No fair! Complicating sales tax filing for certain sellers in California – Wacky Tax Wednesday

Filing a California sales tax return is about to get a little more complicated for retailers that sell tangible personal property on the real property of a California state-designated fairground. Although no extra tax is due on these sales, retailers are required to separately report them on sales and use tax returns starting July 1, 2018.

Temporary and permanent sellers affected

California’s new reporting requirement for fairground sales applies to retailers with a permanent place of business at a state-designated fairground. It also applies to sellers temporarily doing business at these sites.

According to the California Department of Tax and Fee Administration (CDTFA), “the separately-stated amount must include sales that took place at any time and at any event on the state-designated fairground, not just during an actual fair.” This includes temporary events such as car shows, flea markets, home and garden shows, swap meets, and festivals.

Temporary sellers are generally required to obtain a temporary seller’s permit when making sales at a location for less than 90 days. Those participating in multiple events at multiple locations must register each temporary sales location. When it’s time to file a sales tax return, any sales made on a state-designated fairground must be included on the line for total sales, and also separately stated on the line for state-designated fairground sales.

Sellers with a permanent seller’s permit aren’t required to obtain a temporary permit when participating in a special event, although they should register for a sub-permit for each temporary location. If an event is held at a California state-designated fairground, the total sales generated in that location must be separately stated on the sales tax returns.

The new line only applies to sales made while a retailer is on the premises of a state-designated fairground. Sales generated by a lead received while participating in an event at a fairground should not be separately stated if the actual sale took place after the conclusion of the event.

Out-of-state sellers

Generally, an out-of-state seller whose only presence in California is attendance at a temporary event is not considered to be engaged in business in the state unless it:

• is in the state for more than 15 days during a 12-month period, and
• generates more than $100,000 in income from such events during the prior calendar year.

Nonetheless, out-of-state sellers that sell taxable goods at temporary events in California are required to obtain a temporary seller’s permit and collect and remit tax on all taxable sales made. And, as with their in-state counterparts, any sales made at events held at a state-designated fairground must be separately stated.

Why?

The CDTFA explains that “the information reported on this new line will be used for allocation purposes only” — but that doesn’t fully explain why this change is taking place.

As it turns out, it’s the result of the enactment of Assembly Bill 1499, which enables state fairgrounds that meet certain working conditions to keep a percentage of the sales tax revenue generated on site. Bill sponsor Assemblymember Adam C. Gray said, “California was forced to make devastating cuts during the Great Recession, including cutting $30 million in annual funding from the fairs.” Revenue generated under AB 1499 should “significantly improve” the financial well-being and economic viability of state fairs.

Gray underscored that fairgrounds “act as evacuation centers and staging areas for fire and emergency services personnel during natural disasters.” In other words, the revenue generated from separately stating this sales tax revenue will help Californians adversely affected by natural disasters.

Sometimes it may be necessary to make sales tax compliance more complicated.

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