Alternative Apportionment: Requesting Relief From Unfair Allocations, Common Alternative Methods, State Nuances

Following Wayfair, and with more states moving to single-factor sales apportionment, more businesses are finding relief by utilizing alternative apportionment methods. Statutory formulas for apportioning income often yield disproportionate results for particular companies. These formulas, developed with manufacturers and tangible property sellers in mind, can result in apportion distortion for service-oriented and SaaS companies.

All states offer some type of apportionment relief. The taxpayer requests permission to use an alternative method from the relative tax authority and the burden of proof remains with the taxpayer to show that the statutory methods are distortive and, therefore, unfair. In single-factor apportionment states, taxpayers have successfully argued that the three-factor apportionment method is more determinative in certain situations. Other taxpayers have used transfer pricing studies and separate accounting as acceptable methods to establish more reasonable determinations of state income tax liability. SALT advisers working with multistate businesses must understand the nuances of alternative apportionment to ensure businesses are not burdened with more than their fair share of state income tax.

Listen as George W. Rendziperis, JD, Managing Director, State and Local Tax at M+D Consulting, reviews common scenarios where alternative apportionment can provide a fairer tax allocation and explain how to apply for alternative apportionment in certain states.

1. Benefits of alternative apportionment
2. Requesting relief
3. Alternative methods
4. State nuances
5. Common scenarios
6. Recent rulings

The panelist will cover these and other important issues:

• The benefits of alternative apportionment for SaaS and service-oriented companies
• Common alternative methods used in states that use single-factor sales apportionment
• Applying for an alternative apportionment method in specific states
• Recent state rulings concerning alternative apportionment

Learning Objectives

After completing this course, you will be able to:

• Identify industries most likely subject to suffer from unfair apportionment in certain states
• Determine nuances of applying for alternative apportionment in particular states
• Ascertain which businesses benefit most by choosing alternative apportionment
• Recognize common alternative apportionment methods
• Decide when requesting alternative apportionment could benefit specific businesses

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite: Three years+ business or public firm experience preparing complex tax forms and schedules, supervising other preparers or accountants. Specific knowledge and understanding of SALT taxation, nexus and apportionment as it applies to multi-state businesses.

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.