The Indiana Tax Court recently ruled in favor of The University of Phoenix, Inc. (“University of Phoenix”) on an important issue of first impression involving the sourcing of service revenue for purposes of computing Indiana’s corporate income tax apportionment factor. The University of Phoenix, Inc. v. Indiana Dep’t of State Revenue, Cause No. 49T10-1411-TA-00065 (Ind. Tax Ct. 2017). Baker & McKenzie LLP represented the University of Phoenix in the case. The Tax Court held that in sourcing service revenue, Indiana law requires a taxpayer activity/cost-based analysis and rejected the market/customer-based analysis historically advanced by the Indiana Department of State Revenue (“Department”).
The Utah Tax Court recently issued its decision in See’s Candies, Inc. v. Utah State Tax Commission, Case No. 140401556, holding that the “arm’s-length” standard set forth in the federal treasury regulations relating to section 482 of the Internal Revenue Code (“IRC”) controls for purposes of guiding the Utah State Tax Commission (“Commission”) in reallocating income pursuant to Utah Code section 59-7-113 (“Section 59-7-113”), which is nearly identical to section 482 of the IRC.