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.