Understanding the Apportionment Rules for Service-Based Businesses
Gain a clearer understanding to stay abreast on special apportionment issues to prevent potential pitfalls. Apportionment of income for state tax purposes is where the rubber meets the road. That is to say, the complex and varied rules for determining a taxpayer’s state income tax apportionment percentage can provide opportunities, with careful planning, for state tax minimization or create traps, without such planning, that lead to multiple taxation. Service-based businesses face particular difficulties in identifying and analyzing the rules applicable to their operations for two reasons. First, state apportionment rules were written several decades ago, at a time when our economy was dominated by the manufacturing of tangible personal property. Thus, these rules focused on the manufacturing industry and were out of touch with service operations. Second, as our economy has shifted its focus to services and e-commerce, states are beginning to revise their apportionment rules to account for differences between the industries. These new rules lack clear guidance thus creating uncertainty for taxpayers. This topic will provide a comprehensive look at particular apportionment issues facing service-based business in order to arm you with the information necessary to structure your operations to take advantage of the opportunities and avoid the traps.
Who should attend?
- Basic Apportionment Concepts
- What Is Apportionment?
- Constitutional Limitations
- Trends in ApportionmentRules for Sourcing Service Receipts
- Income Producing Activity Method
- Market-Based Sourcing Method
- Industry Specific, Hybrid and Other MethodsSpecial Apportionment Issues
- Service vs. Tangible Personal Property vs. Intangible Property
- Personal Service Receipts
- Unitary Combined Reporting Considerations
- Economic Substance and Related Tax Doctrines
- Non-Income-Based Taxes – Franchise, Gross Receipts, etc.
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