Trade shows and conventions, such as the SHOT Show, are the perfect place to find new suppliers, promote the business, capture marketplace intelligence, generate leads and network with other industry professionals. And, don’t forget, every firearms retailer, store owner, manager and employees of that business (even someone who is a shareholder/employee), can legitimately claim an income tax deduction for the expenses of attending these events and shows.
Knowing what can and cannot be written off on the annual tax return is a key to an affordable experience. Thanks to our tax laws, the government picks up the tab for a sizable portion of the expenses of attending events — if it is “business-related” and the rules are followed. Naturally, when it comes to events for investment, political, social or other purposes unrelated to business, only a limited expense deduction may be available.
Our tax rules allow a deduction for all of the ordinary and necessary expenses paid or incurred in carrying on a trade or business. All that is required is a bona fide business purpose to claim tax deductions for the cost of:
- Conference or trade show registration fees
- Standard mileage for a vehicle driven to the meeting, trade show or convention
- Air, bus or train fare
- Lodging, including tips
- 50 percent of meal expenses
- 50 percent of the cost of entertaining customers or clients
That’s right. Meals taken when traveling overnight away from home can be deducted if it is business-related. Unfortunately, only 50 percent of the meal cost is deductible because, in the eyes of our lawmakers, the other half represents an expense that would have been occurred even if not on a business trip.
If a spouse, dependent or other individual accompanies an attendee to a business convention or on a business trip, that individual’s travel expenses are not usually tax deductible. Of course, if a bona fide business purpose exists for the individual’s presence and can be proven, a tax deduction might result. Incidental services, such as keeping notes or assisting in entertaining customers, are not enough to make the expenses deductible.
Generally, the travel expenses of someone accompanying an attendee can be deducted if that person:
- Is an employee of the business
- Has a bona fide business purpose for the travel
- Would otherwise be allowed to deduct the travel expenses
If a business associate, such as a current or prospective (likely to become) customer, client, supplier, employee, agent, partner or professional advisor travels with an attendee and meets the conditions in (2) and (3) above, their expenses can be deducted. Consider our hypothetical tactical retailer, Jerry. Jerry drives to Chicago to attend a business meeting and takes his wife, Linda, with him. Although Linda occasionally keeps notes, performs similar services and accompanies Jerry to luncheons and dinners, she is not Jerry’s employee. The performance of those services is not enough to establish her presence on the trip as necessary to the conduct of Jerry’s business and her expenses are not deductible.
Regardless of who accompanies him, Jerry still has deductible expenses. Consider that Jerry pays $199 a day for a double room while a single room costs $149 a day. He can deduct the total cost of driving his car to and from Chicago, but only $149 a day for his hotel room. If he uses public transportation, he can deduct only his fare.
Those Dreaded Receipts
Whenever business expenses are claimed, it’s a good idea to keep detailed records and receipts for everything. While receipts for expenses of $75 or less are not required, when attending a show, meeting or conference, a copy of all charges, as well as a copy of the convention schedule/agenda, can help prove it is relevant to the tactical firearms and equipment business.
The IRS requires contemporaneous records for expenses related to travel, meals and entertainment. And, for each day’s business expense, recording the business purpose, the time and place should be documented close to or at the time the expense was incurred.
Although a firearms retailer may not be required to keep all receipts, it doesn’t hurt to do so. They often serve as a reminder of a deductible expense, especially where the payment was in cash. Also, keep in mind that while there is no overall dollar limit on the amount that can be deducted for trade show-related expenses, entertainment and meal costs that are “lavish and extravagant” cannot be deducted. What’s more, everyone is limited to a deduction of only 50 percent of the cost of meals.
The Per Diem Standard Deduction
Itemizing expenses while traveling can be a chore. Fortunately, there is an optional standardized deduction known as “per diem.” These are available in two categories. The first is lodging, the second is meals and incidental expenses (M&IE). Both are determined by the location of the trip and/or conference.
Under the optional high-low method for 2018 travel, the per diem rate is $284 for travel to any high-cost locale and $191 for travel to anywhere else within the continental U.S. The amount of the $284 high rate and $191 low rate that is treated as paid for meals is $68 for travel to any high-cost locality and $57 for travel to any other locality within the continental U.S.
When it comes to the 50 percent limit on meals, everyone traveling away from home for any length of time may deduct half of the per diem allowance or “Standard Meal Allowance” (SMA), rather than half of the actual cost of meals, laundry, cleaning and tips.
Bottom-line however, using the standard meal allowance means records don’t have to be kept of actual meal expenses, although records are required to prove the time, place and business purpose of all travel. The biggest disadvantage is that the standard meal allowances are not very generous. Chances are that the actual expenses — and therefore the deductions — would be larger.
Working In A Vacation
Every tactical retailer can deduct all of their travel expenses if the trip was entirely business related. If the trip was primarily for business and, while at the business destination, the stay was extended for a vacation, to make a personal side trip or for other personal activities, only the business-related expenses can be deducted.
Naturally, if the trip was primarily for personal reasons, such as a vacation, the entire cost of the trip is a non-deductible personal expense. However, any expenses incurred while at that destination that are directly related to the business are, of course, deductible.
In the eyes of the IRS, a trip to a resort or on a cruise ship may be a vacation, even one advertised as primarily for business. The scheduling of incidental business activities during a trip, such as viewing videotapes or attending lectures dealing with general subjects, rarely changes what is really a vacation into a business trip.
It should also be noted that no tax deduction is available for the expenses of attending a convention, seminar or similar meeting held outside the North American area unless it is “reasonable” to hold it outside the North American area. The popular IWA & Outdoor Classics Show taking place in March in Nuremberg, is clearly outside the “North American area.”
As mentioned, meals and entertainment expenses are subject to a 50 percent limitation. New rules allow convention or trade show attendees, except the self-employed, to deduct the cost of local lodging so long as it is business-related. That means the expense of staying in town while attending a local trade show, convention, seminar or meeting can be tax deductible. A self-employed firearms retailer can, of course, deduct travel away from his or her home base.
Trade shows and conventions are a great way to find new products and make profitable contacts. But there’s a downside. With the rising cost of travel, getting to a show can be quite expensive.
A Fringe Benefit For The Business
Most travel expenses (including travel, lodging and meals) can be a legitimate tax deduction for anyone attending a convention within the United States — so long as it can be shown that attending the convention benefits the firearms business.
The requisite business relationship test can be satisfied by showing that an attendee’s business duties and responsibilities tie in to the program or agenda of the convention. The agenda doesn’t necessarily have to deal specifically with the attendee’s duties or responsibilities — a tie-in is enough.
Whether planning to attend the SHOT Show in Las Vegas, or other shows, conventions or meetings, planning will be a lot easier and the chances of Uncle Sam, in the form of our tax laws, picking up part of the cost, greatly enhanced.
Obviously, there are many fine points to consider. Additional guidance is available from the IRS in “Publication 463: Travel, Entertainment, Gift and Car Expenses.” A copy of this publication is available at: www.irs.gov/formspubs. Taking advantage of the complex travel and entertainment tax rules might require seeking professional assistance.
Mark E. Battersby is a freelance writer who has specialized in taxes and finance for the past 25 years. Working from offices in the suburban Philadelphia community of Ardmore, PA, Mr. Battersby currently writes for publications in a variety of fields, syndicates two weekly columns that appear in more than 65 publications and has written four books.