Advertising and Nexus Triggers

For most outdoor advertising companies sales starts on the billboard with an  “Advertise Here” vinyl. The potential driver calls the number and hopefully the ad space is sold. Sometimes outdoor companies have to hire sales people to go out and about to sell the outdoor space. Something to strongly consider when doing this is your location. Do you live on a bordering state and travel into another state to sell advertising space? If the answer is yes…then you could be triggering a nexus in that state and might need to register your business in that state.

Here is a great example.  According to Avalara, “Texas: According to the Texas tax code, if you engage in regular or systematic solicitation of sales of taxable items in the Lone Star State by way of catalogs, magazines, flyers, radio, television, mail, telephone, computer, cable, optic or any other means, you have nexus in Texas.”

What is a Nexus? “Sales tax nexus is the connection between a seller and a state that requires the seller to register, collect, and remit sales tax on sales made in the state. Certain business activities such as having a physical presence in a jurisdiction or reaching a sales threshold may establish nexus with the state,” Avalara.  “General rule that if the advertising is remote, it will not trigger nexus. Of course, there are exceptions to that, like California and Texas, so it’s wise to know the law in the states where you do business.”

Why should outdoor companies care? After all….billboard advertising is non-taxable in most states. “Generally, an agency must pay sales tax on all the materials used to create nontaxable advertising.” According to Attorney Aaron Hall.

We hate to be the bearer of bad news but it might be time to talk with your CPA about your tax liability or a sales tax specialist. A pre-Audit might be a great idea to prospectively know your tax liabilities and how you can protect your business from triggering nexus in other states.

With the rapidly changing sales tax laws it is time to start paying attention.

 

Questions to ask your CPA:

Does hiring a 1099 contractor in another state trigger nexus?

Does driving into a certain state create nexus?

Should I pay USE tax to my state for the printing if the printer did not collect it?

How do I avoid registering to collect sales tax in my state?

Should I charge sales tax on graphic design?

 

References:

Aaron Hall: https://aaronhall.com/sales-tax-on-advertising-creative-promotional-services-in-minnesota/

Nexus Triggers: https://www.avalara.com/us/en/blog/2016/06/will-your-advertising-efforts-trigger-nexus.html