Business Services Policy - Clothing Purchases
This policy defines guidelines for purchasing clothing using university funds. Additional review is required for clothing given to employees to ensure compliance with the Internal Revenue Service (IRS)
tax code and other applicable policies and statutes.
| Functional Owner | Controller |
| Executive Sponsors | Vice Chancellor for Administration & Finance |
| Policy Contact | Assistant Controller |
Who this policy applies to:
All employees
Rationale:
This policy defines guidelines for purchasing clothing using university funds. Additional review is required for clothing given to employees to ensure compliance with the Internal Revenue Service (IRS)
tax code and other applicable policies and statutes.
Policy Detail:
Definitions
- Clothing – items worn to cover the body.
- Employee – an individual who performs paid work for the university.
Policy
Clothing purchases with a cost of $75 or greater made with university funds require a Clothing Purchase Approval form. Clothing that will be used as a prize, award, or gift also need to comply with the UWL Prizes, Awards, and Gifts Policy. Clothing that is purchased for a university employee will be classified as follows by Business Services based on information provided by the department:
- Taxable Employee Benefit
- Clothing purchased with university funds and given to an employee that is suitable for everyday use outside of employment and has a cost of $75 or greater per item.
- Non-Taxable Benefit
- Clothing purchased with university funds and given to an employee that meets all of the following conditions:
- Wearing the specific item of clothing is a condition of employment.
- The clothing is not suitable for everyday wear.
- The clothing is not worn for general use, but for a specific job-related duty.
- De Minimis Benefit
- Clothing purchased and given to an employee infrequently and valued at less than $75 is considered a non-taxable de minimis benefit to the employee. The de minimis rule applies per item.
Procedures
Departments making clothing purchases using university funds must complete the Clothing Purchase Approval form if the purchase cost is $75 or greater per item and provide the information necessary to ensure compliance with this policy. The form will be reviewed by Business Services and must be approved before the purchase can be made.
The correct taxability determination for clothing purchased for employees can be complex and requires informed judgement, particularly in cases where qualifying factors are not immediately clear. Each
purchase is evaluated individually.
Procurement cards are not to be used for the purchase of clothing. Clothing purchases under $5,000 should be purchased through the University Bookstore portal, providing appropriate funding information, or through the ShopUW+ purchasing system as a non-catalog item request, attaching the price quote and approved Clothing Purchase Approval form where required. For purchases greater than $5,000, a bid process will be needed. Please contact Purchasing Services for additional guidance.
Taxable Employee Benefit
Clothing purchased for an employee using university funds is considered a taxable fringe benefit when it is suitable for everyday wear and its cost equals or exceeds the de minimis level of $75. When
purchasing clothing to be given to employees, the department will be responsible for identifying each article of clothing distributed by employee name, along with the value of each item.
Non-taxable Benefit
University-purchased clothing given to employees exceeding the de minimis threshold is considered nontaxable and can be excluded from earnings if the following conditions are met:
- The clothing is specifically required as a condition of employment.
- The clothing cannot be worn or adapted to general usage as ordinary clothing.
The qualifying conditions for non-taxable clothing purchases should be documented on the Clothing Purchase Approval form before the purchase is made. The department must purchase the items following university purchasing policies and procedures and the guidelines of this policy.
De Minimis Benefit
Although the IRS does not explicitly define de minimis, UW-La Crosse has defined the amount of a de minimis benefit to be less than $75. This means that if the value of an article of clothing purchased for an employee can reasonably be valued at less than $75, it will be considered a non-taxable fringe benefit under the de minimis rule. The department must purchase the items following university purchasing policies and procedures and the guidelines of this policy.
If Business Services determines that clothing furnished to an employee is non-taxable and the purchases are later ruled by the IRS to be taxable, the employee is responsible for any individual taxes or penalties. The applicable department is responsible for any related taxes and penalties assessed against UW-La Crosse for such purchases.
Revision history:
Effective: November 1, 2021
Last Reviewed: January 12, 2022
Supporting tools:
IRS Publication 5138 https://www.irs.gov/pub/irs-pdf/p5138.pdf
Responsibilities:
N/A
Links to related information: