Nonprofit Newswire | To Tax or Not to Tax Performance Venues

May 2, 2010: Source: Burlington Free Press | Honestly, the rules for when nonprofits are exempt from state sales tax are often so murky that only Nostradamus could figure them out. In Vermont, nonprofit performance venues such as the Champlain Valley Exposition (with headliners such as Bill Cosby for us oldsters and Justin Bieber for the under-16 crowd) are selling tickets tax free, but they might be hit with after-the-fact sales taxes after a review from the state Department of Taxes.

The department might decide that the Exposition doesn’t qualify for exemption from sales taxes because it splits the ticket revenues with the performers. It has happened before. Earlier this year, the Tax Department hit the Flynn Center for the Performing Arts with a bill for back taxes, penalties, and interest. Tax Department officials for the life of them can’t figure out why nonprofits would be confused by the law, which apparently says that jointly produced or presented performances would not be exempt from the sales tax.

The Exposition’s position is that it isn’t a business partner with Cosby or Bieber, it simply contracts with them for their services and pays for it through a split of the revenues (beyond a base guarantee, which headliners typically demand regardless of ticket sales numbers). The state assumes that by splitting the revenues, these performance centers are splitting the business risks with their headliner-partners. But the Exposition says that the risk is all on the nonprofit’s shoulders, so there is no partnership.

One suspects that the Tax Department’s suddenly aggressive and tight interpretation of the law might be connected to the state’s effort to eke out whatever nickels and dimes it can find to avoid potential deficits or tax hikes. We doubt that the Champlain Valley Exposition is in a business partnership with Justin Bieber. Stick to your position, Exposition people!—Rick Cohen