8422.190     Reportable Payment Identification and Classification Requirements 
(Renumbered and Revised 2/99)

1. Required Payee Data Record form, STD. 204.  See 8422.190 Illustration 1 through 8422.190 Illustration 1 (Cont. 1).
   A completed STD. 204 must be obtained whenever a state agency engages in a transaction that leads to a payment to any individual or any entity that is not a governmental entity.  The information provided in this form must be used in conjunction with reportable transaction markers in the UCM (Object section, column "FBR"), to select the payments that are reportable from the payment history files, through electronic data processing methods.
   
   In order to obtain the data necessary to determine what payments are reportable, the STD. 204, must be completed by the vendor and attached to each contract.  For non-contract transactions, this form must be completed by the vendor and retained in the state agency's business services or accounting office as determined by state agency policy.  Information provided by the vendor on this form will include:
   1. Name and address of state agency purchasing vendor services.
   2. Complete business name and address of vendor doing business with the State including owner's name, if a sole proprietorship.
   3. The vendor type and the Taxpayer Identification Number (TIN) as shown.  The TIN is the Social Security Number (SSN) for individual and sole proprietor vendors and the FEIN for all other vendors.
   4. The residency status of the vendor by indicating resident or nonresident as shown.  The reverse side of the STD. 204 provides instructions for making this determination.  Nonresidents are subject to state withholding at the standard rate unless verification authorizing a reduced rate or a waiver is attached to the STD. 204.  (See SAM Section 8422.195 for details.)
   5. The name, title, telephone number, and dated signature of the vendor's authorized representative will be provided.  This signature certifies the accuracy of the information provided.
      State agencies that need to customize the STD. 204 in order to fulfill a unique reporting need of a specific program may submit a request for approval (including a draft of the customized STD. 204) to DOF, Fiscal Systems and Consulting Unit.A copy of the completed STD. 204, for payments to all non-governmental entities will be kept on file at each state agency.  If the STD. 204 is not completed by the payee and the required payee data is not otherwise provided, payment shall be reduced by 31 percent for federal backup withholding and seven percent for nonresident state income tax withholding (refer to SAM Section 8422.195.)  A state agency will not process revolving fund payments or file claims for SCO warrants unless a STD. 204 has been completed by the vendor being paid or federal backup and state income tax withholdings have been deducted from the payment in accordance with SAM Section 8422.195.
2. Payments that will be reported.
   1. Payments for services to medical and legal service corporations and to non-corporate entities (except governmental units) will be reported.  These may include:  fees, commissions, other forms of compensation for services (to the extent not reported on Form W–2), interest, rent, royalties, prizes, awards, and "gross proceeds" connected with legal services.  The STD. 204, is required for all payments (except for payments to governmental entities).
   2. Payments are reportable if all three of the following points can be answered YES:
      1. Payment is within the conduct of trade or business.
      2. Payee is not a corporation (note that all payments to medical corporations for services provided and legal fees (including "gross proceeds") paid to attorneys or legal services corporations are reportable).
      3. Payment is for rents, prizes, awards and services (including construction contract services) rendered and not solely for merchandise.
   3. The following identifies (1) the various recurring payment types that are required to be reported and (2) the box on the Form 1099 MISC in which they are to be reported:
      Box 1 Rent of real or personal property.
      Box 2 Royalties.
      Box 3 Other income (including prizes, awards, and punitive damages not involving physical injury or sickness).
      Box 4  Federal Income tax withheld (backup withholding).
      Box 6 Medical and Health Care payments, including doctors, medical corporations, dentists, audiologists, optometrists, psychologists, psychiatrists, etc.
      Box 7 Nonemployee compensation.
      Prizes and awards for services rendered (e.g. bonuses not reported in W-2).
      Commissions to non-employees.
      Commissions to real estate brokers.
      Consulting fees to non-employees (including travel expenses, per diem, and other expenses not supported by travel claim).
      Professional fees.
      Payments to entertainers.
      Construction service contracts (roads, streets, buildings, etc.).
      Box 11  State income tax withheld
      Box 13  Attorney Fees - Gross Proceeds pursuant to IRC section 6045(f); that consist of (1) amounts intended to be paid to the client; and  (2) amounts intended for the attorney.
      d. Interest (other than tax exempt government obligations; interest by or to nonresident aliens and most foreign entities; corporations; tax-exempt retirement plans, custodians and nominees, brokers, registered dealers in securities and commodities, and U.S. state governments, including their subdivisions and wholly-owned agencies and instrumentalities) must be reported on Form 1099-INT.
3. Payments that are not reported.
   1. Payments to governmental entities.
   2. Payments to corporations for goods and services.  However, payments to incorporated physicians and other health care providers payments to attorneys (including legal corporations) are reported.
   3. Payments for merchandise (including freight, storage, and similar charges) and utilities (such as electricity, gas, oil, water, telephone, telegraph, and similar services).
   4. Payments of non-punitive damages (for physical injury or sickness) awarded by the courts.  However, any interest payment is reportable.
   5. Salaries and wages paid from the State Payroll Revolving Fund or otherwise reported on Form W–2.
   6. Scholarships, fellowships, and stipends (except where such payments are subject to the performance of services).
   7. Per diem and travel expense reimbursements paid to employees or non-employees to the extent supported by approved travel claims.  However, note that effective January 1, 1999, IRC Section 162(a) requires that meal reimbursements for daily travel of less than 24 hours that do not involve overnight stay or the Sleep/Rest Rule, are reportable.
4. Payments that include reportable and non-reportable items.
    When a payment to an individual includes both reportable and non-reportable items, state agencies usually have the option of reporting the total payment or only the reportable portion.  If the agreement is only for a lump sum, then the full amount will be reported (including gross proceeds paid to an attorney in connection with legal services).  However, when a payment includes both non-reportable principal and interest, only the interest will be reported.  When a payment to an external consultant includes a stated amount for travel expenses, per diem, or other expenses, as well as an amount for services, the total amount will be reported.
    Questions regarding the determination of reportable payments and/or the use of STD. 204, should be directed to the FTB, Information Reporting Unit, at:  (916) 845–6304.