California’s long-anticipated market-based sourcing âguidanceâ is finally out. Legal Ruling No. 2022-01 provides the Franchise Tax Board’s take on how to find the market in certain business-to-business sales. Though the guidance emphasizes that a seller should look to where its direct customer receives the benefit of sales of services, it keeps with current market-based sourcing trends amongst states and directs taxpayers to source such receipts based on the location of the taxpayerâs customerâs customer. The…
On July 21, the Washington Department of Revenue (âDORâ) issued its analysis of the Court of Appealsâ decision from March 30, 2020, in LendingTree, LLC v. Depât of Revenue, no. 80637-8-I (Wash. App. Ct. Mar. 30, 2020). Â As set forth in the analysis, from the DORâs perspective, the LendingTree court followed the existing Washington Business and Occupation tax (âB&Oâ) attribution rules and guidance and did not create a new interpretive legal framework.[1]Â Although the DOR lost the case, and the court held that LendingTreeâs receipts could not be sourced based where its customersâ customers were located, the DORâs response suggests that they are factually distinguishing the case and will continue to attribute receipts to the customerâs customer location if that is where it determines the benefit of the services occurs.
On Friday, July 24, 2020, the Commonwealth Court of Pennsylvania issued its decision and order on the Pennsylvania Department of Revenueâs motion to intervene in the highly-anticipated case of Synthes USA HQ, Inc. v. Commonwealth of Pennsylvania, No. 108 F.R. 2016. The Synthes case is noteworthy not only because the Commonwealth Court addresses, for the first time, the Department of Revenueâs hotly debated interpretation of the stateâs former âcosts of performanceâ statute, but also because…
The Texas Court of Appeals recently issued a decision that applied market-based sourcing for services, despite the stateâs statute that requires the sourcing of receipts to the location where the service is performed. In Hegar v. Sirius XM Radio Inc., No. 03-18-00573-CV (Tex. App. Austin, 2020), the court narrowly defined the scope of âperformanceâ as the final act that gets the service to the customer, thereby ignoring all of the costs that went into the performance and production of the service up to that point. Such an application produces a result that equates to market-based sourcing.