If it moves, tax it? |

I’ve been warning you that states are desperate for cash. And, they got the go ahead from the Supreme Court to tax sales from out-of-state vendors. Some states want to collect tax from the first sale, others have more reasonable thresholds ($ 100K, 200 transactions). Which means we have to be vigilant about tracking our sales; more importantly, if we think we may come close to the threshold during a given year, then we better start collecting those taxes now- or be out the cash we have to shell out later.

But, there are other wrinkles to this state tax issue that I had not considered- until now.

And, since many of you are going to be ensnared, I figured I better share these new “interpretations” with you.

In the past, one of my firms attended about 20 trade shows a year. Many of those shows were in the same state, since the big convention halls were able to accommodate those large medical conferences. And, that’s the crux of the matter.

Because states have just glommed onto these trade shows as a method to expand their sales tax capabilities. No, this won’t cross the economic nexus (number of sales, gross value of sales) determination, but the physical presence set of state sales tax rules.

Let’s consider a state where we had a large physical presence- but no longer do. (Or, is that true, since economic nexus may keep us there?) That state is California.

California has decided that if we attend convention or trade show activities in their state for 15 or more days- we pass the physical presence test. Of course, the $ 100K rule (of net income… that leaves a great deal of interpretation in my mind) also applies- if we obtain those sales from our trade show/convention activities. And, now, comes another question- what constitutes a trade show?

If I attend the California Dialysis Council meeting or the American Society of Nephrology meeting (which may have a meeting or two in California), does that constitute my attendance at a trade show? Must I have a booth or exhibit to be so defined? Or, is my presence at these meetings all it takes? (Yes, I can see a bunch of lawyers making a fortune off these questions.)

Illinois (don’t forget the big Chicago Convention Center is in this state) has decided that we are obligated to register for sales tax if we attend two or more trade shows in any given calendar year. Or, if we are in the state for more than 8 days in a calendar year for those trade shows. And, as opposed to California’s $100K of ‘net income’ threshold, Illinois wants our sales taxes if we gross more than $ 10K in any given year from those trade shows.

It gets better- or is that worse? If we display products, answer queries, and collect orders for FUTURE sales (not ones made at the trade show per se), then we are obligated to register and collect sales taxes.

The state of Washington upped their requirements when we have to register and collect sales taxes from 1 trade show attendance per year to two or more. (I figured I would drop some good news into this post!)

Connecticut holds that if you make sales on any single day during a trade show, you must collect sales taxes.

Texas claims if you deliver or take orders (selling, of course, is included) at a trade show, you must collect sales taxes. (If we don’t normally sell taxable items- like medical devices or drugs, then Texas will let us off the hook.)

Florida relies on the trade show rules. If the trade show agreement allows one to make mail order or retail sales- we have to register and collect sales taxes. If the trade show prohibits sales from the trade booths, we are exempt from registration as a result of our trade show attendance.

Massachusetts doesn’t like that Florida interpretation. Instead, the Commonwealth prohibits anyone from displaying for sale or effecting the sale of any taxable property if we haven’t first registered with Massachusetts. And, that means the certificate needs to be visibly posted in our booth. (By the way, if we solicit orders that won’t be fulfilled until after the trade show- and were in the state for 3 or more days, we have to register and collect sales tax, as well.)

As one of my client learned (beforehand, because we warned him), Minnesota requires participants to register and collect sales tax. (Thankfully, his other sales don’t cross their threshold so he just gets a short-term permit, covering his attendance at the trade show. And, he need not keep other extensive records.)