2023 Vermont Statutes › Title 32 - Taxation and Finance › Chapter 151 - Income Taxes › § 5833. Allocation and apportionment of income

§ 5833. Allocation and apportionment of income
(a) If the income of a taxable corporation is derived from any trade, business, or activity conducted entirely within this State, the Vermont net income of the corporation shall be allocated to this State in full. If the income of a taxable corporation is derived from any trade, business, or activity conducted both within and outside this State, the amount of the corporation’s Vermont net income that shall be apportioned to this State, so as to allocate to this State a fair and equitable portion of that income, shall be determined by multiplying that Vermont net income by the gross sales, or charges for services performed, within this State, expressed as a percentage of such sales or charges whether within or outside this State.
(1) Sales of tangible personal property are made in this State if: the property is delivered or shipped to a purchaser, other than the U.S. government, who takes possession within this State, regardless of f.o.b. point or other conditions of sale.
(2) Sales, other than the sale of tangible personal property, are in this State if the taxpayer’s market for the sales is in this State. The taxpayer’s market for sales is in this State:
(A) in the case of sale, rental, lease, or license of real property, if and to the extent the property is located in this State;
(B) in the case of rental, lease, or license of tangible personal property, if and to the extent the property is located in this State;
(C) in the case of sale of a service, if and to the extent the service is delivered to a location in this State; and
(D) in the case of intangible property:
(i) that is rented, leased, or licensed, if and to the extent the property is used in this State, provided that intangible property utilized in marketing a good or service to a consumer is “used in this State” if that good or service is purchased by a consumer who is in this State; and
(ii) that is sold, if and to the extent the property is used in this State, provided that:
(I) a contract right, government license, or similar intangible property that authorizes the holder to conduct a business activity in a specific geographic area is “used in this State” if the geographic area includes all or part of this State;
(II) receipts from intangible property sales that are contingent on the productivity, use, or disposition of the intangible property shall be treated as receipts from the rental, lease, or licensing of such intangible property under subdivision (i) of this subdivision (2)(D); and
(III) all other receipts from a sale of intangible property shall be excluded from the numerator and denominator of the receipts factor.
(3) If the state or states of assignment under subdivision (2) of this subsection cannot be determined, the state or states of assignment shall be reasonably approximated.
(4) If the taxpayer is not taxable in a state to which a receipt is assigned under subdivision (2) or (3) of this subsection, or if the state of assignment cannot be determined under subdivision (2) of this subsection or reasonably approximated under subdivision (3) of this subsection, such receipt shall be excluded from the denominator of the receipts factor.
(5) The Commissioner of Taxes shall adopt rules as necessary to carry out the purposes of this section.
(6) A taxable corporation subject to apportionment under this section shall report to the Commissioner of Taxes:
(A) the average of the value of all the real and tangible property within this State at the beginning of the taxable year and at the end of the taxable year, provided the Commissioner may require the use of the average of the value on the 15th or other day of each month in cases where the Commissioner determines that the computation is necessary to more accurately reflect the average value of property within Vermont during the taxable year, expressed as a percentage of all property both within and outside this State; and
(B) the total wages, salaries, and other personal service compensation paid to employees within this State during the taxable year, expressed as a percentage of all compensation paid, whether within or outside this State.
(b) If the application of the provisions of this section does not fairly represent the extent of the business activities of a corporation within this State, the corporation may petition for, or the Commissioner may require, with respect to all or any part of the corporation’s business activity, if reasonable:
(1) separate accounting;
(2) the exclusion or modification of any or all of the factors;
(3) the inclusion of one or more additional factors that will fairly represent the corporation’s business activity in this State; or
(4) the employment of any other method to effectuate an equitable allocation and apportionment of the corporation’s income. (Added 1966, No. 61 (Sp. Sess.), § 1, eff. Jan. 1, 1966; amended 1971, No. 73, §§ 15, 16, eff. April 16, 1971; 1987, No. 82, § 6, eff. June 9, 1987; 2003, No. 152 (Adj. Sess.), § 5, eff. June 7, 2004; amended 2019, No. 51, § 8, eff. Jan. 1, 2020; 2021, No. 148 (Adj. Sess.), § 3, eff. January 1, 2023; 2023, No. 6, § 378, eff. July 1, 2023.)