SUBJECT:

Sales Tax Increase

Reference:  PPM 300-23, State Sales Tax - The University as a Seller
       PPM 523-2.3.2, Applicability of State Sales Tax to
       Purchases of Goods and Services

Beginning April 1, 1996, the state sales and use tax rate for San
Diego county will increase from 7% to 7 3/4%. The increase results from
the March 31, 1996 expiration of the San Diego County Justice Facility Tax
Refund Claim Period.

The new tax rate will apply to University of California, San Diego
(UCSD) purchases and sales subject to state sales or use tax. The
following is a summary of guidelines that will affect UCSD as both a
buyer and as a seller:

PURCHASING

All UCSD purchase orders for tangible personal property (goods),
rentals and certain specific services placed on or after April 1,
1996 will be subject to the 7 3/4% tax rate. The tax regulation
also states that the applicable tax rate is the rate in effect at
the time goods or services are delivered. Departments should
scrutinize invoices for purchase orders placed before April 1 using
the 7% tax rate but for which goods were received after March 31.
Departments should adjust invoices to reflect the 7 3/4% rate.

Exceptions such as purchases of goods for resale are exempt from the
application of state sales or use tax.

INVOICES

Payment of invoices dated April 1,1996 and thereafter will include
7 3/4% tax (unless otherwise exempted) and will have the amount
reflected in the Operating Ledger either as a sales tax or as use
tax.

For invoices issued by vendors residing within San Diego County, the
Operating Ledger will show a 7 3/4% sales tax included in the invoice
total remitted to the vendor.

Invoices issued by vendors residing outside San Diego County that do
not reflect the proper San Diego County sales tax rate will be
processed with the new tax rate of 7 3/4%. The Operating Ledger will
show the sales tax included in the invoice total remitted to the
vendor and any incremental adjustment as accrued use tax. For
invoices issued by vendors residing outside San Diego County which do
not reflect any sales tax, the Operating Ledger will show the 7 3/4%
use tax as a separate line item.

SALES ACTIVITIES

Activities performing cashiering functions and those departments
preparing University invoices for which sales tax is applicable will
be impacted by the increase in the sales tax rate. Please note that
this increase applies only to the sale of goods delivered within San
Diego County. The tax rate of 7 1/4% remains the same for sales of
goods delivered to California locations outside San Diego County, and
sales of goods delivered out-of-state are not subject to California
State Sales Tax. Upon request, the General Accounting Division will
provide copies of the 7 1/4% and 7 3/4% tax schedules and a listing of
the cities within San Diego County.

To meet sales tax reporting requirements, it is imperative that sales
tax be recorded at the proper amount and in the proper account. Rules
for applying the two sales tax rates and the related general ledger
accounts and/or ISIS accounts receivable/cashiering system detail
codes that must be used for accounting are as follows:

Rate           Rule           Account/(Detail Code)

7 3/4%   Sales of tangible personal property     215513 (TX___1)
       delivered within San Diego County.

7 1/4%   Sales of tangible personal property     215515 (TX___2)
       delivered by common carrier to
       California locations outside San
       Diego County.

NOTE: 69997A is the correct fund to use with either sales tax
    account.

Tax detail codes are comprised of the letters TX followed by a three
(3) letter code identifying the department, then a 1 or 2 as described
above. For example, the detail code for a 7 3/4% sale made by the
Biology department would be TXBIO1. The sales tax amount must be
calculated and entered on the invoice.

For additional information regarding the application, payment, and
collection of the new tax rate, please contact:

    Purchasing.....................x44436 - Roy Brown
    Invoices..........................x40541 - Alicia Cole
    Sales Activities...............x44951 - Patricia Lee-Leonard

Donald A. Larson Assistant Vice Chancellor - Business and Financial Services