Avalara TaxQuest Question: Do foreign businesses need to collect sales tax at U.S. trade shows?

The easiest and most straightforward way to establish nexus in a U.S. state is by having a physical presence there. But while your business may not have a permanent physical presence in a U.S. state, being physically present in that state for a limited time — the duration of a trade show, for example — can trigger what is known as temporary nexus. Even short-term activities like exhibiting products and interacting with customers can trigger this.

Nexus triggers can vary significantly from state to state. This means that trade show sales could trigger nexus in one state but not in another. There are several factors that might lead to a nexus trigger — total sales volume, number of transactions, duration of the trade show, local tax laws, and more. In the state of Georgia, for example, nexus is triggered if trade show sales exceed $100,000. The threshold could be more or less than that amount in a different state. You need to collect and remit sales tax only if your sales surpass the specified threshold.

In the state of Nevada, selling at more than two trade shows in a 12-month timeframe will trigger nexus. This is important because Las Vegas is home to some of the biggest trade shows in the U.S.

On-the-spot sales

On-the-spot sales refer to transactions where goods are sold and handed over to the customer during the trade show, rather than being shipped later.

• Taxable transactions: If you’re making direct sales to customers at a trade show, those transactions are generally subject to sales tax based on the location of the trade show.

   

  • Collecting tax: You must collect the appropriate amount of sales tax at the time of sale. This means you need to determine the correct sales tax rate for the location of the trade show.
  • Sales receipts: Ensure that sales receipts or invoices provided to customers clearly show the sales tax collected. This transparency is essential for adhering to tax compliance laws of the state. 

• Tax rates: Sales tax rates vary by state and even within local jurisdictions. It’s important to keep track of the specific rate applicable at the trade show’s location.

   

  • Local variations: In addition to state sales tax, there may be additional local taxes (county, city, or district). For example, while the state rate might be 6%, local taxes could bring the total rate to 8% or more.
  • Rate determination: Use tools or resources to determine the exact sales tax rate for the trade show venue. Websites of state tax authorities or automated tax compliance software like Avalara can provide accurate, up-to-date rates.
  • Multi-rate locations: Some trade shows span multiple jurisdictions. If your booth is located in a venue that straddles the borders of different tax zones, you need to be aware of the specific rates for each zone.

Ensuring compliance with sales tax regulations involves more than just understanding nexus triggers. Proper registration and adherence to post-event requirements are essential to avoiding penalties and maintaining good standing with state tax authorities. Here are the steps you need to follow both before and after participating in a trade show:

• Registration requirements: Before the trade show, register for a sales tax permit in the state where the event is held. Each state has its own registration process. We recommend that you check the requirements well in advance.
• Compliance checklist: Prepare a checklist to ensure you comply with all sales tax obligations, including registration, collection, and remittance.

• Remitting sales tax: After the trade show, remit the collected sales tax to the appropriate state tax authority by the required deadline. This step is crucial to maintain compliance and avoid penalties.
• Keeping records: Keep detailed records of all sales made at the trade show, including invoices, receipts, and the amount of sales tax collected. This documentation will be essential for filing returns and in case of an audit.

Managing sales tax compliance across multiple states with varying regulations can be daunting. Businesses can benefit from automated tax compliance software to help streamline these processes and ensure accurate tax calculation.

• Tax software: Consider using automated tax compliance software like Avalara to manage the complexities of sales tax collection and remittance. These tools can help you accurately calculate the applicable tax rates, ensure timely tax filing, and reduce risk. 
• Real-time updates: Tax automation software like Avalara can also provide real-time updates on tax rates and regulations, helping you stay compliant amid frequently changing laws and regulations. Additionally, it can alert you if and when your trade show activity triggers nexus in a particular state.

Participating in a U.S. trade show offers valuable opportunities for foreign businesses but also comes with specific tax obligations. By understanding the concept of nexus, preparing for sales tax collection, and leveraging technology to maintain compliance, you can navigate these challenges confidently. Remember, state-specific rules play a significant role in determining your tax responsibilities. We recommend verifying the requirements for each state where you plan to attend or participate in a trade show.