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Using New Apportionment Method Reduces a Company’s Missouri Tax Base by 90%


As Seen in BizTalk in the St. Louis Business JournalA taxpayer’s right to apportion can have a favorable impact for businesses that are filing and paying income tax in only one state. A right to apportion arises when a taxpayer engages in multistate business activities. Apportionment is a common method used by states to tax only the portion of income related to the taxpayer’s business in that state.

Missouri taxpayers that sell tangible personal property and have customers with destination points outside Missouri and are only filing in Missouri should review their current multistate activities closely to determine whether they have a right to apportion in Missouri.

Plus: Click to request a copy of "Key Considerations for Determining the Right to Apportion."

Historically, Missouri has allowed taxpayers to utilize two different methods of apportionment. In 2013, Missouri introduced a new single sales apportionment method to add to the two other methods already available to its taxpayers. This new method, known as the alternative single sales factor method, provides that for sellers of tangible personal property:

  • A sale is in Missouri if the purchaser’s destination point is in Missouri.
  • A sale is not in Missouri if the purchaser’s destination is outside Missouri.

Missouri’s new method may provide a greater opportunity for a taxpayer than the other methods depending on the taxpayers’ specific facts and circumstances. Just recently, this new legislation significantly impacted one of our clients.

Here’s how we were able to help this company that manufactures tangible personal property in Missouri and sells product to customers primarily outside Missouri:

  • The company reported 100 percent of its income to Missouri.
  • We reviewed the company’s sales, contracts, relationships and activities with its customers.
  • As a result, we discovered that most of the company’s sales were outside Missouri and identified a substantial amount of activity occurring outside Missouri related to these sales.
  • We applied Missouri’s new alternative sales factor method and calculated a factor that was less than 10 percent.
  • Just one year’s benefit in applying Missouri’s new alternative sales factor method was substantial.
  • A similar benefit applied retroactively and will continue to apply prospectively.

The right to apportion can be beneficial to taxpayers in other states as well. Determining the right to apportion will vary by state and is based on taxpayer specific facts and circumstances.

Pamela HuelsmanTo discuss your right to apportion, schedule a meeting with Pam Huelsman, Manager, Tax Services, to learn more. 

Plus: Click to request a copy of "Key Considerations for Determining the Right to Apportion."

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