Two areas in state income taxation that are not uniformly consistent (and thus bring opportunity and exposure) are the sourcing of service receipts and the categorization of certain types of income as either business or nonbusiness. Retailers need to understand how to source service receipts – whether they are intercompany transactions, bundled transactions, or separate revenue streams in the business. Additionally, today’s difficult economic environment today may lead retailers to sell off certain business units or close down certain operations – which could lead to income that may not be business income.
Grant Thornton is a thought leader in the arena of apportionment of income and has been published in the various articles listed below:
The California State Board of Equalization recently held that the net gain from the sale of goodwill resulting from an election pursuant to Internal Revenue Code Section 338(h)(10) resulted in business income subject to apportionment, and the gross proceeds from the deemed sale of the taxpayer’s assets should be excluded from the sales factor of the apportionment formula.
Rejecting the ultimate destination rule, the Indiana Tax Court recently ruled that for purposes of the adjusted gross income tax, a taxpayer’s sales of products to Indiana customers who picked up the products through third-party common carriers outside the state should not have been sourced to Indiana.
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