(long) Out-of-town License Discussion

[Barb Barasa]

A while back someone said he was notified that he would have to get a
license in a town which was not where his business was located.  I
saw the following article at my temp office job today, and thought it might
shed some murky light on the subject, altho it refers to a trade show
and sales tax rather than services and a license.

If I knew who had the original problem, I wouldn't send this to the
whole list!  Delete now if you're not interested!

In this column in CFO & Controller Alert (newsletter), a situation is
presented and readers are asked what the outcome was.  The outcome is
published later in the same edition.
=====
DO TRADE SHOWS CREATE A LOCAL TAX LIABILITY?

"If you hold another trade show here," said Joe Thomas of teh Florida
state tax office, "you'll owe tax on sales in our state."
   Blue Belle CFO Evan Shields shook his head.  "I don't agree," said
Evan.  "Only about 15% of the attendees at our show are from Florida.
 And most of them have been customers for years."
   "The show establishes a businesspresence in Florida," said Joe,
"which makes your sales in the state taxable."
   "I don't see a trade show establishing a presence," said Evan.
"We don't have an office or permanent reps in the state."
   "Besides," Evan continued, "There are just as many people at the
show from, say, New York as from Florida, and they don't tax us for
mail order sales."

STATE DECIDES WHAT IS TAXABLE?

   "That's for New York to decide," huffed Joe, unimpressed.
"Florida decides what is taxable within its borders and what is not."

Blue Belle went ahead with the show, and Florida ordered it to pay
sales taxes.  Did Blue Belle have to pay the tax?

....... No,  The Florida Supreme Court ruled for Blue Belle.  BUT THE
RULING WAS MORE SYMPATHETIC TO THE TAX DEPARTMENT
THAN IT FIRST APPEARS.  [emphasis mine]

   The state tax authorities argued that by holding a trade show,
Blue Belle created a "substantial nexus," or business presence, in
Florida.
   That's the test laid down by the US Supreme Court to determine
whether a company is liable for a state's taxes.  But the court ruled
that the mere fact of a short trade show does not create a business
presence.
   The court noted that most of the attendees were from out of state,
and that many were already long-standing customers of Blue Belle.
Thus the company didn't create a customer base in Florida as a result
of the show.
   THERE'S THE RUB.  The case could have gone the other way if
Florida had proved that the show created a substantial customer base
in the state.  And what is or isn't  "substantial," of course, is a
subjective judgment.

======
Apparently the "substantial nexus" test applies thruout the US as
far as state tax departments.

Barb Barasa
Ashland OR