Administrative Rules of Montana › Department 42 - REVENUE › Chapter 42.26 - CORPORATE MULTISTATE ACTIVITIES › Subchapter 42.26.2 - Income Allocation and Apportionment › Rule 42.26.250 - NUMERATOR OF RECEIPTS FACTOR - SALE OF INTANGIBLE PROPERTY

Current through Register Vol. 13, July 5, 2024
(1) Assignment of receipts. The assignment of
				receipts to a state or states in the instance of a sale or exchange of
				intangible property depends upon the nature of the intangible property sold.
				For purposes of this rule, a sale or exchange of intangible property includes a
				license of that property where the transaction is treated for tax purposes as a
				sale of all substantial rights in the property and the receipts from
				transaction are not contingent on the productivity, use or disposition of the
				property. For the provisions that apply where the consideration for the
				transfer of rights is contingent on the productivity, use or disposition of
				property, see ARM 42.26.249(1).
(a) Contract
				right or government license that authorizes business activity in specific
				geographic area. In the case of a sale or exchange of intangible property where
				the property sold or exchanged is a contract right, government license, or
				similar intangible property that authorizes the holder to conduct a business
				activity in a specific geographic area, the receipts from the sale are assigned
				to a state if and to the extent that the intangible property is used or is
				authorized to be used within the state. If the intangible property is used or
				may be used only in this state the taxpayer shall assign the sale to Montana.
				If the intangible property is used or is authorized to be used in Montana and
				one or more other states, the taxpayer shall assign the receipts from the sale
				to Montana to the extent that the intangible property is used in or authorized
				for use in Montana, through the means of a reasonable approximation.
(b) Sale that resembles a license; receipts
				are contingent on productivity, use, or disposition of the intangible property.
				In the case of a sale or exchange of intangible property where the receipts
				from the sale or exchange are contingent on the productivity, use, or
				disposition of the property, the receipts from the sale are assigned by
				applying the provisions set forth in ARM 42.26.249, pertaining to the license
				or lease of intangible property.
(c) Sale that resembles a sale of goods or
				services. In the case of a sale or exchange of intangible property where the
				substance of the transaction resembles a sale of goods or services and where
				the receipts from the sale or exchange do not derive from payments contingent
				on the productivity, use, or disposition of the property, the receipts from the
				sale are assigned by applying the provisions set forth in ARM 42.26.249(5),
				relating to licenses of intangible property that resemble sales of goods and
				services). Examples of these transactions include those that are analogous to
				the license transactions cited as examples in ARM 42.26.249(5).
(d) Excluded receipts. Receipts from the sale
				of intangible property are not included in the receipts factor in any case in
				which the sale does not give rise to gross receipts within the meaning of ARM
				42.26.202. In addition, in any
				case in which the sale of intangible property does result in gross receipts
				within the meaning of ARM 42.26.202, those receipts are excluded from the
				numerator and denominator of the taxpayer's receipts factor if the receipts are
				not referenced in ARM 42.26.245. The sale of intangible property that is
				excluded from the numerator and denominator of the taxpayer's receipts factor
				under this provision includes, without limitation, the sale of a partnership
				interest, the sale of business "goodwill," the sale of an agreement not to
				compete, or similar intangible value. Also, in any instance in which the state
				to which the receipts from a sale is to be assigned can be determined or
				reasonably approximated, but where the taxpayer is not taxable in such state,
				the receipts that would otherwise be assigned to such state shall be excluded
				from the numerator and denominator of the taxpayer's receipts factor.