Conference in Another State: Will Sales Tax Apply?
Must you pay taxes if you hold your conference in a different state?By: Temkin, Terrie
Category: Law & Taxation
Issue: Jan/Feb/Mar 2017
: In an effort to attract a strong attendance at our annual conference, we decided to hold it in a destination city outside the state in which our organization is registered. Obviously, weíd like to avoid paying sales tax on the facility, food, rentals, and so on. Will our tax exemption apply, or do we have to register for tax exemption in the state in which the conference is being held?
: This is a common question, but a question that has no common answer. Some initial clarifications will help. First, Iím assuming that when you talk about your ďtax exemption,Ē you are talking about your sales tax exemption. The tax exemption you receive from the IRS is a different animal, though having that is generally a prerequisite to obtaining a sales tax exemption. Sales tax exemptions are granted by the states, and they are specific to the state. You canít use your sales tax exemption in another state.
You might be in luck if youíre a recognized subordinate of a national organization thatís registered in the state in which youíre holding your conference. Some states will allow you to benefit from the parent organizationís sales tax exemption if it has one. If thatís not the case in your situation, understand that different states make obtaining a sales tax exemption more or less difficult. Some states require that you be incorporated in their state to be eligible for such an exemption. Others will let you register as a foreign business doing business in their state, and with that designation you can file for a sales tax exemption. To actually file, some states require that you complete a separate application, whereas others ask only that you send in a copy of your IRS determination letter. In a number of states, the exemption is automatic when you check the right box on your state registration.
Obtaining a sales tax exemption may not help you, though. Be sure to get answers to a couple of other questions first. Does the state limit the types of purchases that are considered tax exempt? If so, what are those limitations? Would the exemption cover enough items to make it worth your while to apply? And, does the state allow for home rule, whereby cities within the state can make their own rules about accepting a sales tax exemption? If so, will the city in which youíll be gathering accept the stateís sales tax exemption for the hotel and other needed purchases?
You can go online to view the stateís statutes regarding nonprofit corporations to find the answers to all your questions. Easier might just be to speak with the sales manager at the hotel you intend to use. If youíre going to a destination city, my guess is that your question has been asked and answered many times before.
Terrie Temkin, Ph.D., Founding Principal CoreStrategies for Nonprofits, Inc. corestrategies4nonprofits.com