North Carolina: Department Addresses Sourcing of Asset Management Services

The North Carolina Department of Revenue determined in a private letter ruling that receipts from the sale of asset management services provided to pension plans, institutional investors, university endowments, retail investors, SEC-registered and non-SEC-registered funds are sourced using rules generally applicable to business customers. The taxpayer generated revenue from investment advisory services provided to two categories of customers referred to as “Private Accounts” and “Pooled Accounts.” Private Accounts customers comprised both individual and business customers including pension plans, institutional investors, high net-worth individuals, university endowments and retail investors. The Pooled Accounts category included SEC-registered and unregistered U.S. and non-U.S. funds and unregistered private funds.

The Department concluded that the receipts from the sales of professional services delivered to Private Account business customers, as well as to Pooled Account customers, should be assigned to the state using the rules generally applicable to businesses, which is where the contract of sale was principally managed by the customer; or if the place of customer management was not reasonably determinable, to the customer’s place of order; or if the customer place of order was not reasonably determinable, to the customer’s billing address. Receipts from services delivered to Private Account individual customers should be assigned to the state using the rules generally applicable to individual customers, which generally is the customer’s state of primary residence, or if the taxpayer could not reasonably identify the customer’s state of primary residence, to the state of the customer’s billing address. Please contact Nikki Emanuel-Jarrell with questions on North Carolina Corporate Private Letter Ruling 2021-01.