Vermont: Market-Based Sourcing Rules Adopted

House Bill 514, signed into law on June 10, 2019, makes certain changes to Vermont’s tax laws, including the adoption of market-based sourcing. Currently, Vermont requires corporations to apportion their income using a three factor double-weighted sales formula. The traditional income-producing activity test is used to source receipts from other than sales of tangible personal property.  Under the revised law, effective for tax years beginning on or after January 1, 2020, sales, other than sales of tangible personal property, will be sourced to Vermont if the taxpayer’s market for the sale is in Vermont. The statute provides specific rules for certain types of receipts; service receipts will be sourced to Vermont to the extent the service is delivered to a location in Vermont. Receipts will be thrown out of the sales factor denominator entirely if they are attributed to a state in which the taxpayer is not taxable or the state of assignment cannot be determined or reasonably approximated. In addition to Hawaii, Indiana, and New Mexico, Vermont is the fourth state this year to adopt market-based sourcing provisions. Please stay tuned to TWIST for more apportionment developments.