New Hampshire Adopts Market-Based Sourcing for 2021 & Beyond
The New Hampshire Department of Revenue Administration has adopted various business profits tax and business enterprise tax rules that implement the market-based sourcing method of apportioning sales of services and intangible receipts in the sales factor. The rules are effective January 1, 2021, for taxable periods ending on or after December 31, 2021, for both the business profits tax and business enterprise tax. The new rules source the receipts, other than those from tangible personal property, as follows:
- Sales, rentals, leases, or licenses of real property located within the state
- Rentals, leases, or licenses of tangible personal property located within the state
- Sales of services delivered to a location within the state; delivered to a location in New Hampshire means the location of the market for the services provided by the taxpayer, without regard to the location of the taxpayer’s property or payroll
- Sales, rentals, leases, or licenses of intangible property used within the state
- Interest income when the debtor or encumbered property is located within the state
- Dividend income when the business is domiciled in the state
- Other income that is derived from sources within the state
If the state of assignment cannot be determined using the new rules, the state of assignment must be reasonably approximated. New Hampshire also now has a “throw-out rule,” which excludes sales from the numerator and denominator of the sales factor of any sales other than sales of tangible personal property if the taxpayer is not taxable in the state to which the sale is assigned. If the state of assignment cannot be determined or reasonably approximated, the sales are excluded from the sales factor numerator and denominator. Taxpayers should be cautious of the throw-out rule’s effects when determining the sourcing of services and intangible receipts.
For additional guidance on New Hampshire’s new sourcing rules, contact your BKD Trusted Advisor™ or submit the Contact Us form below.