Q: In an effortto attract a strong attendance at our annual conference, we decided to hold it in a destination city outside of the state in which our organization is registered. Obviously, we’d like to avoid paying sales tax on the facility, food, rentals and so on. Will our tax exemption apply, or do we have to register for tax exemption in the state in which the conference is being held?
A: This is a common question, but a question that has no common answer. Some initial clarifications will help. First, I’m assuming that when you talk about your “tax exemption,” you are talking about your sales tax exemption. The tax exemption you receive from the IRS is a different animal, though having that is generally a prerequisite to obtaining a sales tax exemption. Sales tax exemptions are granted by the states, and they are specific to the state. You can’t use your sales tax exemption from one state in another.
You might be in luck if you are a recognized subordinate of a national organization that is registered in the state in which you are looking to hold your conference. Some states will allow you to benefit from the parent organization’s sales tax exemption if it has one. If that’s not the case in your situation, understand that different states make obtaining a sales tax exemption more or less difficult. Some states require that you be incorporated in their state to be eligible for a such an exemption. Others will let you register as a foreign business doing business in their state, and with that designation you can file for a sales tax exemption. To actually file, some states require that you complete a separate application, whereas others ask only that you send in a copy of your IRS determination letter. In a number of states, the exemption is automatic when you check the right box on your state registration.
Obtaining a sales tax exemption may not help you, though. Be sure to get answers to a couple of other questions first. Does the state limit the types of purchases that are considered tax exempt? If so, what are those limitations? Would the exemption cover enough items to make it worth your while to apply? And, does the state allow for home rule, whereby cities within the state can make their own rules about accepting a sales tax exemption? If so, will the city in which you’ll be gathering accept the state’s sales tax exemption for the hotel and other needed purchases?
You can go online to view the state’s statutes regarding nonprofit corporations to find the answers to all your questions. Easier might just be to speak with the sales manager at the hotel you intend to use. If you are going to a destination city, my guess is that your question has been asked and answered many times before.