Written By: Ashley Trabaris, CPA,MST, State & Local Tax Manager
In the realm of sales tax compliance, the concept of "nexus" is paramount. Sales tax nexus refers to the connection between a business and a state that obligates the business to collect and remit sales taxes on sales made to customers within that state. Traditionally, sales tax nexus was established through physical presence, such as having a store or office within a state. However, with the rise of e-commerce and the South Dakota v. Wayfair, Inc. Supreme Court decision in June of 2018, many states have expanded their definition of sales tax nexus to include economic activity, such as exceeding a certain sales or transaction threshold.
Trade shows present a unique challenge for businesses in terms of sales tax nexus. When a business participates in a trade show in another state, it may create a physical presence, thereby establishing nexus. This means that even a temporary presence, such as renting a booth at a trade show, could obligate the business to register for sales tax, collect tax on sales made during the event, and remit those taxes to the state. The rules and thresholds for establishing nexus through trade show participation can vary widely between states, making it essential for businesses to understand the specific requirements of each state in which they operate. Some states, Georgia for example, will allow for a limited number of days to be in the state, even making retail sales, without creating nexus while other states will assert nexus just from having presence at a trade show and soliciting sales from in state customers.
Navigating sales tax nexus for trade shows requires careful planning and compliance. Businesses should conduct thorough research on state laws regarding trade show participation and nexus, ensuring they meet all registration, collection, and remittance requirements. By staying informed and proactive, businesses can avoid potential penalties and ensure a smooth experience when participating in trade shows outside their home state.
It is also important to note that your business may have income tax nexus implications if you engage in trade shows in different states as the nexus rules for income tax are not the same as nexus rules for sales tax.
Reach out to your Porte Brown advisory team if you have any questions on your sales or income tax nexus exposure in regards to trade shows or other conventions that your business participates in.
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