Maryland Governor OKs Single-Sales Sourcing for Corporations (Corrected)

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By Leslie A. Pappas

Maryland will adopt single-sales-factor apportionment for most businesses under a measure Gov. Larry Hogan (R) signed into law April 24.

Under the new law, Maryland will alter its formula for calculating the state’s corporate net income tax to a single-sales-factor formula, phasing it in over a five-year period through 2022.

Maryland joins more than 20 states that have adopted or are phasing in single-sales-factor apportionment for most businesses, according to an online tally from the Maryland Single Sales Factor Coalition.

“It levels the playing field for Maryland companies,” Steve Banks, vice president and director of Finance and Corporate Services for T. Rowe Price and chairman of the Coalition, told Bloomberg Tax April 24. “Under the current system, Maryland was at a competitive disadvantage.”

While Maryland manufacturers already are required to use single-sales-factor apportionment, H.B. 1794 expands it to most other industries. Any “worldwide headquartered company” meeting specific criteria including having its principal executive office in Maryland, and from July 1, 2017, to June 30, 2020, employing at least 500 full-time employees at the Maryland executive office, may elect to use a three-factor formula that includes property, payroll, and double-weighted sales. The provision was written with the hotel chain Marriott International Inc. in mind.

H.B. 1794 would alter apportionment formulas so that sales represent 60 percent of the final apportionment factor in tax year 2018, 66.67 percent in 2019, 71.42 percent in 2020, 75 percent in 2021, and 100 percent in 2022 and beyond, according to the bill’s most recent fiscal and policy note.

Decreasing, Increasing Tax Liabilities

The impact of Maryland’s switch will vary by business.

Single-sales-factor apportionment will help reduce overall corporate income tax liabilities for corporations headquartered in Maryland or with significant amounts of property and payroll in the state, the policy note said.

Agriculture, retail trade, and other services are most likely to experience an increase in tax liabilities, while mining, the arts, entertainment, recreation, finance, and insurance industries would more likely see their taxes decrease, according to a state analysis of 2011 and 2012 tax year data.

The bill takes effect on July 1 for tax year 2018.

To contact the reporter on this story: Leslie A. Pappas in Philadelphia at

To contact the editor responsible for this story: Ryan C. Tuck at

For More Information

Text of H.B. 1794 is at

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