We had dozens of questions on today’s Sales Tax Webinar, and we know that there will be many more to come. To help, we have compiled answers to all of the questions asked (with some consolidation of similar questions).
We 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.
We are a nonprofit/school/college recreation program. Does any of this apply to us?
It depends on the state. Nonprofits who have certificates of exemption are, by definition, exempt from paying sales tax on items they buy. However, in this case, the nonprofit is the seller not the buyer, and is not necessarily exempt. There are states that exempt nonprofits from sales tax on items they sell, but not all. You can consult the taxability matrix for the rules in your state.
We are a nonprofit in a state with an exemption for nonprofits on race registrations. Is there still a tax on the processing fee?
If a state charges sales tax on the processing fee that tax will apply regardless of exemption status because RunSignup is considered the seller of the processing fee. RunSignup will be responsible for collecting and paying the associated sales tax on the processing fee. The processing fee sales tax will be based on the cardholder billing address of the person paying for the transaction. There are seven states who collect tax on processing fees currently.
Can you explain location, and whether the laws apply based on race location or the event operator location?
The location is important for determining taxability. Taxes are considered applicable at the location where the service or good is delivered, so the main categories to consider are:
- Race registrations or admission: the service (the event) is delivered at the site of the race, so the taxability is the race location.
- Merchandise for pickup at the race site: the race location is the tax location.
- Merchandise to be shipped: the location where the item is shipped is the tax location (there are some minor deviations to this in states with origin based sourcing rules for intrastate transactions).
- Memberships are taxed based on the location of the club.
- Processing fees are taxed based on the location of the billing address (credit card address) of the cardholder who pays for the transaction.
Is RunSignup going to pay the collected sales tax to the state, or is it set up that we collect it, we report it, and we pay it?
In Marketplace states, RunSignup is responsible for collecting the taxes and will report and pay it to each state. In non-Marketplace states, The race can choose to turn on sales tax calculation. If so, then RunSignup will calculate the tax and remit it to the race; the race will be responsible for reporting and paying it to the state. There will be reporting tools in RunSignup to help with this process.
When will collection of sales tax on marketplace states begin?
The tentative timeline for the collection of sales tax is as-follows:
- October 30: Private Beta (limited setup available for all races, but not available to enable for most). Races can correct or specify their specific taxability address beginning now.
- November 4: Limited Beta (races can set their exemption status)
- November 12-20: Release 1 (Non-Marketplace States can begin collecting, and RunSignup will roll out collecting for marketplace states on a rolling basis)
- December 15: Full functionality of sales tax will be released
Are there any issues unique to virtual races?
Virtual Races are an interesting use-case. We believe the service of the Virtual Race is delivered at the home of the participant, so we use the billing address of the cardholder paying for the transaction to determine taxability.
What risk do we have for retroactive liability for past registrations processed in prior years?
None of the new Marketplace laws really change the actual liability of races to collect sales tax. If items or registrations were taxable in your state before and you had nexus in the state, you had an obligation to be collecting in your state. This new process doesn’t change anything about your previous liability, but it does ensure that you are compliant in the future.
We are in a state that does not have a sales tax on race registrations. We also giveaway a shirt and a medal, though – do we have to charge sales tax because of that merchandise?
The standard we use for calculating sales tax is the primary reason for the transaction. In this case, the race is considered the primary reason for the transaction and the giveaway items are considered incidental. For that reason, there would be no sales tax on a registration that includes incidental giveaway items in a state that does not tax registrations.
We absorb the processing fee as a race, rather than passing it onto participants. Do we also cover the sales tax on a processing fee by default , then?
Sales tax is calculated based on the items that a participant sees in their cart. So in this case, an absorbed processing fee is seen as just a registration fee and the processing fee does not accrue an additional sales tax.
We are a nonprofit, and don’t have any more races this year. Do I need to renew my races before the end of the year to setup the exemption? Or else, when I renew the race, can I setup the exemption then?
If you aren’t collecting any registrations yet, you can wait until you’re ready to renew to setup the exemption. The interface will likely improve by then, anyway.
We sell merchandise on the RunSignup store. We pay sales tax on the items when I order them from a local provider; if RunSignup still has to add sales tax to the item, aren’t our customers paying tax twice for the mug/hat/etc.?
To reiterate, RunSignup cannot provide tax advice. It does sound like you may be a reseller, and may want to look into being recognized as such so that you can avoid the sales tax on the initial purchase from the retailer/provider of the merchandise.
What’s the difference between a race and a coached running program in terms of taxes? I setup my coaching program as a race on RunSignup.
There are different taxability rules for a membership versus a race. However, if you set it up as a race, it will be taxed as a race.
We have always included sales tax in our registration fee and taken it out in our books to send to our state (Vermont). Will we now have to set a pre-tax registration fee?
If you are in a Marketplace State, RunSignup will begin to collect those taxes (we’ll give you a heads up before that happens). If you were using the Version 1 Sales Tax (from 2015), that will go away when Marketplace states roll out. However, if you were collecting the sales tax in another way (added to price, as a fee, etc), you will either want to change your fees (or you will just collect extra money in any non Marketplace states for any sales tax that you are no longer paying or is charged separately to registrants).
I have registration open currently, and have collected registrations. Can I go back and adjust my setup once the sales tax platform is up and running in November?
Yes. When sales tax gets turned on, sales tax will work going forward. You can’t retroactively collect or calculate tax, but you will be compliant moving forward.
I’m in a marketplace state where merchandise is taxable but registrations are not. Does RunSignup still collect and submit the taxes?
Yes. If you are in a Marketplace State, RunSignup will collect and submit all sales tax, whether they are on registrations, merchandise, or both.
I’m based in Colorado, my race is held in Colorado, and Colorado does not tax race registrations. If I’m understanding correctly, that means none of my runners will be taxed for their registrations, including runners from “yes” states, correct?
We’ll take this as a two-part question, because Colorado is complicated.
- Colorado is a Home Rule State, meaning that each separate jurisdiction (60+ within the state) may have different taxation laws. So there isn’t a Colorado STATE tax on the sale of a registration, but a jurisdiction within the state could have a tax.
- However, if we assume that the jurisdiction has no tax, then you are correct that there will be no tax on the registration, even if the runner lives in a state that has state tax on registrations.
- There could be a sales tax on the processing fee if a registrant comes from another state to your state for a race and pays for the race with a billing address outside of Colorado.
I see “Sales Tax” and “Sales Tax Beta” under the Financial tab for my race. What’s the difference?
On the Financial Tab of your Dashboard, “Sales Tax” is the old system that was released in 2015, and will go away when the new one (marked Beta) is rolled out. “Sales Tax Beta” is the new sales tax system – you won’t currently see much functionality there, but you will over the next month.
We are a nonprofit in an exempt state, but processing fees are taxable. Will my nonprofit have to file the taxes on the processing fees (in a non-marketplace state), or will RunSignup do this?
Sales tax on processing fees is RunSignup’s responsibility, and RunSignup will file those where they are applicable.
Sales tax is an added fee for participants, so the race itself doesn’t pay an additional fee, correct?
Correct. There is no extra cost to a race for sales tax. However, in non-Marketplace states, the race is responsible for passing that money onto the state.
What happens with Puerto Rico or other US territories outside the continental US?
RunSignup only collects tax on the 50 States and Washington D.C.
If we have a late sign up (on race day), would it be best to have them register through RunSigup? Otherwise, we have to charge tax (or eat the cost) and report that money ourselves, correct?
The best way to handle this is to allow participants to register on their own phones. The Signup App and Expo mode will calculate and collect sales tax on credit card transactions. For cash transactions, we will calculate and show the tax, but will not record the tax information. For example if a $30.00 registration has a sales tax of $1.50, we will show the $1.50 but not store that in our system if cash is collected.
If we have multiple races, do we have to go into each race separately and enter the information?
Yes. Since each race is specific in terms of taxable items and location and exempt status it is necessary to check that each race is set up correctly.
Our event is in a state without sales tax. Do we still need to go through the Sales Tax Setup process?
You will need to ensure the address is valid (there is a red error banner at the top of the dashboard if it is not). Otherwise, there is no work to do unless you are shipping out of state and want to collect and pay sales tax in non-Marketplace states.
We offer a “mail my packet” option for an additional fee (the packet includes an athlete’s bib and free shirt). How does sales tax apply there?
We currently have an option in Add-Ons to ask for a Valid shipping address. The items with that turned on will be taxed according to the shipping address. A feature we will add is when you have a “Mail” option that might cover multiple add-ons, then we will provide a way to mark which items should be covered by that shipping address.
There is an upcharge of $5 for a 3XL size of our t-shirt giveaway, but it is otherwise free to participants. How is that specific upcharge taxed?
It is taxed as clothing. You will see an option in the tax setup to specify the type of taxable item it is.
I’m in Michigan and only charge for registrations (not merchandise). Do we need to collect any taxes or file anything?
Again, we do not provide sales tax advice. Michigan is not a Marketplace state so it is your determination. Our tax advisors have said for Michigan that race registrations are not taxable, but merchandise is taxable.
Is Tennessee a marketplace or non-marketplace state?
Tennessee is not currently a Marketplace state. See the taxability matrix to stay up to date.
Are raffle tickets taxable in Florida?
Raffle tickets cannot be sold on our site. Please don’t set up raffle tickets to be sold on our site. If we see a raffle ticket for sale on our site we will take down the listing.
How do we make sure we’ve paid sales tax on registrations to our state?
In Marketplace states you will see reports that show what RunSignup will be paying on your behalf. If you are in a Non-Marketplace state, then your organization will have reports to guide you on how much tax has been collected and remitted to you from your sales on RunSignup. You would be responsible for payment to the state in Non-Marketplace states.
Are you planning on collecting/remitting for the states in which it says “No” currently?
We are not. However, we expect many of these states to pass marketplace laws and make us responsible for collecting,, reporting and payment. When that happens, we will take over – for example we will be doing that in Illinois when that state law goes into effect on January 1, 2020.