Industry events such as September’s National Advisory Group (NAG) Conference in Minneapolis are a good way to gain know-how, find new suppliers and network with others in the industry. Best of all, Uncle Sam, in the form of our tax laws, is willing to pick up the expense of attending many events — at least for some.
Unfortunately, many deductions for show attendance previously claimed on the personal tax returns of attendees were temporarily suspended by the 2017 Tax Cuts and Jobs Act (TCJA), the same bill that put a bigger crimp in the meals and entertainment deductions.
The TCJA eliminated, at least until 2026, the deductibility of some itemized deductions on the tax returns of individuals. That means that unreimbursed employee business expenses — including expenses for travel, lodging, meals, entertainment, continuing education and others — can no longer be claimed.
Fortunately, the rules for deducting the expenses for getting to, staying at and attending meetings, conventions, trade shows or seminars that formerly applied to both individual attendees and businesses, remain only for convenience store businesses — including sole proprietorships.
Although the TCJA isn’t too clear on how the new law applies to business meals, under the new law, entertainment is no longer deductible. No change was made to the 50% deduction for business meals or the 100% deduction for expenses incurred for recreational, social or similar activities primarily for the benefit of employees.
The tax laws limit the business meal deduction to only 50% of the expense. Not too surprisingly, the rules in this area contain quite a few gray areas. If, for instance, the convenience store business foots the bill to take employees to a conference, the full amount of their meals is deductible by the business. The 50% rule applies only to the business owner.
Side Trip Stipulations
Generally, taking extra days for a mini-vacation won’t result in the loss of the show-attendance deduction. The tax rules permit a deduction for the total travel costs when the main purpose of the trip is attending a convention, trade show or conference.
When combining a vacation or side trip with convention attendance, a good rule is to spend more days on business than on pleasure. Lodging expenses cannot be deducted for personal days, but purchasing a reduced-fare ticket requiring stay-over days means lodging costs for stay-over days is permissible.
When friends, family or other guests accompany an attendee to a show, convention or conference, only the business-related portion of the expenses can be deducted. In other words, deducting the cost of the family’s hotel suite is a no-no. Instead, deduct the cost of a single room.
If a bonafide 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.
Any convenience store operation clearing the hurdles created by our lawmakers, with the proof to support it, may be able to deduct the entire cost of the convention, show or conference trip (subject to the usual 50% limit on meals and entertainment).
However, the rules are tighter if the event is held outside North America or on a cruise ship.
Foreign Conventions: In order to deduct the expense of attending a trade show or convention held outside North America, the c-store business must show that the event is directly related to the active conduct of the operation, and it is as reasonable for the event to be held outside North America as it is to hold it within.
Cruise Ship Conventions: In order to deduct a cruise ship convention, meeting or other event, even more stringent rules exist. First, the cruise ship must be a U.S.-registered vessel. Next, the ship must make all of its ports of call in the U.S. or U.S. possessions. Finally, the tax law limits cruise ship convention deductions to only $2,000 per year.
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 convenience store business. And while keeping all receipts may not be required, it doesn’t hurt to do so.
As with the expenses of other business trips, the primary reason for attending must be business-related in order to qualify for deductions. When it comes to events for investment, political, social or other purposes unrelated to business, only a limited- expense deduction may be available.
Owners and operators of convenience store businesses needing additional help with this confusing area of our tax rules might seek professional advice.
Additional guidance from the IRS, “Publication 463: Travel, Entertainment, Gift and Car Expenses” is available at: irs.gov/formspubs.