Illinois: Investment Advisory Receipts Sourced to Customer’s Billing Address

In a pair of letter rulings, the Illinois Department of Revenue recently addressed how receipts from advisory services performed for investment funds should be sourced. The taxpayer, an investment advisor, earned management fees, transfer agent fees, and other fees for performing services for unaffiliated investment funds. Under Illinois law, receipts from sales of services are sourced using a tiered “waterfall” methodology in which “gross receipts from the performance of services … may only be attributed to a state where that corporation… has a fixed place of business.” The Department first noted that because the investment funds did not own any physical assets nor have any employees, they had no fixed place of business. Next, the Department concluded that the taxpayer’s services were not received by the investment fund at the location of its investors because the taxpayer’s services were not directly provided to the investors. In the Department view, because a majority of the taxpayer’s services were not directly provided to investors, the receipts should be sourced based on either the ordering or billing address of the investment funds. The investment funds did not have an ordering office, and therefore the Department concluded that the investment advisory receipts should be deemed to be received at the office of the customer (the fund) to which the services were billed. For more information on these rulings, please contact Brad Wilhelmson at 312-665-2076.