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  3. Is compensation paid to an out-of-state promoter or entertainer subject to tax withholding for services performed in NC?

Is compensation paid to an out-of-state promoter or entertainer subject to tax withholding for services performed in NC?

It depends on the circumstances, for example:

SCENARIO 1: A venue contracts with an out-of-state promoter to find an entertainer; the venue enters into a separate contract with the performer. Is the compensation paid by the venue to the promoter subject to withholding?
In this scenario, the compensation paid by the venue to the promoter is NOT subject to withholding unless the promoter physically performed services in North Carolina.
SCENARIO 2: A venue contracts with an out-of-state promoter to find an entertainer; the promoter enters into a contract with the performer. Is the compensation paid by the venue to the promoter subject to withholding?
The answer depends on whether the promoter is an entity or an individual.

  • If the promoter is an entity, tax must be withheld because the entity is deemed to be doing business in North Carolina through its agent (the entertainer).
  • If the promoter is an individual, tax is only required to be withheld from the payment to the promoter to the extent the promoter performed services in North Carolina.

SCENARIO 3: A venue contracts with a promoter to find an entertainer; the promoter enters into a contract with the out-of-state entertainer. Who is responsible for withholding tax from the compensation paid to the out-of-state entertainer?
The promoter is responsible to withhold from the compensation paid to the entertainer because the entertainer is providing a personal service for the promoter.
SCENARIO 4: Can a promoter that is responsible for withholding from the compensation paid to an entertainer contract with the venue to withhold the tax?
The Department of Revenue has no objection to a venue satisfying a promoter’s withholding responsibility if the venue is willing to accept that responsibility.

However, the promoter is the entity required by law to withhold the tax and could be pursued by the Department of Revenue for collection if the tax is not withheld or is withheld but not remitted to the Department by the venue.

A contractual provision between the promoter and the venue shifting the responsibility to the venue is not binding on the Department since the Department is not a party to the contract.

SCENARIO 5: A promoter rents a facility from a venue and contracts with an out-of-state entertainer. The venue sells tickets to the event and deducts the rent and other fees and expenses from the gross ticket proceeds before payment to the promoter. On what amount is withholding required?
No withholding is required from the ticket proceeds paid to the promoter because the promoter is not providing a personal service for the venue.

The promoter is required to withhold from the compensation paid to the entertainer because the entertainer is providing a personal service in North Carolina for the promoter.

Updated on March 2, 2020

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