The Mississippi Supreme Court unanimously decided that Saltwater Sportsman Outfitters LLC is liable for $80,000 in additional sales tax.
Saltwater Sportsman Outfitters (SSO) LLC is a small business, selling fishing-related clothing both online and in-person. The company frequently sold materials at trade shows and conventions in addition to its website.
The Mississippi Department of Revenue (MDOR) audited SSO in 2018, during which the MDOR found the company to be liable for collecting and remitting sales tax on products sold at the in-person events.
A trial court ruled that the MDOR had accurately assessed SSO’s sales tax liability. SSO contested the decision, taking the case to the Mississippi Supreme Court.
The company argued that the event promoters were liable for paying Mississippi’s sales tax, not the individual vendors. However, Mississippi Code Section 27-65-17 establishes that “every person engaging or continuing within this state in the business of selling any tangible personal property” is liable for sales tax. This code was amended in 2005 to include a “promoter of a temporary event” within the definition of a person liable for collecting and remitting sales tax. Therefore, the company was liable for collecting, reporting, and remitting tax on sales made at the in-person events. Just because the promoter of an event may be liable, a written agreement, or some sort of agreement regarding tax would have had to been available to support such a stance in the event of audit. There was no such written agreement, only an assumption that the company or vendor in this scenario was free of tax obligation, and that the event promoter was liable.
Another misstep in this case was that SSO didn’t maintain adequate records. In fact, most of the arguments made were based off memory. SSO argued it did not have to keep records of sales from promoted events, as the company believed the promoters were liable. However, the trial court had already determined SSO was the taxpayer and was therefore liable.
In today’s climate of shared economy, sellers who are truly void of tax obligation, could still have reporting obligations which can only be fulfilled by having robust records. This case emphasizes the importance of doing your due diligence and research when you are using alternate selling methods. Tradeshow and conventions can not only create physical nexus for taxpayers, but it can also come with additional licensing requirements. While these in-person events can serve the company well, it can also be a source of risk if you do not ensure you are licensed and prepared to follow the state or local jurisdictions tax laws regarding in-person sales, even if only temporary in nature. We also suggest that when attending tradeshows or conventions that do hold the promotor/organizer liable rather than the vendor/seller, that you have document supporting such in case of audit, and that you continue to maintain sales documentation for the event as well.
Saltwater Sportsman Outfitters LLC v. Mississippi Department of Revenue, 2021-SA-00881