Understanding The Apportionment Rules for Service-Based Businesses

Jeff Glickman presented this program sponsored by Lorman Education Services.  Apportionment of income for state tax purposes is 'where the rubber meets the road.' That is to say, the complex and varied rules for determining a taxpayer's state income tax apportionment percentage can provide opportunities - with careful planning - for state tax minimization or create traps - without such planning - that lead to multiple taxation. Service-based businesses face particular difficulties in identifying and analyzing the rules applicable to their operations for two reasons. First, state apportionment rules were written several decades ago at a time when the economy was dominated by the manufacturing of tangible personal property. Thus, these rules focused on the manufacturing industry and were out of touch with service operations. Second, as the economy has shifted its focus to services and e-commerce, states are beginning to revise their apportionment rules to account for differences between the industries. These new rules lack clear guidance thus creating uncertainty for taxpayers. This teleconference will provide a comprehensive look at particular apportionment issues facing service-based business in order to arm the business with the information necessary to structure its operations to take advantage of the opportunities and avoid the traps.