What is “Grossing Up” a Payment?

The North Carolina Department of Revenue levies a 4% tax on certain types of payments to nonresidents:

  • Personal services in connection with a performance, an entertainment or athletic event, a speech, or the creation of a film, radio, or television program performed in North Carolina by nonresidents
  • An ITIN holder who performs services in North Carolina for compensation other than wages. An ITIN holder is a person whose taxpayer identification number is an Individual Taxpayer Identification Number (ITIN).

In cases such as those above, WFU Financial Services is required to deduct this tax whenever these criteria are met:

  • The vendor has an out of state business address.
  • The single payment amount is over $1500, or a total of $1500 or more will be paid over the course of the year.

Some contracts stipulate that state and local taxes should not be deducted from the payment. When reviewing a contract, you and your advisor should look for wording such as (but not limited to):

  • “Not responsible for state and local taxes”
  • “No taxes are to be deducted”
  • “All taxes are the responsibility of the purchaser”

If the contract contains such phrases, we will need to ask Financial Services to “gross up” your payment, by increasing the total paid to cover any required tax deductions. Please note that the additional amount will be deducted from your SAF or DCF funding.

If your payment meets the requirements for tax withholding listed above and the contract does not require a “gross up”, the final total on the check you give your vendor will reflect the 4% deduction.

If your vendor’s contract wording isn’t clear about taxes and deductions, it may be advisable to discuss the matter with them or their agent prior to requesting a check. It is the policy of the SAF administrative office to “gross up” payments only when the contract explicitly requires it.

Questions? Feel free to contact the Office of Student Engagement for contract help.