Washington Issues Guidance on Sales Tax Nexus from Trade Show Participation
Washington has joined the ranks of states which grant an exception to sales tax nexus for trade shows and conventions.
Many business owners and employees travel each year to participate in trade shows and conventions. Oftentimes these events can be a great way to network with potential customers and business partners and even make some sales. However, trade show attendees should consider the sales and use tax implications of attending and/or making sales at trade shows, including whether attendance at the trade show creates sales and use tax nexus.
Not surprisingly, states take different positions on trade show attendance. In order to encourage trade shows and conventions (and the economic benefit that results from them), many states provide more lenient rules regarding sales tax nexus. For example, Michigan guidance states that sales tax nexus is not established if the only activity in the state is “participation in a trade show at which no orders for goods are taken and no sales are made for less than ten days cumulatively on an annual basis.” 
California’s rule is that a retailer is not required to obtain a seller’s permit provided that it does not engage in trade show activities for more than 15 days and did not derive more than $100,000 in net income from those activities in the state during the prior calendar year. However, a trade show attendee must, in any event, collect and remit California sales/use tax on any sales actually made during the trade show or pursuant to an order taken at the trade show that is delivered to a customer in California. The attendee may obtain a temporary sales tax permit for this purpose. 
On May 27, 2016, Washington issued a Special Notice explaining new legislation establishing a trade convention exemption from nexus for retail sales. The new law, effective July 1, 2016, creates an exception to what constitutes physical presence for purposes of determining sales/use and business and occupation tax nexus by stating that attendance and/or participation by one or more representatives of a person at one trade convention per year does not establish a physical presence in Washington and therefore does not create nexus for retail sales.  A “trade convention” is defined as an exhibition for a specific industry or profession, which is not “marketed to the general public,” for the purposes of:
- Exhibiting, demonstrating and explaining services, products or equipment to potential customers; or
- The exchange of information, ideas and attitudes in regards to that industry of profession.
This exception does not apply if the taxpayer is making retail sales at trade conventions or is taking orders for products where receipt occurs in Washington. It is important to remember that if nexus is established, all sales into Washington (not just sales made at conventions and trade shows) are subject to Washington’s taxes. In addition, for wholesaling and most service activities, business and occupation tax nexus is determined based on an economic nexus standard, and thus this exception does not apply to taxpayers engaged in those activities.
Generally for businesses making retail sales into Washington, a person is considered to be physically present if the person has property or employees in Washington. A person is also physically present in Washington if the person, either directly or through an agent or other representative, engages in activities in this state that are significantly associated with the person’s ability to establish or maintain a market for its products in Washington. Being ‘physically present’ in the state creates sufficient nexus for the company to collect sales tax from Washington. Examples of nexus-creating activities in Washington include, but are not limited to:
- Having employees or property in the state
- Soliciting sales in the state through employees or other representatives
- Installing or assembling goods in the state, either by employees or other representatives
- Maintaining a stock of goods in the state
- Renting or leasing tangible personal property
- Providing services
- Constructing, installing, repairing or maintaining real property or tangible personal property in the state
- Making regular deliveries of goods into Washington using the taxpayer’s own vehicles
In order to determine whether attendance or participation at a trade show creates nexus, it is important to look at each state’s specific rules addressing (i) duration and net income limitations, (ii) what activities can and cannot be conducted and (iii) whether an event actually qualifies as a trade show for purposes of the exemption. If you are planning on traveling for a trade convention, please contact your Aprio SALT Team to assist you in determining potential sales tax nexus consequences.
This article was featured in the June 2016 SALT Newsletter. To view the newsletter, click here.
 Michigan Revenue Administration Bulletin 1999-1 (May 12, 1999).
 Cal. Reg. 1684(d)(3); Cal. SBE Information Publication No. 77, 2/1/2014.
 WA. House Bill 2938, Chapter 137; eff: 07/01/2016.
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