SALT Report 1149 – The Texas Comptroller’s Office released a statement clarifying the sales tax treatment of DMC contracts that occurred on or after September 1, 2009.
Currently a qualified destination management company is considered the consumer of the taxable items sold or provided under a service contract and services provided under such a contract are not considered taxable services.
What is qualified DMC company?
A qualified DMC is a business that receives at least 80% of its annual total revenue by providing or arranging for the provision of destination management services. The service provider must actually perform, or make arrangements for a subcontractor to perform the services. Simply offering services is not the same as providing services.
Additionally at least 1% of total revenues must be spent on marketing the destinations where the services are provided. Marketing means advertising and is not limited to traditional ads and billboards advertising on a website or in another form of media may be included in the calculation.
The tax treatment is allowed only to a business that qualifies as a DMC and then only on a contract that qualifies as a DMC contract. A qualifying DMC contract must have at least 80% of the service provider’s clients outside the state. All clients must be considered when making the 80% determination, and the calculation must be performed prior to beginning each contract to see whether the service provider qualifies as a DMC at that time.
A contract between a qualified DMC and a Texas client may qualify as a DMC contract if the principal place of business of the client is located outside the county where the event is held and all other contract requirements are met.
For Further Information: