Origin versus Destination Sales

[Snaggletooth]

Focus on corporate taxes with multi-state reporting.

It is common for each state to define an allocation formula which measures activity in their state. This is often called a "Three-Factor Formula" or "Four-Factor Formula" with some weighted average amongst the various factors. Typically, three of the "factors" are 1)Property Investment
2)Sales and 3)Payroll.

With respect to the "Sales" factor, some states have reporting split between "Origin Sales" and "Destination Sales". Contract performance in a state constitutes "origin" sales. However, selling and delivery to a state constitutes "destination" sales.

Now the question. A customer in a state receiving delivered goods from my client creates a "destination" sale in that state. It is quite probable that my client does not even have a location or even nexus in that state. DOES THE EXISTENCE OF DESTINATION SALES IN A GIVEN STATE GIVE RISE TO A REQUIREMENT TO FILE A CORPORATE RETURN IN THAT STATE, even if the corporation has no other activity?

[Black Bart]

Don't know if this applies, but

it was interesting.

http://www.itepnet.org/pdf/pb39throw.pdf

"Nowhere Income" is an intriguing concept.

[Snaggletooth]

Good Information

Not really addressing the question, but the concept of "throwback" and "throwout" is something I didn't know anything about, so I'm very happy you posted about it.

It is intense reading, though, to my pea-sized brain. If I hear any more about "throwback" and "throwout", I'm going to "throwup."

[taxxcpa]

FOB point of origin vs FOB destination

Title passes based on the FOB point. Once I did a sales tax audit in which I questioned whether freight added to the purchase price was taxable. The audit went to a hearing and it was decided that freight was NOT taxable if title passed at the point of origin, but would constitute part of the taxable sale if FOB destination.

From that I would infer that it would be as if you went to another state and bought something; that would not result in the seller doing business in your state. But if he shipped it FOB destination, then title would pass in your state, and possibly that would constitute doing business in your state. However, even so, not having a physical presence in the State might rule out doing business in the state.

The risk in buying something FOB point of origin is that if it is damaged in transit the buyer takes the risk, but if FOB destination, the seller takes the risk and cannot collect from the buyer unless he replaces the damaged item.