State income tax apportionment What you need to know now
[Pages:25]State income tax apportionment--What you need to know now
Arthur J. Parham, Jr. Entergy Service Inc.
Marilyn A. Wethekam Horwood Marcus & Berk Chtd.
Kristen Cove Deloitte Tax LLP
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Agenda
Trends in state income tax apportionment ? Factor presence nexus and single sales ? Cost of performance updates ? Multistate Tax Commission rewrite ? Throwback and throw-out
Alternative apportionment and Multistate Tax Commission litigation update ? Alternative apportionment ? Multistate Tax Commission litigation
Applying market-based sourcing ? Analysis of revenue stream ? Lack of consistency in market definitions ? Data solutions
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Copyright ? 2016 The National Multistate Tax Symposium: February 3-5, 2016
Trends in state income tax apportionment
Apportionment--emerging trends
? Factor presence nexus standards ? States are more heavily weighting sales factors as well as moving to 100% sales factors ? Significant focus from states on cost of performance rules and ongoing litigation ? For sales factor sourcing, the trend is that states are moving towards market-sourcing rules
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Copyright ? 2016 The National Multistate Tax Symposium: February 3-5, 2016
Sales factor considerations
Sales of nonTPP
Sales of TPP
Cost of performance
Destination
Market
Ultimate destination
Proportional/ Time spent
Dock
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Copyright ? 2016 The National Multistate Tax Symposium: February 3-5, 2016
Cost of Performance Update
Cost of performance
Sales of non-TPP
Time spent
Transactional
Operational
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Market
Copyright ? 2016 The National Multistate Tax Symposium: February 3-5, 2016
Sales throwback and throw-out rules
Considerations for throwback and throw-out rules: ? Foreign sales transactions ? Nexus standards ? Origination determinations ? Revenue stream treatment
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Copyright ? 2016 The National Multistate Tax Symposium: February 3-5, 2016
Update on proposed UDITPA rewrite
? In light of the overwhelming lack of uniformity among the states, the Multistate Tax Commission (MTC) approved a public hearing to review five provisions of UDITPA: - Sales factor numerator for sourcing services and intangibles - The definition of "sales" - Factor weighting - The definition of "business income" - Equitable apportionment
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Copyright ? 2016 The National Multistate Tax Symposium: February 3-5, 2016
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