Idaho Enacts Market-Based Sourcing for Sales with a Single Sales Factor for Apportionment

Thoughtware Alert Published: Apr 04, 2022

On March 15, 2022, Idaho Gov. Brad Little signed House Bill 563, which enacted: (1) market-based sourcing for sales—other than sales for tangible personal property—for corporate income tax purposes; (2) a single sales factor for apportionment purposes; and (3) enhanced taxpayer protections for an alternative apportionment petition process. 

Under market-based sourcing, all sales, other than tangible property, are in Idaho if the taxpayer’s market for sales is in Idaho. The legislation set out the following criteria for determining if the taxpayer’s market for sales is in Idaho: 

  1. In the case of sale, rental, lease, or license of real property, if the property is located in Idaho;
  2. In the case of rental, lease, or license of tangible personal property, if the property is located in Idaho; 
  3. In the case of a service, if the service is delivered to a location in Idaho;
  4. In the case of intangible property that is rented, leased, or licensed, if the property is used in Idaho; 
  5. In the case of intangible property that is sold if the property is used in Idaho, provided that certain conditions are met; and 
  6. In the case of sales of a broadcaster from advertising or licensing income that arises from the broadcast or other distribution of film programming by any means, if the commercial domicile of the broadcast customer is in Idaho.

Under a single sales factor regime, all apportionable income is apportioned to Idaho by multiplying the income by a fraction: the numerator of which is the taxpayer’s total sales in Idaho during the tax period and the denominator of which is the taxpayer’s total sales everywhere during the tax period. Previously, the Idaho apportionment factor consisted of property, payroll, and double-weighted sales. 

There is alternative apportionment available if the allocation and apportionment provision do not fairly represent the extent of the business activity in Idaho of taxpayers engaged in a particular industry or in a particular transaction or activities. 

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