"I sell collectible stamps and coins on eBay and locally. I currently collect sales tax in the state of California. Beginning next year, when I retire from my day job, I want to start travelling around the U.S. going to big stamp and coin conventions, setting up a vendor stand and selling merchandise and networking. However, the people running the conventions tell me I need to get a sales tax ID in each state. Do I really need to do this for a three-day event? It is causing me huge issues.
"If I get the sales tax IDs in each state, I will then have to collect sales tax on all of my online transactions. This will create far too much paperwork and record keeping for myself; I currently run the entire business myself and with some help from a friend. Is there any way around the option of getting sales tax IDs in each state? Can I just pay the sales tax out of my own pocket to avoid filling all of the paperwork?"
This is not a rare situation at all; in fact, it applies to anyone who sells merchandise at a trade show.
You are always required to pay taxes on in-state sales — where the seller and buyer are in the same state at the moment of sale. Whenever you sell merchandise at a trade show, you are selling locally — the seller and buyer are considered to be in the same state (the trade show floor) at the time of sale.
When are you selling on a trade show floor? Here are the basic rules:
—If you are merely advertising and promoting your business on a trade show floor and not actually selling anything there, you are not liable for sales tax
—If you are taking orders for products or services on a trade show floor, taking the customer's money there and fulfilling the order later from your home office, you are liable for sales tax
—If you are taking orders for products or services on a trade show floor, shipping the merchandise to the customer after the show and collecting their money at that time, you MAY be liable for sales tax (the rules here vary from state to state so check with your accountant before you sign up for the show).
Most states (such as New York, Illinois and Texas) require out-of-state vendors to register for sales taxes on ALL sales made to in-state residents even if they spend only one day attending an in-state trade show or convention. In Texas, you may also be subject to franchise (income) taxes. The standout exception is Nevada, where you can fill out a "one-time sales tax permit" each time you attend a trade show or convention without registering for sales taxes generally (gee, I wonder why they're so easy?)
In a shrinking handful of states, you are not considered to have nexus if you spend fewer than X days at a trade show (for example, four days in Minnesota, three days in Massachusetts, 16 days in California), but you are still required to pay tax on sales made during the show.
To get a sense of where each state stands, check with your accountant, or spend $125 and get a copy of the Bureau of National Affairs' annual "Survey of State Tax Departments" (www.bna.com/statetaxsurvey), which lists each state's nexus rules on over 200 situations affecting out-of-state vendors.
Many event sponsors will provide you with the necessary forms to handle state and local taxes on sales made during their events; some will even collect the tax and submit the forms for you. If an event sponsor instructs you to register for sales taxes generally, then you probably will have to comply. After all, they and their tax experts have probably done everything they can to negotiate an exception for their exhibitors, and if they couldn't succeed, you probably won't either.
Note to eBay, Amazon and other online merchants. Next week, Congress will decide whether or not to enact the Marketplace Fairness Act of 2013, empowering roughly half of the states (those that have signed onto the Streamlined Sales and Use Tax Agreement) to impose their sales taxes on Internet sales transactions if (1) the purchaser resides in the state, (2) the state imposes a single tax rate and a single point of collection, and (3) the seller has $1 million or more in total out-of-state sales (not just from the Internet) each year, among other conditions.
Even if your sales are well below the $1 million threshold, take a few minutes out this week to let your elected representatives know how the Act will impact your business. To send a strong message to Congress that taxing Internet sales will hurt a lot of small businesses (whose owners vote), go to www.ebayinternetsalestax.com/ist/step1_b.asp or www.freedomworks.org/blog/mkibbe/freedomworks-key-vote-no-on-an-internet-sales-tax.
Cliff Ennico ([email protected]) is a syndicated columnist, author and former host of the PBS television series "Money Hunt." This column is no substitute for legal, tax or financial advice, which can be furnished only by a qualified professional licensed in your state. To find out more about Cliff Ennico and other Creators Syndicate writers and cartoonists, visit our Web page at www.creators.com.