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Corporations May Use Alternative Single Sales Apportionment Method

08.08.2013

6d028b118c733f90ddcc387bf4851f1cMissouri has recently enacted H.B. 128 which authorizes the use of an alternative single sales apportionment method for calculating Missouri taxable income.  Effective August 28, 2013, Taxpayers having multi-state activities will have three apportionment options.  Currently, Missouri provides two options to apportion income, equally-weighted three factor formula of property, payroll and sales, and a single sales factor method.

Under the existing single sales factor method, a sale of tangible personal property is in Missouri if the sales transaction is wholly within Missouri, i.e. in-state shipping point and in-state destination point.  A sale of tangible personal property is treated as 50% in Missouri if the sales transaction is partly within Missouri, i.e. in-state shipping point and out-of-state destination point or vice-versa.  A sale of tangible personal property is not in Missouri if the shipping point and destination point are outside Missouri.

H.B. 128 provides another option entitled alternative single sales factor method.  This option states that a sale of tangible personal property is in Missouri if the purchaser's destination point is in Missouri.  A sale of tangible personal property is not in Missouri if the purchaser's destination point is outside Missouri.  The purchaser's destination point is determined without regard to the F.O.B. point or other conditions of the sale, and the destination point is not in Missouri if the purchaser received the tangible personal property from the seller in Missouri for delivery to the purchaser's location outside Missouri.

Consistent with the existing single sales factor method, a taxpayer’s investment or reinvestment of its own funds, or sale of any such investment or reinvestment, is not considered to be a sale or other business transacted for purposes of determining the apportionment fraction.

H. B. 128 does not address the first tax year in which the new apportionment option is available.  Furthermore, the legislation provides no guidance on how to source sales of service or intangibles.  Additional guidance from the state is required to clarify these issues.

Huelsman_PamelaPlease consult with your Brown Smith Wallace advisor or Pam Huelsman at (314) 983-1392 or phuelsman@bswllc.com to learn more about each of the apportionment options and determine which option is most beneficial to your organization.

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