Article
Source: Tax Notes State
Article
02.04.21
In a multi-part series of Tax Notes State’s SeeSALT Digest, Pillsbury Tax partner Carley Roberts, counsel Robert Merten III and associate Malcolm Brudigam review the landscape of market-based sourcing rules and provide an in-depth focus on various states’ use of reasonable approximation.
“The U.S. and global economies have substantially transformed over time from the sale of goods toward the sale of services and intangibles, or from tangible personal property to 'other than tangible personal property.' Determining how to source these sales for state income tax purposes drives how much a company will pay in tax to states with a corporate income tax. While sourcing sales receipts from one state to the next is far from uniform, the market-based sourcing trend for sales of services and intangibles continues to grow. Representing a shift from the traditional cost of performance sourcing method used by many states that was focused on where the taxpayer’s labor and capital were employed, market-based sourcing typically assigns receipts from sales of other than tangible personal property to the state where the taxpayer’s customer receives the benefit of the service or uses the intangible."
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