How Trade Shows Trigger Sales Tax Nexus
In many states, attending trade shows can create sales tax nexus, requiring sellers to collect and remit sales tax to the state for ALL taxable products and services sold to customers in that state now and into the future. How has the introduction of economic nexus impacted these often overlooked laws?
Auditors are focusing more attention on trade show participation by out-of-state sellers. Not only are they looking for remote sellers who create nexus by establishing sufficient physical presence in a state through trade show participation, but now the auditors look to trade shows to collect names of eCommerce sellers who may meet their economic nexus requirements. Either way, trade shows are good forums for states to identify new taxpayers.
Find out which states have economic nexus requirements here:
If your company attends trade shows, it is important to understand the nexus implications to avoid being surprised if you receive a nexus questionnaire asking about business activities that could create a historical tax liability. How do auditors know about trade show participation?
It’s not uncommon for auditors to review trade show exhibitor lists which are easily accessible online. Some auditors attend trade shows to scout out exhibitors making sales or having a large customer base in the state. Remember, the sales you make at the trade shows are not the main concerns of auditors.
What Auditors Look for at Trade Shows
Now auditors have two good reasons to pay attention to trade shows:
1) Exhibitors may become taxpayers based on meeting the state’s physical presence rules of trade show participation.
2) Exhibitors may become taxpayers by meeting the economic nexus requirements set by the state.
If your company establishes nexus either through trade show participation or meeting economic nexus thresholds, the auditors are interested in all the taxable sales made into the state.
While not every state deems trade show attendance to create nexus, close to 20 states take the position that trade show attendance creates physical nexus. More than 35 states are enforcing economic nexus laws.
• Know where your company attends trade shows and understand the nexus laws in those states
• Determine if nexus has been established
• Address nexus issues before being contacted by the Department of Revenue
A proactive approach will reduce penalties, save tax dollars and maximize negotiating power.
Cherry Bekaert works with sellers of all sizes to identify nexus footprints and achieve full compliance. Contact us or visit our website for more information.