Sales Tax Nuances of Trade Show Attendance

Trade shows can be a fun way to send company representatives out into the world to spread awareness about company products and services. Booths! Business cards! Kitschy giveaways! Product demos! Samples!

While the marketing and sales teams prepare their pitches and materials and choose the people to attend, it is critical that the tax department stays in the loop.

Trade show attendance in another state can create physical nexus and trigger sales tax obligations. In some cases, you may be required to not only collect and remit sales tax on trade show sales, but all taxable sales into that state going forward. And remember that physical nexus overrules the economic nexus thresholds.

Because trade shows are a hook for sales tax registration, they can become a target for auditors. Auditors can review exhibitor lists and may even attend a trade show to scour exhibitor names and verify their registration requirements.

Each state has its own rules that you should investigate well in advance of the trade show so you can stay on top of your sales tax obligations. Despite varying rules, there are some common nuances to keep a watchful eye out for among trade show rules across the states.

Number of Days Attended & Derived Income

Some states set varying time and monetary limits to determine if a retailer establishes physical nexus with the state due to trade show attendance. Several will use both the number of days spent at trade shows and net income (or a similar metric) derived from trade show sales to determine nexus, others use only the number of days.

Let’s look at a few examples:

An out-of-state retailer that attends trade shows in Illinois may not have to register with the state if the following conditions are met:

  1. The retailer attends no more than 2 Illinois trade shows during any calendar year;
  2. The retailer is physically present at those 2 Illinois trade shows for an aggregate total of no more than 8 days during any calendar year; and
  3. Combined gross receipts from sales made subject to Retailers’ Occupation Tax at all Illinois trade shows during any single calendar year do not exceed $10,000

In California, a retailer is not considered ‘engaged in business in the state’ if:

  1. The retailer’s sole physical presence is California is to engage in trade show activities;
  2. The retailer and any of its representatives do not engage in trade show activities for more than 15 days, in whole or in part, during any 12-month period; and
  3. The retailer did not derive more than $100,000 of net income from trade show activities

The Georgia rule reads almost exactly the same as the California rule, setting a limit of $100,000 of net income derived from trade show activities but trade show attendance is limited to 5 days.

An out-of-state vendor with no presence in Massachusetts other than trade show appearances is not engaged in business in the state unless the vendor solicits orders at trade shows for more than 3 days in a calendar year.

For states that set limits on the number of days, you need to delve into the minutiae of each state’s rule to understand how that state calculates the number of days you have presence. For example, in Illinois, any portion of a day that a retailer is physically present at an Illinois trade show counts as a whole day – but set-up and tear-down days do not count.

Are you transacting business at the trade show?

Even if you don’t meet the time and monetary limits for trade shows set forth by the state, it doesn’t always mean you’re off the hook for sales tax collection. If you make actual sales at the trade show or take orders for products delivered later to a state, you are most likely required to pay tax on those sales – but you may only need a temporary permit (more on that below).

Sales at trade shows are the key determinant for triggering sales tax nexus.

You will need to prepare well in advance if you know you will make sales at the trade show to understand your sales tax obligations for those sales and to secure the correct type of permit and forms.

If you plan to attend a trade show sheerly to exhibit and promote your products and don’t plan to make sales, you likely do not need to register or secure a permit in states that have safe harbor days rules. But keep in mind that many states don’t have any published guidance and therefore the assumption is that this exhibiting activity would create physical nexus.

Washington changed its law to state that a trade show participant that only attends one “trade convention” per calendar year does not establish physical presence in the state and does not need a temporary registration certificate as long as the participant doesn’t make retail sales at the trade show. But to qualify, the trade convention cannot be open to the general public!

Temporary vs. Permanent Permits

Most states require out-of-state sellers to register for a sales tax permit in preparation of collecting tax on taxable sales at a trade show. In certain states, you will only need to register for a temporary sales tax permit that is only valid for the duration of the trade show.

A trade show exhibitor in Florida that displays tangible personal property or services must register as a dealer and collect sales tax on taxable sales provided the written agreement between the exhibitor and the event sponsor/organizer authorizes the exhibitor to make retail sales in the state or mail orders to Florida customers.

Trade show attendance in Texas or Connecticut even if for one day is enough to constitute physical presence in the state and require that the seller obtain a sales tax permit. A non-Texas seller may qualify for an occasional sale exemption if they don’t normally make taxable sales.

Colorado requires sellers to obtain an $8.00 Special Event License in advance of the trade show. The state defines a special sales event as an event that occurs no more than 3 times in a calendar year where retail sales are made by more than 3 sellers at a location other than their normal business locations.

Trade show participants in Idaho should obtain a temporary seller’s permit that allows the participant to make retail sales at the event.

Stay on Top of Physical Nexus – from Trade Shows and Beyond!

Trade show attendance is just one activity that can put you on the hook for sales tax collection. Are you aware of all the other types of activities your company is engaging in across the states that may be creating nexus?

Consider checking out the resources below for more information about physical nexus.

Posted on January 15, 2020