sales factor

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For decades, the sales factor has been a primary focus of state and local tax articles and a hot topic of discussion at conferences across the country, and the attention is well deserved. There has been no shortage of impactful legislative changes, interesting administrative rulings, and significant (and at times frustrating) judicial decisions regarding the…

On February 14, 2024, the California Office of Tax Appeals (OTA) denied the California Franchise Tax Board’s (FTB) request for rehearing in the Appeal of Microsoft Corporation and Subsidiaries (OTA Case No. 21037336). Microsoft is allowed to include 100 percent of its foreign dividend income in its sales factor denominator. This is a huge opportunity…

On May 14, 2021, the Indiana Tax Court upheld a pharmacy benefit management company’s sourcing of its receipts under Indiana’s costs of performance rules applicable to receipts from services. The court rejected the Indiana Department of Revenue’s position that the receipts should instead be sourced according to the rules for sales of tangible personal property.…

On April 14, 2021, the Oregon Tax Court issued a ruling on cross motions for summary judgment in a case involving the inclusion of receipts from commodity hedging activities in the taxpayer’s sales apportionment factor. Chevron filed amended Oregon corporation excise tax returns including its gross hedging receipts in its Oregon sales apportionment factor, and…

The Michigan Supreme Court held that revenue from the performance of services must be sourced to the location where the service provider’s employees performed the work, not where the services were delivered, for purposes of the City of Detroit’s income tax. Detroit imposes an income tax under the Uniform City Income Tax Ordinance (“UCITO”), which…

On February 28, 2020, the Oregon Tax Court held that multiple airlines operating as a unitary business should aggregate not only transportation revenue but also other metrics, such as departure ratios, that are factored into the apportionment formula used by Oregon for airline taxpayers. Oregon regulations provide a modified single sales factor apportionment rule for…

The Texas Supreme Court held that a defense contractor was entitled to a refund of franchise tax because it had incorrectly sourced certain sales of military aircraft made to foreign governments to Texas on its originally-filed returns for the 2005 through 2007 tax years. The contractor produced military aircraft in Texas, which it sold to…

On January 9, 2020, the New Jersey Superior Court, Appellate Division, upheld a New Jersey Tax Court decision that income, or “receipts,” earned by a taxpayer from providing broadcast fax, email and voice messaging services were performed within New Jersey and thus the majority of such receipts were properly sourced to New Jersey for purposes…

The California Office of Tax Appeals held that pursuant to market-based sourcing rules, a nonresident individual did not derive California sourced income and was not required to file a California return or pay personal income tax. The taxpayer resided in Texas and worked as an independent contractor for Christopher Konrad Consulting, LLC (Konrad), a company…