External Rates


Non-federal external user rates do not have to be cost-based like internal user rates. However, external user rates need to be set to recover at least the cost of providing the goods or services being sold. There are additional charges that may apply to external users including institutional overhead (required), surcharges, and sales tax.

If the center sells to external users, the center could be subject to Unrelated Business Income Tax (UBIT) if the exemption criteria are not met.

For additional information on sales to external users, refer to Administrative Policy Statement 59.5

Institutional Overhead


Institutional overhead is a rate calculated by the Budget Office to reimburse the University for costs paid centrally such as rent, light, heat, etc.

Institutional overhead is similar to, but distinct from, facilities & administrative (F&A) costs charged to grants. Unlike F&A costs, institutional overhead is charged on revenue received from external users. Internal users are not charged institutional overhead.

This is a pass through charge for the service or recharge center and the center should add institutional overhead to the rates charged to external users. The institutional overhead should be added after all surcharges have been applied.

The current institutional overhead rates are:
Service or recharge center located on-campus: 15.6%
Service or recharge center located off-campus: 6.85%

Example: If an internal user rate is $10/hour, then a recharge center located off-campus should charge their external customers a minimum of $10.59/hour ($10/hour x 1.05919). A recharge center located on-campus would charge external users a minimum of $11.56 ($10/hour x 1.156).

Please note these are general overhead rates.  For department specific rates please work with the Office of Planning and Budgeting.

Reconciling Institutional Overhead on BARs/BSRs

A quarterly JV is prepared by Financial Accounting to charge the recharge center for institutional overhead collected from external users.

The revenue that is shown on the center's BAR/BSR is the total amount collected including the institutional overhead. When Financial Accounting takes out institutional overhead, they first remove the institutional overhead already recorded in the revenue.

To calculate how much institutional overhead will be charged on external sales by Financial Accounting, use the following formula:

Total External Revenue on BAR for calendar quarter x [Institutional Overhead % / (1 + Institutional Overhead %)]

Example: The external revenue (including institutional overhead) posted to an on-campus recharge center budget for the quarter January - March is $20,000. The total institutional overhead charged by Financial Accounting will be: $20,000 x .156 / 1.156 = $2,698.96.



Surcharges are an additional amount that can be charged to non-UW external users above the cost to provide the service. The surcharge amount is determined by the recharge center.

Calculating the Surcharge

The surcharge is applied to the rate before institutional overhead is applied.

Scenario 1

If the external rate has been established, but the surcharge is not known, the institutional overhead is first removed before the surcharge is calculated, as illustrated in the example below.

Example: The rate to internal users to provide the service is $50.00/unit. The maximum rate that can be charged to external customers is $75.00/unit because that is the normal amount charged by others providing the same service. This center is located off-campus so the institutional overhead rate is 6.85%.

  1. Removing Surcharge:
    External Rate / (1 + Off-campus Institutional Overhead)
    $75.00/1.0685 = $70.19/unit
  2. Calculating Surcharge Amount:
    (External Rate - Institutional Overhead) - Internal Rate
    $70.19 - $50.00 = $20.19/unit (this is the surcharge)

Scenario 2

If the surcharge to be applied is a percentage increase in the internal user rate, then the surcharge percent is applied first, then (1+ institutional overhead rate) is applied to yield the external rate. This method is illustrated in the example below.

Example: The internal customer rate is $35.00/unit. The desired surcharge is an additional 20% over the internal rate. The center is located on-campus so a 15.6% institutional overhead rate is applied.

  1. Calculating the surcharge amount:
    Internal Rate x 20%
    $35.00 x 20% = 7.00/unit (this is the surcharge)
  2. Calculating the rate to charge external users:
    (Internal Rate + Surcharge) x On-campus Institutional Overhead
    ($35.00 + $7.00) x 1.156 = $48.55/unit (this is the external rate)

Transferring the Surcharge

Centers should submit JV’s directly to jvreq@uw.edu for processing. The center is also responsible for submitting and maintaining the necessary documentation supporting that only the “surcharge” revenue from external users is being transferred.  This documentation, along with the listing of transfers, including date and other supporting documentation, e.g., customer name, total invoice, surcharge portion of invoice, should be maintained on an ongoing basis and may be requested at various times by MAA or UW Internal Audit, State and/or federal auditors.  For sample reconciliation please see /fm/maa/recharge/templates

Revenues collected through surcharges from external customers can be used to:

  • Pay for future equipment purchases
  • Pay for non-reimbursable or unallowable costs per the Uniform Guidance
  • Reduce the rate to internal users
  • Generate working capital

The intended use of surcharge revenue determines the amounts that should be transferred from the center’s operating budget.

  1. Surcharge revenue used to pay for future equipment, non-reimbursable or unallowable costs per the Uniform Guidance or to build a reserve for future costs should be transferred to the equipment reserve account on a quarterly basis using a journal voucher (JV). Only the surcharge portion of the external revenue should be transferred. Note, expenditures for unallowable costs should be charged directly to the reserve account or transferred to the reserve account if originally charged to the operating account. The operating account should not be charged for these expenditures. The JV has the following coding:
  Account Object Code Amount
Debit Operating 9481-98 Quarterly surcharges
Credit Equipment reserve 9480-98 Quarterly surcharges

Centers should submit surcharge JV’s at least quarterly or at the same time they submit equipment depreciation or use allowance JV.

  1. Surcharges used to reduce rates charged to internal users or generate allowable working capital should remain in the operating account and should not be transferred.

Sales Tax

Sales tax may need to be collected for sales of "tangible personal property" and certain services to external users. For example, copy services are subject to sales tax. For more information, contact the UW Tax Office.

Unrelated Business Income Tax

Unrelated Business Income Tax (UBIT) is a tax that is charged on external sales that do NOT meet all of the following criteria:

  • The activity is a trade or business,
  • The activity is regularly carried on, AND
  • The activity is related to the University's educational mission.

If all of the above criteria are met, the activity is not subject to UBIT. Most recharge centers are exempt from UBIT. However, if you have sales to external users, contact the UW Tax Office for more information.

If your center is subject to UBIT, you will have to provide information to the UW Tax Office so they can prepare a tax return detailing the sales, expenditures, and profit of the recharge center.

Powered by Drupal