United States

Missouri: Legislation Providing Guidance on Sourcing Service and Intangible Receipts Sent to Governor

Apr 27, 2015
From KPMG TaxWatch

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Under Missouri law, multistate businesses can elect to apportion their income using a single-factor formula based on business transacted in Missouri, an equally-weighted three-factor formula, or a more traditional single-sales factor methodology. Under the single-sales factor method, which was adopted in 2013, taxpayers determine Missouri taxable income based on total sales within Missouri divided by total sales everywhere. The statute includes guidance on how to source receipts from sales of tangible personal property, but does not address how to source receipts from sales of other than tangible personal property. The Missouri Department of Revenue has interpreted this lack of guidance as precluding taxpayers that are not selling tangible personal property from making the single-sales factor election.

Last year, Governor Nixon vetoed several bills providing guidance on how taxpayers electing the single-sales factor apportionment methodology should source service and intangible receipts. On April 21, 2015, a similar bill, Senate Bill 19, was delivered to Governor Nixon. Under Senate Bill 19, a sale of other than tangible personal property will be considered to be in Missouri if the taxpayer’s market for the sale is in Missouri. Notably, receipts from the sale of a service would be attributed to Missouri if the ultimate beneficiary of the service rendered by the taxpayer or the taxpayer’s designee is located in Missouri. Receipts from rented, leased, licensed or sold intangible property would generally be sourced to Missouri if the intangible property was used in Missouri. All other receipts from intangible property that are not specifically addressed would be excluded entirely from the numerator and denominator of the sales factor. If the state or states of assignment cannot be determined, then taxpayers would be allowed to reasonably approximate the state or states of assignment.  If it is not possible to reasonably approximate, then the sales would likewise be thrown out of the sales factor entirely. Senate Bill 19 does not include a specific effective date for the new market sourcing provisions. Please stay tuned to TWIST for future updates.

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The following information is not intended to be "written advice concerning one or more federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.