TWIST - April 12, 2021

Welcome to TWIST for the week of April 12th, featuring Sarah McGahan from the Washington National Tax State and Local Tax practice.

First up, significant corporate net income tax changes have been enacted in West Virginia. Recently signed legislation moves West Virginia to single-sales factor apportionment and market-based sourcing. The sales factor throwout rule that applies to sales of tangible personal property attributed to states where the taxpayer is not taxable is also repealed.  All of these changes are effective for tax years beginning on or after January 1, 2022.

In other legislative news, legislation that makes certain changes to Maryland’s digital advertising tax and pushes the effective date of the tax to tax years beginning after December 31, 2021 is working its way through the General Assembly. As amended, the bill also makes certain technical corrections to the recent law imposing sales and use tax on sales of digital products and codes.

A New York appellate court has held that for the tax years at issue, in measuring where services were performed for purposes of the sales factor, activities of the taxpayer’s salespeople, IT staff, consulting managers, as well as core consultants, all contributed to the performance of the services provided to clients. The taxpayer had argued that only the locations and amounts paid to consultants and research managers who provided services directly to clients should be counted.

Finally, the Ohio Board of Tax Appeals concluded that a taxpayer had receipts attributed to Ohio under the CAT sourcing rules for receipts from the sale of the right to use intellectual property.   The Board determined that the receipts at issue— broadcast receipts, media revenue, license fees, and sponsor fees—should be sitused based on the location where the purchaser of the right used or gained the right to use the intellectual property. This occurred in part in Ohio and therefore the Commissioner properly sitused certain receipts to Ohio.