New York Codes, Rules and Regulations › Title 20 - DEPARTMENT OF TAXATION AND FINANCE › Chapter I - Franchise and Certain Business Taxes › Subchapter A - Business Corporation Franchise Tax › Part 4 - APPORTIONMENT › Subpart 4-4 - RECEIPTS FROM OTHER SERVICES AND OTHER BUSINESS ACTIVITIES › Section 4-4.11 - Examples

Current through Register Vol. 46, No. 28, July 10, 2024
For purposes of these examples, it can be assumed that
						the corporation has met all the requirements of due diligence, unless otherwise
						provided, and that the business address presumption does not apply.
Example 1: Audit Corp is located in New York and
						provides accounting and tax services. Audit Corp contracts with Client Corp to
						audit the books and records of Client Corp's three locations in State A, State
						B and New York. Client Corp's managers of the three locations make several
						visits to Audit Corp to provide their respective locations" books and records
						to the auditors assigned to the respective audits and to address periodic
						inquiries. In its books and records, Audit Corp tracks the hours each of its
						auditors spent on the respective audits of the three locations. Audit Corp
						bills Client Corp for its services using the same hourly rate for each of its
						auditors.
Audit Corp's services are not considered an in-person
						service because, although there was in-person contact, it was not required for
						Audit Corp to be able to perform its service. Therefore, Audit Corp must apply
						the general rule for determining where the benefit is received. It determines
						the benefit is received by Client Corp at each location based on Audit Corp's
						books and records. The amount Audit Corp includes in its New York receipts is
						the hourly charge spent on audits of the New York State location. All of Audit
						Corp's receipts from Client Corp are included in everywhere receipts.
Example 2: Teaching Corp provides in-person seminars in
						New York to individuals and business customers. The seminars and the materials
						used in connection with the seminars are prepared outside New York, the
						teachers who teach the seminars include teachers that are not New York
						residents, and the students who attend the seminars include students that are
						not New York residents. Since the customers are in the same location as
						Teaching Corp when the service is provided, it is deemed to be an in-person
						service and the special rule for determining where the benefit is received
						applies. As such, it is presumed that the benefit is received at the location
						where the service is performed, which is New York State. 100% of such receipts
						are included in New York receipts and everywhere receipts.
Example 3: Watch Corp is a watch repair corporation with
						retail locations in multiple states including New York. The repair work is
						performed at Watch Corp's New York location. In some instances, the customer
						takes back possession of the watch in New York State. In other instances, the
						customer requests that the repaired watch be shipped to the customer's home
						address. Since the repair is completed on the customer's watch, which is
						tangible personal property, it is considered a service related to tangible
						personal property. Therefore, the special rule for determining where the
						benefit is received for services related to tangible personal property applies
						and it is presumed that the benefit is received at the location where the
						property is received after the service is performed. In those instances where
						the customer takes back possession of the watch in New York State, the benefit
						is received in New York State because the customer receives the repaired watch
						in New York State and the receipts for the repair work are included in New York
						receipts. In those instances where the watch is shipped to the customer's home
						address, the benefit is received in New York State only if the watch is shipped
						to a home address in New York. In both instances, all of the receipts are
						included in everywhere receipts.
Example 4: Troubleshooting Corp operates a call center
						located in New York State that provides troubleshooting services for use of
						home appliances over the telephone to individual customers located throughout
						the United States. The contract between Troubleshooting Corp and its customers
						provides that, for a fee per call, the customer can call Troubleshooting Corp
						and the call center employee will walk the customer through troubleshooting the
						appliance. Although provided over the telephone, this service includes a level
						of human interaction and, therefore, it is not a digital service and must be
						apportioned under the rules in this Subpart.
Home appliances are tangible personal property so the
						service Troubleshooting Corp is providing is related to tangible personal
						property.
Under the special rule for determining where the benefit
						is received for services related to tangible personal property, the benefit is
						presumed to be received at the location where the property is received after
						the service is performed. However, Troubleshooting Corp does not have
						information on where the tangible personal property was received by the
						customer or where it is currently located. It only has the billing address of
						its customer. Therefore, Troubleshooting Corp uses the billing addresses of its
						customers to reasonably approximate where the tangible personal property is
						located and will include receipts in New York receipts to the extent that
						customers have billing addresses located in New York State. Troubleshooting
						Corp must include 100% of its receipts from troubleshooting services in
						everywhere receipts.
Example 5: Law Corp, located in State C, is hired by
						Client Corp to handle a major litigation matter concerning the sale of its
						manufacturing plant located in New York State. Client Corp has manufacturing
						plants in New York and State B. The trial takes place in State C, which is the
						location of the opposing party in the lawsuit. The court documents, which are
						public records, reflect that the subject matter is the manufacturing plant
						located in New York. Because Law Corp's entire service is related to the
						manufacturing plant, which is real property, the special rule for determining
						where the benefit is received for services related to real property applies.
						Therefore, the benefit is presumed to be received by Client Corp at the
						location of the manufacturing plant. Therefore, Law Corp must include 100% of
						its receipts from Client Corp in both New York receipts and everywhere
						receipts.
Example 6: Consulting Corp provides two main types of
						facility consulting services - licensing requirements and environmental
						compliance. Consulting Corp has 60 business customers who have hired them to
						obtain applicable permits and licenses and 200 business customers who have
						hired them to provide environmental compliance services. No more than 5% of
						Consulting Corp's receipts are from any particular business customer. Despite
						the differing subject matter, the consulting services are substantially similar
						enough that the business address presumption applies.
Example 7: Consulting Corp provides consulting services
						to determine the safety of train tracks to 200 business customers, including
						Train Corp. Consulting Corp provides consulting services to Train Corp in
						relation to a portion of train service that runs through New York and 5 other
						states for a flat fee. As this is a service related to real property, the
						special rule for determining where the benefit is received for services related
						to real property applies. Under that rule, the benefit is presumed to be
						received at the location of the property. Because the real property involved is
						located within six states, it is necessary to look to Consulting Corp's books
						and records to determine the share of the benefit received at the real property
						located in New York State.
Some areas of the track are more heavily traveled than
						others, requiring more attention, and some portions of the track require
						special attention, such as where signals are located. Consulting Corp's books
						and records indicate only the location of the tracks its services relate to and
						how many miles of track are located in New York State and each of the 5 other
						states. Upon reasonable inquiries, Consulting Corp cannot obtain additional
						information to determine specifically where Train Corp receives the benefit of
						its service. Consulting Corp should reasonably approximate based on customer
						information where the benefit is received by multiplying the total receipts it
						receives from Train Corp by a fraction, the numerator of which is the miles of
						track its service relates to located within New York State and the denominator
						of which is the total miles of track its service relates to located within and
						without New York State. Consulting Corp must include 100% of its receipts from
						Train Corp in everywhere receipts.
Example 8: Furniture Sales Corp owns showroom locations
						in various states and acts as a sales agent of Couch Corp. Pursuant to the
						agreement between the two parties, Furniture Sales Corp receives a commission
						on each piece of furniture it sells. A salesperson at Furniture Sales Corp's
						State A location received an order for a couch from a customer and, as part of
						the process, documents that the customer would like the couch delivered in New
						York State. Furniture Corp's commission is earned for a service related to
						tangible personal property (the couch) and the special rule for determining
						where the benefit is received applies. As such, the benefit of its service is
						presumed to be received at the location where the tangible personal property is
						received after the service is performed. Therefore, the commission is
						apportioned to the delivery address. 100% of Furniture Sales Corp's commission
						is included in both New York receipts and everywhere receipts.
Example 9: Architect Corp, located in New York, provides
						architectural services to Developer Corp, located in State A, to design the
						floor plan of homes to be built at one of the development sites owned by
						Developer Corp. Developer Corp knows the floorplan will be used at one of its
						developments, but Developer Corp will not know which floorplan goes to which
						site until it enters into contracts with homebuyers. Architect Corp is
						providing a service related to real property. Therefore, the special rule for
						determining where the benefit is received for services related to real property
						provides that the benefit of the service is presumed to be received at the
						location of the real property. As Architect Corp does not know where the real
						property is located to apportion the receipt based on the special rule for
						services related to real property and reasonable inquiries to the Developer
						Corp do not yield that information, it must use reasonable approximation based
						on customer information to determine the real property location. The books and
						records, including the contract with Developer Corp, indicate that Developer
						Corp owns two development sites, one in New York State and one in State A.
						Therefore, Architect Corp must use reasonable approximation to apportion the
						receipt between these two locations and include 50% of the receipt in New York
						receipts. 100% of the receipts are included in everywhere receipts.
Example 10: Retail Corp offers extended warranties on
						computers purchased by individual customers for personal use for a flat fee.
						The extended warranty covers both the computer hardware and any software
						installed on the computer. To utilize the warranty, customers bring the
						computer to any of Retail Corp's locations for repair. Once the repair is
						complete, customers have the choice to take back possession of the computer at
						Retail Corp's location where the repair was completed or request that the
						repaired computer be shipped to the customer's address.
The amount Retail Corp receives for the extended
						warranty does not separately state the portion of the receipt that is for
						hardware repairs (subject to the rules in this section) and software repairs
						(otherwise subject to the rules for receipts from digital products and digital
						services). As a result, the entire amount is properly apportioned under the
						rules in this section. The sale of the warranty is the sale of an obligation to
						perform a service at an undetermined future date. Therefore, the receipt does
						not qualify as a sale of a service related to tangible personal property and
						instead must be apportioned under the general rule for determining where the
						benefit is received. Retail Corp's customers are individuals, so the benefit is
						presumed to be received at the customers' billing addresses.
Retail Corp includes receipts from sales of extended
						warranties to customers with billing addresses in New York State in New York
						receipts. 100% of its receipts from the sales of extended warranties are
						included in everywhere receipts.
Example 11: Model Agency Corp contracts with individual
						models to connect the models with modeling jobs in exchange for a commission.
						The contract between Model Agency Corp and the model specifies the commission
						that Model Agency Corp receives for each modeling job it books. In addition,
						such contract requires that Model Agency Corp receives all payments the model
						is entitled to for modeling services and provides that Model Agency Corp must
						retain its commission from the payments and pass the remainder on to the
						model.
Modeling Agency Corp contracts with two such models,
						Model 1 who lives in New York and Model 2 who lives in State Z. Modeling Agency
						Corp books both models for a photoshoot in New York with ClothesCo. ClothesCo
						pays the models" fees to Modeling Agency Corp, which keeps a portion as its
						commissions and remits the remainder to the models. Although Modeling Agency
						Corp collected the fees from ClothesCo, it is receiving a commission from its
						contract with each Model. The service provided by Modeling Agency Corp is
						booking the models for the photoshoot. The models are providing an in-person
						service to ClothesCo because they must be physically present for the
						photoshoot.
Therefore, the receipt received by Modeling Agency Corp
						is a commission for the facilitation of an in-person service. Therefore, the
						special rule for determining where the benefit is received for in-person
						services provides that the benefit is presumed to be received at the location
						where the in-person service is performed, which is the location of the
						photoshoot. The commissions Model Agency Corp receives from Model 1 and Model 2
						are included in New York receipts. 100% of its receipts from commissions it
						receives are included in everywhere receipts.
Example 12: Statistics Corp provides data compilation
						and analysis services that will be used in policymaking for TUV, a Federal
						government agency, which has regional offices throughout the United States.
						Statistics Corp's only contact with TUV is with its main office located in
						State A, and Statistics Corp does not know the locations of TUV's other
						offices, nor which of TUV's offices focus on policymaking and which focus on
						direct client services. After reasonable inquiries, Statistics Corp does not
						have any additional information as to which regional offices will use the data
						compilation and analysis services. Furthermore, a general information
						measurement such as population information would not be relevant because the
						compilation and analysis services are used by employees rather than the general
						public. Because no special rules for determining where the benefit is received
						apply and Statistics Corp does not have adequate information to determine where
						the benefit is received, or even to apply reasonable approximation, Statistics
						Corp is required to apportion the receipts based on the delivery destination of
						its services. Since the contract of sale is managed by TUV's main office in
						State A, the receipts are not included in New York receipts. 100% of the
						receipts are included in everywhere receipts.
Example 13: Sales Corp provides only one type of service
						to approximately 200 business customers and the service is not subject to the
						special rules for determining where the benefit is received. In tax year 2021,
						all of its receipts were apportioned under this Subpart, and, as a result 45%
						of Sales Corp's receipts were included in New York receipts. In tax year 2022,
						Sales Corp continues to provide only one type of service to its customers. At
						the end of tax year 2022, Sales Corp's computer system crashes and it is unable
						to recover information it had obtained on where the benefit of its services
						were received or where the services were delivered. Upon reasonable inquiries
						to its known customers, Sales Corp still cannot obtain information on where the
						benefits were received or where the services were delivered. Therefore, using
						the preceding taxable year method, Sales Corp must include 45% of its 2022
						receipts in New York receipts. 100% of receipts are included in everywhere
						receipts.
Example 14: Taxpayer A has $10,000 in receipts from a new
						type of service subject to this Subpart. Since the service is not subject to
						any of the special rules for determining where the benefit is received,
						Taxpayer A must exercise due diligence to determine where the customer received
						the benefit or where the service was delivered. As Taxpayer A cannot determine
						those locations, it must determine the portion of the $10,000 to include in New
						York receipts based on the current taxable year method. In the current tax
						year, Taxpayer A has $80,000 in other business receipts apportioned using the
						where benefit received method, of which $20,000 is included in New York
						receipts. In addition, Taxpayer A has $70,000 in other business receipts
						apportioned using the delivery destination method, of which $55,000 are New
						York receipts. Therefore, under the current taxable year method, Taxpayer A
						would include 50% of the $10,000, or $5,000, of receipts from the new type of
						service in New York receipts. 100% of receipts from the new type of service are
						included in everywhere receipts.
Taxpayer B also has $10,000 in receipts from a new type
						of service that, after exercising due diligence, it cannot source using either
						the where benefit received method or the delivery destination method. However,
						unlike Taxpayer A, Taxpayer B has been able to source all its receipts from
						other business activities using the where benefit received method and has
						determined that 40 percent of all those other receipts are New York receipts.
						Therefore, under the current taxable year method, $4000, or 40%, of the
						receipts from this new service are included in Taxpayer B's New York receipts.
						Taxpayer B includes 100% of the receipts from the new type of digital product
						in everywhere receipts.
Example 15: Loan Corp (the taxpayer) is based in New York
						and operates offices whereby individuals and businesses can discuss loan
						options and obtain a loan from unrelated lenders. Loan Corp also will service
						the loans it procures. Bank Corp (the business customer) enters into a contract
						with Loan Corp whereby Bank Corp will pay Loan Corp a fee to procure borrowers
						(consumers) and a fee to handle servicing of loans financed by Bank Corp. Loan
						Corp handles all interactions with the consumers, who have no contact or
						interaction with Bank Corp directly.
Loan Corp assists a business consumer in obtaining a
						mortgage loan from Bank Corp to purchase an office building in State C. Because
						this service is related to real property, Loan Corp must use the special rule
						for determining where the benefit is received for services related to real
						property. The benefit of both the procurement fee and the servicing fee is
						presumed to be received at the location of the real property.
Loan Corp assists an individual who is a resident of
						State D, in obtaining a personal loan from Bank Corp. Loan Corp sends monthly
						bills to the borrower during the term of the loan. Loan Corp's receipts from
						Bank Corp for procuring the borrower and servicing the loan is an intermediary
						transaction because, pursuant to its contract, Loan Corp is providing a service
						at the direction of Bank Corp directly to the location of the consumer. These
						receipts are not included in New York receipts because the individual's billing
						address is in State D. 100% of such receipts are included in everywhere
						receipts.
Example 16: Debt Collection Corp (the taxpayer) has
						offices in New York and State A. Student Loan Corp (the business customer),
						which is located in State C, enters into a contract with Debt Collection Corp
						whereby Student Loan Corp will pay Debt Collection Corp a fee to collect
						outstanding debt owed to Student Loan Corp by borrowers (consumers). Debt
						Collection Corp communicates with borrowers by phone and email, and collects
						outstanding debt directly from borrowers who make debt payments online to Debt
						Collection Corp. After retaining a portion of the payment as its fee, Debt
						Collection Corp remits the remainder of the collected money to Student Loan
						Corp electronically. Despite the electronic means to perform its work and
						transfer funds, the service has not been fully automated and there is a
						non-incidental level of human interaction, thus Debt Collection Corp's
						activities do not satisfy the definition of a digital service. Therefore, the
						receipt is to be apportioned using the rules in this Subpart. Debt Collection
						Corp is providing a service to Student Loan Corp, who instructs Debt Collection
						Corp to collect from borrowers on its behalf. This service is provided directly
						to the location of the consumers at Student Loan Corp's direction, which meets
						the definition of an intermediary transaction. Therefore, Debt Collection Corp
						must apportion the receipt from the fee earned from Student Loan Corp to the
						location of the consumers.
Debt Collection Corp uses the billing addresses of the
						consumers to include receipts in New York receipts to the extent that consumers
						have billing addresses located in New York. Debt Collection Corp must include
						100% of its receipts from the service provided to Student Loan Corp in
						everywhere receipts.
Example 17: Credit Score Corp has a contract with Credit
						Card Corp to provide credit rating services to Credit Card Corp for individuals
						applying for credit cards. Credit Card Corp receives all credit rating services
						at its corporate office in State A where it makes determinations on whether or
						not to issue credit cards to applicants. Applicants from all over the country
						submit applications to Credit Card Corp, who then provides information about
						the applicants to Credit Score Corp to receive a credit rating. Credit Score
						Corp issues the rating for each applicant to Credit Card Corp, who utilizes
						this information to make a determination as to whether or not Credit Card Corp
						will issue the applicant a credit card. This is not an intermediary transaction
						because the service is provided by Credit Score Corp directly to Credit Card
						Corp and is not passed on to the applicants applying for the credit cards.
						Because Credit Card Corp utilizes the service entirely in State A, where it
						makes credit determinations on credit card applications, Credit Score Corp does
						not include the receipt in New York receipts. 100% of such receipt is included
						in Credit Score Corp's everywhere receipts.
Example 18: Production Corp enters into a contract with
						Cable Network Corp to provide the service of producing a made-for-television
						movie. Production Corp delivers the television production to Cable Network
						Corp's New York State office, which is the office location responsible for
						contracting for the production and determining its usage. The production
						service receipt is not considered an intermediary transaction because the
						production service is not provided by Production Corp directly to Cable Network
						Corp's consumers at the direction of Cable Network Corp and the production
						service is completed prior to Cable Network Corp determining if and when the
						production will be aired.
As Cable Network Corp receives the benefit of this
						service at its New York State office, the entire receipt is included in both
						New York receipts and everywhere receipts.
Example 19: Credit Ratings Corp, located in New York,
						has a contract with Debt Issuer Corp whereby Credit Ratings Corp opines, via
						the assignment of a letter grade, on the creditworthiness of Debt Issuer Corp's
						debt obligation. The rating does not constitute a recommendation of the
						suitability of an investment for any particular investor. Credit Ratings Corp
						may issue the rating via press release, which allows potential investors to
						consider the rating/letter grade. Credit Ratings Corp also includes the rating
						in its database of ratings on its website, which allows for public viewing.
						However, the principal element of the service is the development of the rating;
						any dissemination via digital means is incidental to such service. Therefore,
						the receipt is apportioned under the rules in this Subpart. Furthermore, this
						service does not constitute an intermediary transaction because the rating is
						not provided by Credit Ratings Corp directly to individual investors at Debt
						Issuer's direction. In addition, the rating is not provided to Debt Issuer Corp
						to pass along directly to individual investors. For this reason, the receipt
						must be apportioned to the location at which Debt Issuer Corp receives the
						benefit of the service. Credit Rating Corp's books and records indicate that
						the rating is being sought on the advice of Debt Issuer's corporate finance
						division, which is responsible for overall fiscal strategy and execution and is
						located in State A. Therefore, the receipt is not included in Credit Rating
						Corp's New York receipts. 100% of such receipt is included in Credit Rating
						Corp's everywhere receipts.