eLearning

Market-Based Sourcing: Opportunities and Traps for the Unwary

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DESCRIPTION

For years, a corporation performing services in more than one state computed the sales factor of its apportionment formula by sourcing sales receipts to the state in which the greater proportion of the income-producing activity was performed based on the costs of performance. Today, a growing minority of states are adopting a market-based sourcing approach, which is generally based on where the benefit of the service is received. The lack of uniformity among states in this area has increased the likelihood that taxpayers will face unexpected results. In some cases, two or more states may seek to tax the same transaction. In other cases, the transaction may escape taxation by any state.

Many states employ a market-based sourcing method without statutory support. Of the 19 states that have already statutorily adopted some form of market-based sourcing for service receipts, each state has slightly different rules. Consequently it can be difficult to ascertain where the market for the services is located. The inconsistencies in the rules and the way in which they are applied leads to compliance burdens for taxpayers.

This new program from Bloomberg BNA provides insights into the market-based sourcing approach and tax planning opportunities that exist in computing the sales factor. In 60 minutes, the panelists will offer:

• An update on the trend towards market-based sourcing in lieu of the cost of performance sourcing.
• A discussion of how state tax authorities have employed a market-based sourcing method without statutory support.
• An examination of three of the latest states to employ a market-based sourcing approach and the different statutory provisions and methods used by these states.
• An analysis of the various issues in applying the market-based sourcing approach and major inconsistencies that create compliance burdens for taxpayers.
• A review of the states’ responses to detailed questions about how they require taxpayers to source service receipts as published in Bloomberg BNA’ 2014 Survey of State Tax Departments.
• A broad overview of look-through sourcing provisions based on the location of the customer’s customer 
• Insight into ways that taxpayers should approach states with a market-based sourcing regime.
• Suggestions on how to develop a multistate approach for sourcing service receipts.
• An explanation of why market-based sourcing provisions may be constitutionally suspect.

Educational Objectives:
• Recognize why states are moving towards market-based sourcing and away from the cost of performance approach
• Examine the market-based sourcing approach and how it affects taxpayers
• Navigate through the various nuances in state statutes that deal with the market-based sourcing approach 
• Analyze the difficulties that taxpayers may face when complying with the different market-based sourcing rules in multiple states.

SPEAKERS

MARIA P. EBERLE, MCDERMOTT WILL & EMERY LLP

Maria P. Eberle is a partner in the law firm of McDermott Will & Emery LLP and is based in the Firm’s New York office.  She focuses her practice on various state and local tax matters, including corporate income/franchise tax, sales and use tax, and property tax.  Maria assists businesses and individuals with state and local tax planning and all aspects of litigation matters, representing clients at all stages of state and local tax disputes including the audit, administrative appeal, state trial court, and state appellate and Supreme Court stages.


CATHERINE A. BATTIN , MCDERMOTT WILL & EMERY LLP

Catherine A. Battin is a partner in the law firm of McDermott Will & Emery LLP and is based in the Firm's Chicago office. Cate has represented clients in state and local tax controversies at the audit, administrative and judicial levels in numerous jurisdictions.   She also assists her clients with various types of planning related to income and franchise taxes, sales and use taxes, and personal income taxes.  Cate has defended numerous internet sellers in cases brought under the Illinois False Claims Act alleging fraudulent failures to collect and remit use tax.


LINDSAY M. LACAVA , MCDERMOTT WILL & EMERY LLP

Lindsay M. LaCava is a partner in the law firm of McDermott Will & Emery LLP and is based in the Firm's New York office.  She focuses her practice on state and local tax.  Lindsay assists businesses and individuals with state and local tax planning and litigation matters.  In the controversy area, she represents clients at all stages of state and local tax disputes including the audit, administrative appeal, state trial court, and state appellate and Supreme Court stages.  In the transactional planning and consulting area, Lindsay advises clients with respect to the state and local business activity tax, sales and use tax, and personal income tax consequences of various transactions and activities.