Does setting up a temporary trade show booth in Utah for under two weeks create sales tax or income tax nexus for an out-of-state mail-order company?

Plain-English summary

A small mail-order business asked the Commission whether operating a temporary booth at a Utah trade show -- for under two weeks -- would create nexus, given that it wanted to protect its current no-nexus status. The company described its planned activities in detail: staffing the booth with its own employees (using a rental truck, not a company vehicle), giving away catalogs (imprinted with a $3.00 cover price but never actually sold), displaying a temporary stock of goods for show only, doing its best to informally resolve any customer complaint that came up, and not taking orders, accepting deposits, delivering goods, or servicing/repairing/installing equipment.

The Commission analyzed sales/use tax and income tax nexus separately, since a single activity can trigger one without the other:

Sales and use tax. The Commission's policy is not to apply sales and use tax nexus to trade show participants present for less than two weeks, unless they have other Utah contacts or their trade show presence is regular/systematic. This booth, at under two weeks, did not create sales and use tax nexus. However, the company still needed to apply for a Utah temporary sales tax license to report any sales made at the show -- and, notably, the planned catalog giveaway was itself a taxable event: under Utah Admin. Code R865-19S-68, a donor of tangible personal property (like a giveaway catalog) is treated as the consumer of that property for use tax purposes. So if the company hadn't already paid sales tax when it bought the catalogs, it would owe use tax calculated on what it paid for them.

Income tax nexus. Utah Admin. Code R865-6F-6 lists activities that do (subpart (K)) and don't (subpart (L)) create income tax nexus, and subpart (J) recognizes federal P.L. 86-272's protection for mere solicitation of sales. Almost every activity the company described fell squarely within subpart (L)'s protected list and created no income tax nexus. The one gray area was resolving customer complaints: subpart (L)(12) protects mediating complaints solely to ingratiate sales staff with customers and facilitate order requests, while subpart (K)(7) creates nexus for investigating, handling, or otherwise assisting in resolving complaints beyond that kind of mediation. The Commission assumed, based on the facts given, that no company employee or agent would actually be positioned to resolve real problems at the booth -- so on that assumption, this activity did not create nexus. The Commission also flagged that if the company actually sold goods, accepted deposits, or approved/accepted orders at the booth (activities it said it wouldn't do), those would create income tax nexus.

What this means for you

Mail-order and multistate businesses attending trade shows

A short (under two weeks), non-recurring trade show presence is a relatively safe nexus posture in Utah for both sales/use and income tax -- as long as your activities stay within the protected list (promotion, display-only inventory, catalog giveaways, no sales/deposits/order-taking). But get a temporary sales tax license regardless, and budget for use tax on giveaway items you haven't already paid sales tax on -- giving something away for free doesn't make it tax-free.

Businesses whose booth staff handle customer complaints

Be careful how you frame complaint handling. Simple mediation aimed at smoothing things over with a customer and encouraging an order is protected; actually investigating or resolving a substantive complaint is not. If your staff might do more than pleasantries, that activity alone could create income tax nexus.

Accountants and tax professionals

This ruling is a useful two-track (sales/use vs. income) nexus checklist for temporary trade show presence, predating the 2018 Wayfair decision and Utah's later economic-nexus statute. Physical-presence concepts like this may still matter for income tax nexus purposes, but confirm against current law.

Common questions

Q: Does a short trade show booth create Utah sales tax nexus?
A: Generally no, if it's under two weeks and not part of a regular/systematic Utah presence. But you should still get a temporary sales tax license to report any sales made at the show.

Q: If I give away free catalogs or samples, do I owe tax on them?
A: Yes, potentially use tax. Under Rule R865-19S-68, you're treated as the consumer of items you give away, so if you haven't already paid sales tax on them, you owe use tax based on your purchase price.

Q: Does handling a customer complaint at a booth create income tax nexus?
A: It depends on what "handling" means. Simple mediation solely to smooth things over and encourage a sale is protected; actually investigating or resolving a complaint beyond that could create nexus.

Q: Does this ruling apply to my business?
A: No. It binds the Commission only for the requesting company and the facts described. Another taxpayer can't rely on it as binding, though it may carry some persuasive weight in a dispute with closely similar facts.

Citations and references

Rules:

• Utah Admin. Code R865-19S-68 (donor of TPP treated as consumer for use tax)
• Utah Admin. Code R865-6F-6, subparts (J), (K)(7), (L)(12) (income tax nexus activities)

Source

• Landing page: https://tax.utah.gov/commission/rulings/
• Original PDF: https://files.tax.utah.gov/tax/commission/ruling/98-021.htm

Original ruling text

98-021

Response
March 20, 1998

REQUEST
LETTER

February
24, 1998

To
whom it may concern,

I am interested in setting up a
temporary booth at a trade show in your state.
I need a written opinion from you regarding what type of activities will
create nexus in your state.

As a mail order company, I currently
engage in several activities which do not create nexus. As such, it is very important for me to
maintain my lack of nexus in your state.
As a small business owner, I would be put out of business if I was
required collect sales tax for your state or any state other than my own.

In reviewing the requirements it
appears that you could interpret my having booth space at a trade show in your state
as creating nexus. I need a written
opinion from you regarding that issue.

I have visited your website and
reviewed the obligations for collecting corporate tax. It appears that having a temporary trade booth for a period of less than two
weeks would not create nexus. I would
not be accepting deposits, approving or accepting orders. Although I would be
giving away catalogs, I would not be accepting any consideration in return.

However, there are some areas that
concern me. For example, I would be
carrying a temporary stock of goods for display only. Although I would not be
directly resolving customer complaints, if a customer walks into my booth with
a complaint, I would be doing my best to resolve it. Finally, although I would not have a company owned vehicle in
your state, my booth representative, which be, an employee of COMPANY A's,
would be driving a rental truck.

Please let me know whether, in your
written opinion on of these items would create nexus.

The trade show booth will be staffed
by employees of my company. Although
they will not be doing any selling, obviously
the purpose of the trade show booth is promote our products. Please include in your written opinion
whether or not this is enough to create nexus.

I will not be taking orders,
delivering orders, driving a company-owned vehicle in your state or servicing,
repairing and installing equipment.
However, I would be giving away samples of my mail order catalog. The mail order catalog is imprinted on cover
with a price of $3.00 but, no copies will be sold. Please include in your opinion whether giving away sample
catalogs would be an activity that
constitutes creation of nexus.

Looking forward to hearing from you.

Sincerely,

NAME

March
20, 1998

NAME

ADDRESS

CITY
STATE ZIP

RE

• Application of nexus to temporary booth at trade show

Dear
NAME,

We have received your letter asking
whether an out-of-state corporation is exposed to nexus with Utah by setting up
a temporary booth at a Utah trade show.
As this activity may subject an entity to nexus for either sales and use
tax or income tax or both, we will address the application of nexus for each
tax separately below.

You indicate that the following
activities would occur in Utah pursuant to your setting up a temporary booth at
a Utah trade show:

1. Operation of a temporary trade booth in
   Utah for less than two weeks;

2. Promotion of goods (tangible personal
   property), which would not include either the sale of goods, acceptance of
   deposits, or approval or acceptance of orders;

3. Giving away catalogues;

4. Providing a stock of goods for display
   only;

5. Having an employee drive a rental truck
   in Utah and representing the company at the trade booth, but would not include
   delivering orders or servicing, repairing, or installing equipment; and

6. Resolving
   customer complaints.

Sales and use tax. You plan to operate the trade show booth
for less than two weeks. It is the
policy of the Commission not to apply sales and use tax nexus to trade show
participants who are in the state for less than two weeks, unless they have
some other contact with Utah that results in nexus or their trade show presence
in Utah is regular or systematic.
Please be advised that should you participate in various Utah trade
shows in a manner that would suggest regular or systematic presence, then sales
and use tax nexus with Utah may then exist.

Your participation in a trade show
for less than two weeks does not create sales and use tax nexus. Nevertheless, you should apply for a Utah
temporary sales tax license so you may report any sales made while in Utah at
the trade show. While you indicate that
no traditional sales will be made, Utah law recognizes your planned giveaway of
catalogues or other promotional items as a taxable event. Utah Admin. Code R865-19S-68 provides that
donors of tangible personal property, such as catalogues, are regarded as the
consumers of that donated property for use tax purposes. Accordingly, the sale of the catalogues to
you is a taxable event. If you have not
already paid sales tax on the items you give away, then you will need to
calculate a use tax based on the price you paid for those items and remit that
tax to Utah.

Income tax nexus. Utah Admin. Code R865-6F-6 indicates which
activities will subject an entity to nexus with Utah for purposes of its income
tax. Subpart (J) of this rule
recognizes Public Law 86-272, which restricts Utah from imposing an income tax
on a corporation whose only activity within the state is the solicitation of
sales for tangible personal property.
Subpart (K) lists activities that will subject an entity to income tax
nexus. Similarly, subpart (L) lists
activities that will not subject an entity to income tax nexus.

All but one of the activities
associated with your temporary booth, as listed above, are activities listed in
subpart (L) and thus do not expose an entity to nexus with Utah for its income
tax. However, that one activity, the
resolution of customer complaints, may or not may trigger income tax
nexus. Subpart (L)(12) allows you to
�mediate customer complaints when the purpose thereof is solely for
ingratiating the sales personnel with the customer and facilitating requests
for orders.� On the other hand, subpart
(K)(7) imposes income tax nexus on an entity for �investigating, handling, or
otherwise assisting in resolving customer complaints, other than mediating
direct customer complaints� in accordance with subpart (L)(12). We assume that no employee or agent of the
company will be available to resolve problems, which would subject your company
to income tax nexus. Advice offered at
the trade fair is not enough, by itself, to create nexus.

Though you have stated that you do
not plan to sell goods, accept deposits, or approve or accept orders, we point
out that should such activities occur, they would result in nexus for the Utah
income tax.

Please contact us if you have any
other questions.

For
the Commission,

Joe
B. Pacheco,

Commissioner

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