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Are Massachusetts Show Exhibitors Due a Dose of Philadelphia-Style Tax Medicine?

David Hewett | May 12th, 2013

A fresh threat from a state taxation entity has emerged to bedevil show dealers, many of whom have not yet recovered from the Philadelphia dispute that cost them dearly last year.

The Philadelphia episode occurred when exhibitors at past shows began receiving dunning notices from a collection agency seeking retroactive “business income and receipt” and “net profits” taxes and a “commercial activity fee.” Some exhibitors ended up paying as much as $6500, others somewhat less, but it was still an unplanned and unexpected expense. (See the April 2013 issue of M.A.D., p. 12-A, for details.)

In April of this year, Gerold Wunderlich of Ossining, New York, who had exhibited at Fusco & Four/Ventures’ Boston International Fine Art Show last year, received a form letter from the Massachusetts Department of Revenue, stating that he had failed to file corporate excise tax for the years 2009-12.

Worse yet, the “Notice of Failure to File Return” letter put the recipient on notice that if he failed to file a proper return within 30 days (meaning it was due on May 3), he could be taxed at double the figure the revenue department had determined, plus interest and penalties.

Gerold Wunderlich shot off a reply to David Bonomi of the revenue department on April 29, and then alerted other exhibitors and the media of the threatened action.

In the letter to Bonomi, Wunderlich said that he had not exhibited in Massachusetts at all in 2011 and had participated in shows for only three days a year in the other years noted. He has filed sales tax returns in the Bay State for the shows that he had participated in since 2009.

Wunderlich said that the Philadelphia tax brouhaha was uppermost on his mind when he read the letter from the Department of Revenue. In his reply, he pointed out that he was a one-man company operating from one room on the second floor of his home. Doing the Boston show typically cost him between $8000 and $10,000 a year, he stated, and he had made no sales at the Boston show during the last two times he participated in it.

If the state of Massachusetts went ahead with collecting a tax that neither the event managers nor participants were aware of, approximately $456 per year, plus back taxes and penalties, Wunderlich declared, “I will not return to the state of Massachusetts for any show [his emphasis] in the future!”

Show co-manager Tony Fusco talked on May 2 about the situation. Fusco said, “Gerry Wunderlich jumped the gun on this action. He’s the only one who got this letter. It’s actually a random audit and probably doesn’t even apply to him. There’s a whole bunch of people who the [corporate excise] law doesn’t apply to, people in limited liability corporations, partnerships, and others. The person that I talked to at the revenue department said that, although they can’t speak to me directly about someone else’s account, it was part of a random audit by the Department of Revenue.”

Fusco said he would have more information to pass on within a matter of days. “We’re working on clarifying the matter.”

We wondered if any other corporate exhibitors at the Boston show received the dunning notices and checked with Debra Force Fine Art, Inc., New York City. “I don’t believe we got one,” said Julianna Tancredi, registrar and administrator for the business. “I was gone part of last week, but I checked with Debra and no, we weren’t sent any such letter.

“We learned about the letter from Gerry Wunderlich, but it appears he’s the only exhibitor who received one,” said Tancredi.

Wunderlich sounded a bit chastened when we spoke to him in the late afternoon of May 3. “Tony [Fusco] is handling it with the Massachusetts people, so I don’t want to say too much now. It appears I’m the only one who received the letter,” Wunderlich said. “They had that thirty-day penalty clause in the letter; that’s why I reacted the way I did. I wanted to get it stopped right then; that’s why I wrote a letter to the governor and the head of the tax department, and others…Tony said I should ignore that deadline and let him handle it, and that’s what I’m doing.”

We tried to get a definitive policy statement from personnel at the Massachusetts Department of Revenue, and left a message for Bonomi. Our call was returned by a man we’ll call Joe, who did not want his name used but said he was returning the call because of the questions we’d posed. He said he was a director and official with “the Division of Miscellaneous Taxes, Sales Taxes, the Corporate Nexus Non-Filing Unit.”

Joe reiterated what we’d heard and stated that they couldn’t discuss any specific cases. “Every case is different, whether they have incorporated or not. You can refer to the regulations we have. If it’s solicitation, it’s covered under public law 86-272; that defines solicitation. Our regulation is 830-CMR 63.39.1.”

There are pages and pages of explanation of those laws in the Massachusetts legal code. Solicitation, by the way, is merely taking orders for something that will be supplied from out of state.

We asked Joe the crucial question: does an incorporated art or antiques seller doing a show in Massachusetts need to file a corporate excise tax form with the state?

His answer was, “It really depends on if they meet the exceptions in the regulations and public laws, 86-272. I can’t say yes or no; it depends on their activities, what they do and what they don’t, what they sell and what they don’t. You can come in once a year for five years in a row and that certainly wouldn’t be a…well, there is no de minimis exception [Latin for trifling matter].

“Hey, you could come in and sell one painting for a million dollars, and we…but it’s really a nexus type matter.” (Nexus refers to the laws governing which corporations fall under the control of Massachusetts regulations.)

And that’s as definitive an answer as we can supply. On one side is the opinion given by a dealer and a show promoter that there is no problem, and on the other is an official stating that every situation is different.

If that worries you, maybe you should ask a lawyer.

Originally published in the June 2013 issue of Maine Antique Digest. © 2013 Maine Antique Digest

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