We held a Sales Tax Webinar on August 21, 2019 to review the status of our Sales Tax implementation work, expected to complete by early October. We had hundreds of people attending and this is a list of the questions asked (trying to remove similar questions).
We will try to answer your questions as directly as possible, but remember that RunSignup does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. RunSignup makes no representations, warranties, or assurances as to the accuracy, currency or completeness of the information provided in this blog.
Can a race opt out of RunSignUp collecting and remitting on our event? For Marketplace States, RunSignup can not allow an opt-out. We are compelled by law to collect and remit on your behalf. For Non-Marketplace states, it is an opt-in for us to collect and pay the race sales tax. Note that there are a complex set of exemptions, especially for non-profits that we will be offering on a per state basis.
It sounds like going forward, we’ll need to be careful about whether we set up some things as a store item or a ticket if store items are taxable but tickets aren’t. If we have a prerace pasta dinner or postrace cookout/lobster bake, those should be set up as tickets, correct? The general answer is to segment items that are taxable from those that are not. Bundling rules treats a bundle as the worst case for the entire bundle. Note the typical free shirt that comes as part of a race fee is not taxed because the primary value of the item is the race.
For taxes that are based on race location, what does this mean for virtual race since they have no official location? Those sales will be taxed at the customer’s address. We will be taking care of collecting and paying sales tax for marketplace states, but you will need to determine collection and payments in non-marketplace states.
How is merchandise classified? If a reg option is 5K with shirt at $25 and another one is 5K with Sweatshirt at $35 are you treating this as a reg option or splitting off a merch factor? That could be construed to say there is a value difference in the merchandise. Our recommendation would be to have an Add-On that is a “Sweatshirt Upgrade” and charge $10, which would be taxable as merchandise.
Will the sales tax opt in be done per race or on the partner side? It will be done on a per race basis for non-marketplace states.
If our organization is a 501c3 tax exempt entity, how is RSU going to handle tax collection? Per the taxability matrix given state rules for taxability and exemption.
If our state had a Taxable designation, where do find those details? Our Taxability Matrix shows the rules we follow.
If a registrant comes from a state where everything is taxable to a race where a nonprofit is exempt – will they be taxed? As discussed in the webinar it depends on the item type. For example, shipping merchandise to a person in a taxable state will cause tax to be charged.
Race Entries are taxable, Tickets are not….what is the difference…can’t I sell a ticket to a race instead of calling it a ticket? 🙂 Sometimes it is because that ticket column is for our nonprofit ticket platform, GiveSignup. But you are right, some states do have different types of tax treatment for different types of events. This is typically “participatory events” like a run are taxed and spaghetti dinners are not. The reality is that we will likely have to add a “type” to tickets in some states as a golf outing is treated differently than that spaghetti dinner.
We are a for profit company that puts on events for non-profits. We collect the entry fees on their behalf as they don’t want to deal with the accounting. Are the entries taxable or not? Well, you should not be doing that as a matter of our contract – the race payment account should be the owner of the event. But this is also clearly taxable as we will do a check of your payment account and it will not be a qualified 501C3 organization and it would not be exempt. The solution is to help these nonprofits set up a payment account.
Do finisher medals count as taxable merchandise? Question from from CA. If you are charging separately for them yes. If they are something you give out for free as part of the race fee, then no since CA does not charge sales tax on race fees today.
Is the tax on the processing fee based on the location of the race or the location of the participant? It is charged on the billing address.
Is this going to increase the amount we pay to RSU? Yes, we will be charging processing fees on sales tax.
What’s the deal with Texas? Texas charges sales tax on participant events unless it is in a facility. There is a lack of clarity on the definition of a facility with arguments on both sides. We are trying to get a final ruling from the state asking about road races or races in parks, etc.
This is all based on where the race takes place, not where the business is based? Correct? So if you have races in multiple states you’ll need to charge differently for each? That is correct.
I love Kevin. We all do.
What about complimentary race entries that may be raffled? Not taxed since no one is purchasing them.
My race sells a bundle of registrations to a nonprofit so they can use them for their fundraisers. Is that taxed? You should handle this with our invoice system and have a purchase exemption from the nonprofit.
My corporate run sells packages to companies to have a bunch of their employees run/walk. Is that taxable? This is best handled with our invoice system in our Corporate Teams system. The same purchase exemption would be needed.
Can you please explain more about what a non-profit’s responsibility will be for non-Marketplace states? You will need to determine if you have responsibility to collet sales tax. If so, then you would turn it on for your event and we would calculate the sales tax and charge each participant. We would remit those funds to you. As part of your monthly sales tax reporting to your state, you would use a RunSignup report that would show amount of sales tax collected and owed.
Part of the race fee goes to charity. Is there a way to divide between race portion and contribution to charity? No. There is a nice utility in RunSignup and GiveSignup that allows you to let the participant know how much is tax deductible on THEIR taxes. The recommendation is to lower the fee and ask for higher donations so you keep them separate. This falls under the bundling rules of sales tax where the whole bundle gets the tax treatment of the highest taxed item in the bundle.
Will sales tax be calculated for each registrant and added to their registration fee? Yep!
NJ has no sales tax on clothes, so if you have clothes as merchandise, do you still need to collect sales tax for those? You will specify a type of merchandise in the store/add-on so it is treated properly by the tax software. It does handle this type of complexity.
I am in Virginia, and we are a local government entity. If I am reading the matrix correctly, it says we only pay taxes on merchandise. We include a tshirt in our registration fee if they register during early registration. How would that process work? This should be OK as this is incidental value. In essence you are having a price increase. But of course you would want to run this by your tax advisor.
My race is scheduled to open early registration Sept. 1st (race in April) It is in FL. Should we postpone opening registration to Oct 1st in order to use the collection software? Florida is not a marketplace state, so you will have to pay tax anyway. You can setup manual sales tax today in RunSignup and this system would take over when the software releases.
Are you collecting sales tax on just the races for marketplace, or for merchandise as well? We collect on everything that is taxable – all those columns in the Taxability Matrix.
Will the system just describe the tax rule or also include specific reference to the laws or tax code? As Kevin said in the presentation, we will try to include references to laws and rulings. This is a good idea.
RSU may not be, or maybe should not be, a marketplace facilitator. Have you considered that angle? Yes. But the laws are very clear. Any provider that is processing transactions or hosting sellable items for multiple sellers is a marketplace. So all the race reg companies and all the ticket and merchandise companies will have to implement this, although some are burying their heads in the sand to be honest…
Will your system be able to handle the Texas sales tax holidays (specific days when sales tax is waived)? Yes, the system should eventually be able to handle this, although perhaps not initially. We think this could be a great promotional opportunity for races since a lot of states do this. Another pony!
I believe that Wisconsin has a 90 day exception for merchandise only sales for non-profits. In other words, as long as the non-profit sells merchandise for less than 90 days or less out of the year the items are not taxed. This does not apply to race registrations. Interesting, and thanks for sending the reference to the code via email. We are looking into that one.
We are a 501c3. Does you system allow for a required minimum donation instead of a sales price that would allow us a way around this? You should check with your tax advisor.
If we are in a non-marketplace state and collecting taxes, will anything change? Wisconsin. We will offer you the ability to use our new calculations, which you should be able to select if the race is already open. Upon renewal we will be forcing people onto the new tax system and will sunset the existing set of self-made tables.
If we have a transfer fee, is that a processing fee? That would be treated as a race fee.
We are a nonprofit and don’t pay sales tax. Do we need to submit information somewhere?
hCheck out the webinar as we tried to answer as best we could. There are about 10 states where nonprofits may have sales tax collection and payment responsibility. But you are best off checking with your own tax advisor.