Virtual Events

Plan Like A Pro: The Taxation Considerations for Virtual Events!

Eventually Learning Team

07 September 2022

Read time 6 Minutes 6 Seconds

“The payment of taxes gives a right to protection.”- James M. Wayne

Virtual B2B events have cut down the venue costs, on-ground staff payments, accommodation charges and other allied expenses for global event organizers. The allocated budgets for the above are being redirected to handpicking the most high-performing and latest in the industry - virtual event platforms. Did you know that online event platforms can bag more revenue returns than in-person events? A Markletic survey says 45.7% of event marketers have reported that the primary objective of virtual events is to generate the ‘pipeline’! With such unquestionable advantage at hand, event organizers are busy strategizing their reach in far and wide corners of the globe. But with transcending worldwide frontiers comes navigating through complicated tax regimes! What are the new taxation policies, virtual event organizers should abide by to avoid facing possible legal hurdles? What is the sales tax for virtual events?

What Is The Current Sales Tax Policy For UK Virtual Events?

The tax treatment is plain sailing to implement for business events organized within a particular geographical boundary. The event admission is subjected to taxation rates applicable in a particular country or state. But given the spread of virtual event ticket sales, most times going cross-country may lead to vagueness in the territorial mapping for the application of the value-added tax. Also, events in the metaverse are not considered to be digital services. The EU VAT legislation has mentioned ‘digital services’ as those utilizing the internet, that are automated, and involve the least possible human interactions. But on-screen events see a lot of panel discussions, fireside chats, networking lounges and even in-event scavenger hunts – making for ample real-time human interactivity at multiple touchpoints. This creates an anomaly in the ‘digital service’ tax qualification! Another new rule consideration is that the EU VAT law has said the law is not restricted to “admission to events” as the right to access a physical event venue but rather the right to participate in events. The Court of Justice of the European Union (CJEU) has included ‘events’ as taxable under the EU VAT if they are organized way in advance, are short in time duration and have a decided theme or topic under their lens. So can events be put under this bracket or under ‘digital services’? The rules are thus.

If a B2B customer shares his VAT identification number, the seller doesn’t charge any VAT as by reverse charge mechanism, the customer is held accountable for VAT on the event ticket sale.
If private B2C transactions are undertaken, the seller will charge the tax rate according to the location of the customer – with information like bank details, IP addresses and billing addresses.

The EU has now realized that virtual events are poles apart from in-person events and has suggested new pointers to eliminate the chaos. The present-day proposed EU VAT regulations have set down that virtual event admission will remain non-taxable in the country where the event is hosted, instead, it will be charged at the customer’s country’s rate.

Understanding the Tax Nexus for US Virtual Event Ticketing

The US has seen a lot of inter-state online sales in the recent few years. This has resulted in the formulation of the click-through nexus (wherein an in-state event company redirects virtual visitors to its event landing page), the affiliate nexus (if an event company has teamed up with another in-state company to promote & sell event tickets within that state, the taxation applies to the ticket-selling partner’s side) and the economic nexus (which states that business transactions are sole proof of a ‘taxable relationship’ if it involves large sums of money). 43 of 45 U.S. states have an active implementation of some type of ‘economic nexus’.

If you are an event organizer whose cash inflow from ticket sales is under a certain bracket then you’ll be exempted from taxation. But for a larger economic inflow, a minimum threshold has been suggested for states for the taxation. In many U.S. states the minimum amount liable for taxes is $100,000 - $250,000. States like Tennessee and Massachusetts put down the number to a whopping $500,000, where’s if its Oklahoma, Pennsylvania or Washington you’ll have to accept the lower limit as $10,000 only! Some events also apply the sales tax nexus based on the number of transactions undertaken.

As mentioned in the UK tax laws, again in the US, if an online event is hosted in Wyoming but an attendee from New York purchases the ticket, when you calculate the sales tax, he or she will be charged the taxes by you keeping the New York city’s tax rates in mind. These tax rules are not universally applicable and also depend on the type of event category you are providing – if it’s a software, online training program or video streaming. It will also differ on the event categories like conferences, trade shows, business summits and more.

The U.S. government has declared the ‘Virtual Event Centre’ also known as the VEC to be subjected to taxes under the ‘software’ term. When companies pay the fees for using a SaaS company’s program, the sales tax applies to the provider. But if you have an in-house virtual event platform then there might be a decision to make if your audience attendees and exhibitors will have to pay to use your software. Plus, some event project management services can be accounted for as untaxable professional services, if they have been sold separately.

Under the Streamlined Sales and Use Tax Agreement (SSUTA), the online event training is not-taxable if any one of the parameters applies – it’s a real-time live seminar, real-time participant and speaker interactions are present and participant evaluation is by a human being over a software tool. If automation, pre-recorded content or downloadable content are present, then the specific feature will have a specific tax charge added on the event ticket price.
To be exempt from the online event-related U.S. ‘remote seller tax’ thus – your yearly revenue from individual states should be less than $100,000, your event should have no downloadable content, your event should be streamed live with real-time audience connect and you should be the one paying to a third-party vendor for the event software.

Wrapping Up

With the pandemic bringing in new virtual business-conducting and event audience-connecting ways, getting yourself updated on the online taxation laws is the most obvious step ahead. If you are still in doubt with regards to the tax structures that apply to your B2B virtual event, you can always get that expert consultation from your certified accountant. Get sorted on all aspects of online event VAT and sales tax for virtual event requirements today!

Frequently Asked Questions

How can I calculate VAT on Virtual Event Tickets?

You can invest in a 3rd party software that uses geo-location technology to identify the event registrants’ IP addresses. You can add the tax to each event ticket sell and help attendees checkout, seamlessly.

What are the key takeaways on tax implications for virtual events?

Some key takeaways on tax implications for virtual events are:

Using a registration software that has tax integrations
It is crucial to itemize your invoice, so that tax is processed only on your taxable items, not in the entirety
In the U.S., sales taxes are charged based on the attendees’ location and keeping the economic nexus thresholds under consideration

What is Value-Added Tax (VAT)?

Valued-added tax or VAT is added to a product or service at each stage of the supply chain where the value is being added to it. More than 160+ global countries use the VAT system. In contrast, when you calculate the sales tax, it is an entire amount levied after the sale of a product, not at particular production stages.