inappropriate outside use of University resources could jeopardize the University’s tax-exempt status for various purposes, give rise to claims of warranty and other liabilities, or appear to involve unfair pricing in relation to commercial providers. See APM-020 Special Services to Individuals and Organizations.

An external user is an entity or person over whom the university has no fiduciary responsibility regardless of the user’s relation to the university’s mission (e.g. students, staff and faculty acting in a personal capacity, other universities (non-UC), private entities, and the public at large). If payment is provided in a form other than a campus chart string, the user should be treated as an external user. Registered student organizations and users from the Lawrence Berkeley National Laboratory (LBNL) are treated as internal users. Any exceptions are subject to approval by the Office of Budget & Planning in consultation with the divisional control point.



Non-University Differential (NUD)

External rates must recover full university costs, both direct and indirect. A Non-University Differential (NUD) markup — at a minimum equal to 55.5% — shall be applied to the Income & Recharge Center’s pure cost recovery rate(s) in order to recover an appropriate amount for campus overhead costs. The NUD rate should be increased so that rates are set at fair market value. The minimum NUD markup rate will be reviewed annually and is subject to change. Any exceptions are subject to approval by the Dean (if applicable), the divisional control point (Vice Chancellor level) and the Office of Budget & Planning. Please contact the Income & Recharge Analyst for more information on the exception process.

NUD is similar to, but distinct from, facilities & administrative (F&A) assessments charged to grants.

NUD funds shall be, unless otherwise specified, retained by the department providing the service.

Revenue Contracts

Centers receiving revenue from external customers must execute a formal revenue contract with each customer prior to the start of services. Revenue contracts protect the campus against liabilities and clearly outline each party’s responsibilities. For more information, visit here:

Private Use

Private Use refers to the use of a UC tax-exempt-debt-financed facility by a “nongovernmental user”, essentially any business entity other than a state or local government.

If an income activity is not consistent with the tax-exempt status of its facility’s debt per guidelines issued by the Internal Revenue Service, a separate “private use” review by the Office of Capital Development will be necessary.


Sales Tax

Centers are required to collect sales tax from external users on the sale of tangible products and taxable equipment, if rented for more than one day.

Unrelated Business Income Tax (UBIT)

External revenue generated by activities or programs not substantially related to the university's tax-exempt functions is considered unrelated business income and subject to federal income taxation.

Gross income (revenue) from an unrelated trade or business activity regularly pursued by the university must be recorded in the revenue account(s) assigned to the activity. If no individual revenue account is assigned to the activity, the campus should maintain detailed records that segregate the department's unrelated business income from all other income. The department may use data or special sampling studies to estimate income attributable to the unrelated business activity.

An activity will be subject to unrelated business income tax if it meets the following criteria:

  1. Is your activity not substantially related to the university’s exempt purpose?
    1. The university’s exempt purposes are education, research and patient care so an activity whose purpose is not substantially related to one of those purposes would be characterized as unrelated. It is irrelevant that the proceeds from an activity are used to fund education or research. The determining factor is the nature of the activity itself.
    2. Some examples: See UBIT Tax Determination Guide
  2. Is it regularly carried on?
    1. The regulation provides that a trade or business activity is regularly carried on if it manifests a “frequency and continuity, and pursued in a manner generally similar to comparable commercial activities of nonexempt organizations.”
  3. Is it a trade or business conducted for the primary purpose of generating income or a profit?
  4. Will your activity generate a gross income of over $1,000 per year?
  5. As part of the proposed activity, will any customers rent or use university facilities, and/or purchase goods or services from the university for commercial purposes (e.g., research and development in anticipation of commercial production)?

Exceptions may be granted to income produced from sales made primarily for the convenience of the organizations members, students, and employees.


If the above criteria apply, Department staff should complete the Nonfinancial Questionnaire (NFQ) using the Questionnaire Instructions. The department head should review and approve the NFQ and then send to Ron Hirst in Accounts Payable (campus tax coordinator). The NFQ provides the basis for UCOP determining whether the activity has UBIT. If the above criteria apply, the department staff should complete a questionnaire for any of the following types of activities:

  • Each “new” activity initiated during the current year with a potential for generating unrelated business income;
  • Any activity reviewed in a prior reporting year that has changed its mode or scope of operations during the current year, and
  • Highly visible activities (e.g., advertising, facilities usage, joint venture, printing, lab rental, services provided to the general public, etc.) that are similar to activities determined to be unrelated at another campus or at other universities.