Sutherland’s SALT Poll, “MTC Considering Broad Throwout Rule Under Cloak of Redefining ‘Sales,’” revealed that more than 80% of those surveyed oppose narrowing the scope of the type of “sales” used to calculate the receipts factor. The vast majority of respondents were opposed to altering the sales factor because they believed all receipts used to calculate business income should be reflected in the apportionment formula. The MTC’s proposal and the poll results are not surprising based on Sutherland’s experience with escalating attempts by state auditors to “throwout” certain types of receipts from the sales factor.

Continue Reading SALT Poll Results: Most Oppose MTC’s Proposal to “Throwout” Receipts

On April 26, the Multistate Tax Commission (MTC) Income & Franchise Tax Uniformity Subcommittee (Subcommittee) held the first of three scheduled meetings to revise corporate income tax apportionment. Specifically, the MTC is seeking to limit the definition of “sales” under Article IV.1(g) of the Uniform Division of Income for Tax Purposes Act (UDITPA) for purposes of calculating the sales apportionment factor. The effect of the proposed limitation will lead to reducing the sales factor denominator in certain situations—and increasing state apportionable income.

Read the Sutherland SALT Team’s legal alert, “No Sale! MTC Proposes to Limit Receipts Included in the Sales Factor,” and be sure to vote in our poll on the MTC’s proposal.

The Multistate Tax Commission (MTC) is proposing to significantly change how the sales factor is calculated for apportioning corporate income. Currently, most states define “sales” includable in the sales factor as “all gross receipts of the taxpayer” (except those receipts related to nonbusiness income). MTC members are considering a proposal to limit the definition of “sales” to include only those gross receipts from activity that meets the “transactional test” of the definition of “business income.” Under this proposal, all other receipts—including receipts from sales that satisfy the “functional test”—would be excluded from the sales factor (even though the related income would remain subject to apportionment). 

Thus, under this MTC proposal, the sales factor would include only those receipts arising from sales of inventory or services.  Examples of receipts that would be excluded are receipts from treasury or hedging transactions and the proceeds from the sale of a unitary subsidiary.


Sutherland’s SALT Poll, “The Impact of State Budget Deficits,” revealed that the majority of those surveyed believe that state budget deficits have led to a difficult state tax audit environment. The poll results are consistent with Sutherland’s recent experience with state tax auditors—an overwhelming 80% of respondents believe that state auditors generally are less flexible in negotiating difficult issues. Further, 60% of the respondents experienced state tax auditors creating more substantial assessments during this time of state budget shortfalls.

Continue Reading Weekly SALT Poll Results: The Impact of State Budget Deficits