It is more complicated to determine an in-state sale regarding the provision of multistate services or licenses of intangibles. Historically, states looked to a taxpayer’s costs of performing the service or licensing the intangible. Some states have become critical of this cost-of-performance method and replaced it with a market-based method of computing in-state sales.

In

The state and local tax (SALT) impact of the recently enacted federal tax reform is still being assessed. Because of states’ broad conformity to the federal income tax laws, many of these changes will have an impact on taxpayers’ SALT liabilities.

In their article for Bloomberg Tax, Eversheds Sutherland attorneys Jeff Friedman, Todd Betor

In a rare special meeting on February 24, 2017, the Multistate Tax Commission (MTC) adopted amendments to the MTC’s Model General Allocation and Apportionment Regulations that it has worked on since 2014. Among other things, the 94-page Model Regulations:

  • Provide a new section related to market-based sourcing of receipts from the sale of services and

The Louisiana Department of Revenue has proposed a new regulation expansively interpreting Louisiana’s recently enacted related party expense addback statute.  

  • Earlier this year, Louisiana enacted a new statute requiring taxpayers to add back interest expenses, intangible expenses and management fees paid to related members, subject to certain exceptions.
  • The Proposed Regulation seeks to adopt

Recently proposed Treasury regulations under IRC § 385 would create sweeping changes to the federal income tax treatment of related-party debt. The Proposed Regulations could also have far-reaching effects for state income tax purposes, particularly on the deductibility of intercompany interest expenses in separate company reporting states.

View the full Legal Alert.

By Zack Atkins and Eric Coffill

A Virginia trial court held that royalties paid to related members that are reported to, but not taxed by, other states do not qualify for the exception to the state’s corporate income tax addback statute. In granting summary judgment in favor of the Virginia Department of Taxation, the court