Does a trade show exhibit contractor have to charge sales tax on storage, transportation, installation, design/construction, supplies, and refurbishing services for client-owned exhibits and displays?

Plain-English summary

The Comptroller's Tax Policy Division answered a trade show exhibit contractor's questions about which of its services are subject to Texas sales tax. The company mainly supervises the handling, delivery, installation, and dismantling of exhibits and displays for clients who exhibit at trade shows in convention centers, and it's sometimes involved in designing and building new exhibits.

The Comptroller went through seven specific services one by one:

1. Storage of client-owned exhibits and displays — not taxable, unless the contractor is selling or leasing the exhibits/displays to the client.
2. Transportation charges for client-owned exhibits and displays — not taxable, same exception.
3. Handling charges for removing client-owned exhibits/displays for shipment and returning them to storage — not taxable, same exception.
4. Electrical drop charges at trade shows — treated as an installation charge, which is not taxable unless connected to a sale or lease of the exhibits/displays to the client.
5. Design and construction of new exhibits and displays — the total charge is taxable to the client.
6. Miscellaneous supplies (nuts, bolts, etc.) needed to set up displays — taxable to the client if tied to a sale or lease of an exhibit/display. If there's a separate charge for supplies incorporated into the customer's exhibit, the contractor collects tax on that separate charge; if the supplies are just folded into a nontaxable service charge, the contractor instead owes tax on its own cost for those supplies (if tax wasn't already paid to a vendor).
7. Removing exhibits from storage and performing minor refurbishing — repair, remodeling, maintenance, or restoration of tangible personal property is a taxable service, so the total refurbishing charge is taxable to the client.

The letter closes with the Comptroller's standard caveat that the answer is based on the facts submitted and that other, similar facts could yield different results.

What this means for you

Trade show exhibit and display contractors

Whether you owe or collect sales tax on a given service line depends heavily on whether it's connected to a sale or lease of the exhibit/display itself. Pure logistics services (storage, transport, handling, and installation like electrical drops) done for exhibits the client already owns are not taxable. But once you design and build a new exhibit, or repair/refurbish an existing one, the total charge becomes taxable — and supplies used along the way carry their own separate tax treatment depending on how you bill them.

Businesses that hire exhibit contractors (trade show exhibitors)

If you own your exhibit and are just paying a contractor to store it, ship it, or install it at a show, expect those charges to come without sales tax. But if you're paying the contractor to build you a new exhibit or to refurbish your existing one, expect sales tax on the full charge.

Accountants and tax professionals

Pay close attention to how "miscellaneous supplies" are billed: a separately stated supply charge that gets incorporated into the client's exhibit is taxable to the client, but supplies bundled into a nontaxable service charge instead create a use-tax obligation for the contractor on its own cost (unless tax was already paid to the supplies vendor). This is a classic taxable-service-vs.-real-property-improvement distinction applied to tangible personal property (exhibits/displays) rather than realty.

Common questions

Q: Do I have to charge sales tax for storing a client's trade show exhibit?
A: No, storage of a client-owned exhibit or display is not taxable, unless you're also selling or leasing that exhibit or display to the client.

Q: What about transportation or handling charges to move a client's exhibit to and from a show?
A: Not taxable, under the same condition — as long as you aren't selling or leasing the exhibit/display to the client.

Q: Is the electrical hookup ("electrical drop") charge at a trade show taxable?
A: It's treated as an installation charge, which is not taxable unless it's connected to a sale or lease of the exhibits and displays to the client.

Q: Is designing and building a new exhibit taxable?
A: Yes. The total charge for design and construction of new exhibits and displays is taxable to the client.

Q: What about miscellaneous supplies like nuts and bolts used to set up a display?
A: They're taxable to the client if connected to a sale or lease of the exhibit/display. If there's a separate charge for supplies incorporated into the client's exhibit, tax is collected on that charge. If the supplies are just part of a nontaxable service charge, the contractor owes tax on its own cost for those supplies instead (if tax wasn't already paid to a vendor).

Q: Is refurbishing a client's exhibit taxable?
A: Yes. Repair, remodeling, maintenance, or restoration of tangible personal property is a taxable service, so the total refurbishing charge is taxable to the client.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9512727L

Original ruling text

December 1, 1995

Dear *****:

Thank you for your letter concerning your services involving trade show
exhibits.

Your company primarily provides the service of supervising the handling,
delivery, installation and dismantling of exhibits and displays for your
clients who are exhibitors at trade shows in convention centers in Texas and
other states. You are sometimes involved with the design and construction of
new exhibits and displays.

You want to know whether to collect tax on the following services for your
clients:

1) Storage of client-owned exhibits and displays.

Response: Not taxable unless you are selling or leasing the exhibits and
displays to the client.

2) Transportation charges for client-owned exhibits and displays.

Response: Not taxable unless you are selling or leasing the exhibits and
displays to the client.

3) Handling charges for removing client-owned exhibits and displays for
shipment, and returning same to storage after use.

Response: Not taxable unless you are selling or leasing the exhibits and
displays to the client.

4) Electrical drop charges at trade shows.

Response: This appears to be a charge for installation. Installation charges
are not taxable unless connected to the sale or lease of exhibits and displays
to the client.

5) Design and construction of new exhibits and displays.

Response: Total charges for design and construction taxable to client.

6) Miscellaneous supplies needed for setup of displays - nuts, bolts, etc.

Response: Taxable to the client if connected to the sale or lease of an
exhibit or display. Sales tax is due on miscellaneous supplies used in
the performance of a nontaxable service. If there is a separate charge for
miscellaneous supplies that are incorporated into the customer's exhibits or
displays, collect tax from the client on that separate charge. If the
miscellaneous supplies are included in the charge for a nontaxable service,
then your company owes tax on your cost for the supplies if the tax was not
paid to a vendor.

7) Removing client-owned exhibits and displays from storage and performing
minor refurbishing.

Response: The repair, remodeling, maintenance, or restoration of tangible
personal property is a taxable service. Total charges for refurbishing are
taxable to client.

This opinion is based on the facts you submitted. Other facts, though similar,
may yield different results.

You may call me toll free at 1-800-531-5441, ext. 5-0030. The direct line is
512/475-0030. You may also write to Tax Policy, Comptroller of Public
Accounts.

Sincerely,

David Somerville
Tax Policy Division