Does a trade show promoter owe Texas sales tax on booth space rentals, booth furniture rentals, electricity charges, or telephone service provided to exhibitors?

Plain-English summary

A trade show promoter asked the Comptroller's office how sales tax applies to several charges it makes to exhibitors at its shows. The Comptroller explained that show promoters who rent booth space to exhibitors are treated as renting real property. Because of that, a promoter may also rent booth furniture — tables, chairs, and similar items — to exhibitors without charging sales tax, the same way a landlord doesn't charge sales tax each month to a tenant renting a furnished apartment.

The same rule works in reverse: if the promoter itself rents a building and furniture together from a building owner, the building owner isn't required to charge the promoter tax either. But if the promoter or its exhibitors instead rent booth furniture from a separate company that doesn't own or manage the facility, that company would have to collect sales tax on the furniture rental, since it isn't bundled with a real property rental.

Electricity charges were treated differently. The Comptroller viewed the charges for electricity as essentially reimbursing the cost of temporarily running electric lines within the building, rather than a sale of electricity or a true rental of power cords — the customer can only turn their own equipment on or off and doesn't otherwise control the lines. The building owner or manager that actually purchases the electricity from the utility is responsible for any tax due on that purchase.

Telephone service is different again: it's taxed as a telecommunications service. The promoter must collect and remit sales tax on phone service charges billed to show participants. In turn, the building owner should collect tax from the promoter on phone service the building owner sells to the promoter for the promoter's own use — unless the promoter gives the building owner a resale certificate for phone service the promoter is reselling to exhibitors.

What this means for you

Trade show and convention promoters

You don't need to charge sales tax on booth space rentals or on booth furniture (tables, chairs, etc.) rented along with that space — this is treated as a real property rental, not a taxable rental of tangible personal property. Charges you pass through for electricity to run exhibitor equipment are likewise not taxable as a sale or rental of power. However, you must collect and remit sales tax on any telephone/telecommunications service charges you bill to exhibitors, and you can use a resale certificate when purchasing phone service from the building owner that you intend to resell to exhibitors.

Companies renting furniture to exhibitors or promoters

If you rent booth furniture but don't own or manage the facility where the show is held, your furniture rental is not bundled with a real property rental, so you are required to collect sales tax on it.

Building owners and facility managers

You aren't required to charge sales tax to a promoter who rents both building space and furniture from you together. You are responsible for any tax due on your own purchases of electricity from the utility, and you should collect tax from the promoter on phone service you sell to them, unless the promoter provides a valid resale certificate.

Common questions

Q: Does a trade show promoter have to charge sales tax on booth space rental?
A: No. Booth space rental is treated as a rental of real property, which is not subject to Texas sales tax.

Q: What about booth furniture like tables and chairs rented along with the booth space?
A: Also not taxable, as long as it's rented by the entity that owns or manages the facility (the same provision that lets a landlord rent a furnished apartment without charging sales tax each month).

Q: Is sales tax due if furniture is rented from a separate company that doesn't own or manage the facility?
A: Yes. In that case the furniture rental isn't bundled with a real property rental, so the rental company must collect sales tax.

Q: Are electricity charges to exhibitors taxable?
A: No. The Comptroller treated these charges as reimbursement for running temporary electric lines, not a sale of electricity or true rental of power cords. The building owner or manager is responsible for tax on its own electricity purchases.

Q: Is telephone service provided to exhibitors taxable?
A: Yes. Phone service is a telecommunications service, so the promoter must collect and remit sales tax on charges to show participants, and the building owner should collect tax from the promoter unless a resale certificate is given.

Citations and references

No specific statutes or administrative rules are cited in the text of this letter.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9501L1330E08

Original ruling text

January 16, 1995

Dear ***:

Show promoters who rent booth space to exhibitors are considered to be renting
real property. That means the promoters may also rent booth furniture such as
tables and chairs to their exhibitors without charging sales tax. This is based
on the same provision in the tax law that allows a person to rent a furnished
apartment without having to pay sales tax to his landlord each month.

By the same token, the building owner is not required to charge you tax when
you rent both a building and furniture from them. If either you or your
exhibitors rent booth furniture from a company that does not own or manage the
facility, they would be required to collect sales tax on the furniture rental.

I discussed these issues with Ms. ** last week and am of the
opinion that the charges for electricity are, in reality, to defer the cost of
temporarily running electric lines within the building. They do not appear to
constitute either a sale of electricity nor a true rental of power cords since
the customer cannot exercise any control over the lines other than to turn on
or off their equipment. The owner or manager of the building that was
purchasing the electricity is responsible for paying any taxes due on its
purchases of electricity.

The provision of telephone service is taxed as a telecommunications service.
You should collect and remit sales tax on charges for phone service that you
make to show participants. The building owner should collect tax from you on
charges for phone service sold to you for your use. You may give a resale
certificate to the building owner in lieu of tax for purchases of telephone
service that you resell to show participants.

This opinion is rendered 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. 3-4680. The direct line
is512/463-4680. You may also write to Tax Administration, Comptroller of Public
Accounts.

Sincerely,

Al Van Allen
Tax Administration Division

NOTE: Previous Accession Number 9501824L