Shaking things up in state and local tax
Shaking things up in state and local tax
By Madison Barnett and Timothy Gustafson
The Michigan Court of Appeals held that a provider of event planning and coordination services presented sufficient evidence to support its costs of performance sales factor sourcing method, under which it sourced services receipts to the location where the event occurred. Over the Department’s arguments that the taxpayer failed…
By Madison Barnett and Prentiss Willson
The Indiana Department of Revenue determined in a Letter of Finding that an out-of-state information service provider must apportion its receipts from sales to Indiana customers to Indiana in a market-sourcing-like manner, even though the majority of its costs were incurred outside Indiana. The taxpayer provided information services electronically…
By Zachary Atkins and Andrew Appleby
An Arizona Department of Revenue hearing officer determined that the gross receipts from a taxpayer’s deemed asset sale pursuant to I.R.C. § 338(h)(10), including gross receipts attributable to goodwill, could not be included in the taxpayer’s sales factor for corporate income tax apportionment purposes. The taxpayer asserted that goodwill…
By Stephen Burroughs and Andrew Appleby
The Mississippi Supreme Court held that the taxpayer bears the burden to prove that an alternative apportionment method imposed by the State is arbitrary and unreasonable. Rejecting the taxpayer’s original cost-of-performance filing position, the Department of Revenue applied an alternative apportionment method utilizing market-based sourcing. On appeal, the Chancery…
By Zachary Atkins and Pilar Mata
The Colorado Department of Revenue issued a private letter ruling permitting a financial institution to deviate from Colorado’s special industry rules and use an alternative method of apportionment for corporate income tax purposes. The taxpayer, a savings and loan holding company with subsidiaries separately engaged in broker-dealer and banking…
By Madison Barnett and Jack Trachtenberg
The Michigan Court of Appeals ruled in two consolidated cases that the state’s estimated corporate income tax assessments were invalid because the taxpayers’ sales factors were improperly calculated using an alternative population-based formula rather than the statutory costs of performance (COP) formula. The two taxpayers were out-of-state book publishers…
On December 18, 2012, the California Court of Appeal ruled that receipts from the right to replicate software are sourced as sales “other than tangible personal property.” In reversing the trial court, the Court of Appeal upheld the taxpayer’s use of costs of performance sourcing. Microsoft Corporation v. Franchise Tax Board, Case No. A131964…
The Oregon Tax Court issued its opinion in Powerex v. Dep’t of Revenue, TC 4800 (Or. Tax Ct., Sept. 17, 2012), holding that sales of electricity are sales of other than tangible personal property for Oregon apportionment purposes. The taxpayer sold both electricity and natural gas at wholesale with contractual points of delivery in…
Florida Department of Revenue (DOR) ruled that tuition receipts from online courses are sourced to the location of the student, as opposed to the location where the costs of performance (COP) are incurred. Technical Assistance Advisement, 12C1-006 (May 17, 2012). While the ruling acknowledges that Florida applies COP for sourcing service revenue (by virtue of…
A recent Florida Department of Revenue Technical Assistance Advisement (TAA) applied costs-of-performance (COP) sourcing for corporate income tax purposes in a manner that is more akin to market sourcing. Tech. Asst. Adv. 11C1-008 (Sept. 15, 2011).
The TAA applied to receipts from the Taxpayer’s two predominant revenue streams: receipts from subscription programming and advertising. The Taxpayer provided subscription content directly to distributors and had no direct contact with its customers’ customers (i.e., retail subscribers/customers). The Department of Revenue stated that the income producing activity is the Taxpayer’s delivery of programming content to distributors and that such delivery constitutes performance. Thus, the Department found that subscription revenue would be sourced to Florida when the distributor is located in Florida. The Taxpayer’s receipts from subscription services provided to out-of-state distributors would not be sourced to Florida, even if that distributor provided the content to Florida residents.Continue Reading “Other Sales in Florida”: COP Sourcing in Regulation, Market in Application
