Are event tickets subject to sales tax? It depends.
Tax laws are complex. Most event hosts and independent ticket sellers struggle to understand the nuances of sales tax, especially since these laws vary by jurisdiction. It is best to work with a tax specialist or accountant to learn and understand the laws in your state or county. You can also trust the expertise of an all-in-one event platform such as Evey to answer all your event planning questions.
Are Event Tickets Subject to Sales Tax?
In most scenarios, event tickets are subject to sales tax. The only reason tickets may not be subject to sales tax is if the event is a fundraising event for a nonprofit or if an out-of-state ticket seller does not meet the economic nexus threshold for an event. The laws governing taxes and out-of-state or virtual retailers experienced a significant change following the Supreme Court case of South Dakota v. Wayfair.
Changes to the Nexus Definition
The Supreme Court case did not create the idea of a nexus determination for taxation. However, nexus determination before the Wayfair trial used the Due Process Clause of the Constitution, calling for a definite link or minimal connection between a state and a possibly taxable entity, and the Commerce Clause, requiring a substantial in-state presence. This basically meant that a state could only tax entities with a physical presence in the state.
The problem with these existing laws and definitions was the advancement and creation of virtual retailers. States saw a noticeable uptick in online businesses with no physical presence. Despite a lack of brick-and-mortar establishments, though, these sellers earned substantial profits from in-state residents without charging taxes, including ticket sales.
So, are event tickets subject to sales tax? The answer depends on the nexus definition, which South Dakota challenged in its fight against Wayfair.
As stipulated by the Commerce Clause, the original nexus for taxes and jurisdiction was a substantial and physical presence. That foundation restricted the state’s access to colossal sums from Wayfair’s virtual sales. South Dakota brought the case to challenge the existing precedent and establish new laws governing taxable jurisdiction; the state won its case and motivated many states to enact economic nexus legislation.
Unfortunately, there is no universal or shared definition of nexus. Each state defines the term, leaving room to maneuver and interpret the meaning to its advantage. When selling tickets for events in any given state, sellers must understand the nexus definition of that state, especially as an out-of-state agent. Economic nexus thresholds only apply when a retailer or seller has no physical presence in the state.
The Supreme Court case of South Dakota v. Wayfair primarily influenced ticket sales for virtual events. If you are a host of an upcoming virtual event, you might question how your event tickets are subject to sales tax if the event is not in any specific territory.
Ticket buyers live in states and counties. Depending on the state’s definition of nexus or its legislation, once ticket sales, transaction amounts, or gross receipts meet the defined threshold of the state, sellers must collect sales tax for that state. Most small event hosts do not have to worry about taxability because most states set thresholds of over $100,000 in sales or over 200 transactions.
Still, as an event host or individual ticket seller, you must check state laws to learn about your tax responsibilities because states can vary. For example, in Nebraska, remote sellers must collect Nebraska and local sales tax once they meet the threshold of $100,000 in sales or 200 transactions. On the other hand, California’s threshold is $500,000 in sales with no set number of transactions.
Are event tickets subject to sales tax when the event is in person? A state typically taxes in-person events in that state. The ticket sales are usually subject to the tax laws of the state or county hosting the event. That said, not all events are subject to taxation, such as nonprofit fundraisers. To host a tax-exempt event, event hosts must get the proper licenses and permits.
Also, even if ticket sales are tax-exempt, other merchandise or items for sale at the event may require a sales tax. All event hosts and ticket sellers should consult a tax accountant or attorney to learn about the tax laws of individual states and about proper bookkeeping and itemization to avoid any violations or overpayments.
The Wayfair decision did not affect much about ticket sales for in-person events much, but it impacted hybrid events to a small degree, if not to the level of totally virtual events. Hybrid events are a mix of in-person and virtual components, so ticket taxes can become murky.
How are event tickets subject to sales tax for a hybrid event? Ultimately, in-person attendees pay the sales tax of the state hosting the event. Virtual attendees pay sales tax according to local state laws and thresholds for their state.
Nonprofit organizations with a tax-exempt status operate in a tricky territory regarding sales tax and event tickets. In general, if a nonprofit is hosting a fundraising event, the tickets are nontaxable; however, if the group is hosting an unrelated event or something that is not a fundraiser, the event tickets may require sales tax. Also, some organizations have limits or restrictions on fundraising activity, so taxation differs.
As always, it is vital to understand your tax and legal obligations to states or territories where you do business. An accountant or tax attorney can help you understand your role. You can also work with a trusted marketplace ticket seller and event organizer like Evey.
Concerned About Event Tickets Sales Tax? We Can Help
You don’t have to bog yourself down with questions about when event tickets are subject to sales tax. Evey Events is your all-in-one, seamless solution for event planning, ticketing, and analytics.
Our team can help you navigate the complicated tax laws surrounding ticket sales, allowing you to focus on your event. If you’re ready to get started on your next big event, contact us for guidance and support.