in-20241113-IR-045240432FNA: The Department of State Revenue (department) is soliciting public comment on adding a rule at 45 IAC 3.1-1-55.5, and repealing 45 IAC 3.1-1-55, concerning the attribution of sales to the state. The department seeks comment on the affected citations listed and any other provisions of Title 45 that may be affected by this rulemaking.

Notice of First Public Comment Period LSA Document #24-432 Sec. 55.5. (a) The definitions in this section apply throughout this rule. (b) "Airline rule" means the Special Rules: Airlines, adopted July 14, 1983, by the Multistate Tax Commission. (c) "Construction contractor rule" means the Special Regulation: Construction Contractors, adopted July 10, 1980, by the Multistate Tax Commission. (d) "MGAAR" means the Multistate Tax Commission Multistate General Allocation and Apportionment Regulations, adopted February 21, 1973, and as amended through February 24, 2017, including Section 18(c), adopted July 25, 2018. (e) "Publishing rule" means the Special Rules: Publishing, adopted July 30, 1993, by the Multistate Tax Commission. (f) "Railroad rule" means the Special Rules: Railroads, adopted July 16, 1981, by the Multistate Tax Commission. (g) "Trucking rule" means the Special Rules: Trucking Companies, adopted July 11, 1986, by the Multistate Tax Commission and as amended July 27, 1989. (h) The terms referenced in this rule have the same meaning as provided in MGAAR Reg. IV.17.(a).(3) unless the context specifically requires otherwise. (i) If a provision of this rule lists multiple possible tests, the tests shall be applied as a hierarchy unless clearly indicated by the particular provision in this rule. The hierarchy is applied in the order by which the test is listed in the particular provision. For instance, subdivision (1) is the first test, and if subdivision (1) cannot result in a determination of a state, subdivision (2) is applied. However, if subdivision (4) states that subdivision (1) must be applied in a particular situation, the test in subdivision (2) is disregarded for that particular situation. (j) The provisions of this rule do not apply to the following: (k) A provision of MGAAR that requires the exclusion of a receipt from a service because the taxpayer is not taxable in a jurisdiction shall be disregarded. However, the disregard for a MGAAR provision does not prevent the exclusion of receipts if: (l) A receipt may be excluded from the receipts denominator only if and to the extent: (m) A provision of MGAAR that requires a reasonable approximation in the absence of information, but provides a specific methodology for the reasonable approximation, shall be treated as if the specific methodology reflects the benefit of the intangible. However, if a substantial portion of the sales can be determined and the taxpayer or the department reasonably believes the remaining sales follow the same geographic distribution as the determinable sales, the taxpayer or the department may attribute those remaining receipts in the same proportion as the determinable sales. (n) For a related party transaction, the information the customer has that is relevant to sourcing the receipts of the taxpayer is imputed to the taxpayer. (o) For a sale, rental, lease, or license of real property, the receipts from the sale are in this state if and to the extent that the real property is in this state. (p) For a rental, lease, or license of tangible personal property, the following conditions apply: (q) For purposes of this subsection, "in-person services" means the services described in MGAAR Reg. IV.17.(d).(2)(A). However, the term does not include legal, accounting, financial, consulting, architectural, engineering, or similar services described in MGAAR Reg. IV.17.(d).(4). For purposes of determining where in-person services are sourced, the following apply: (r) Services delivered to a customer by physical means shall be attributed to the extent the customer receives the benefit in Indiana, subject to the following conditions: (s) Services delivered to an individual customer by electronic transmission are sourced to Indiana if the customer receives the services in this state. In the absence of actual knowledge of the place of receipt, the taxpayer may source the receipts based on the customer's billing address. (t) Services delivered to a business customer by electronic transmission shall be sourced to Indiana if and to the extent the employees or designees of the customer directly use the service in Indiana. If the taxpayer cannot determine the state or states where the service is used, the taxpayer shall use the following to determine sourcing: (u) For purposes of subsections (s) and (t), if the taxpayer cannot determine if a taxpayer is an individual or a business customer, the taxpayer shall treat the receipts as being attributable to a business customer. (v) For services delivered electronically through or on behalf of an individual or a business customer, receipts are sourced to this state to the extent that the end users or other intended recipients of the services are in this state, subject to the following conditions: (w) For professional services provided to an individual customer, receipts from those services shall be sourced to the customer's state of primary residence, subject to the following conditions: (x) For professional services provided to a business customer, receipts from those services are sourced as follows: (y) For the license or lease of intangible property, receipts are attributable to this state to the extent the intangible is used in this state, subject to the following conditions: (z) For a sale or an exchange of intangible property, the following conditions apply: (aa) For receipts from providing airline transportation, the receipts shall be attributed to Indiana in the ratio of departures from Indiana, measured by the value and cost of the aircraft, to the departures from all jurisdictions measured by the value and cost of the aircraft. For purposes of this rule, the following conditions apply: (bb) For receipts from providing railroad transportation, the following conditions apply: (cc) For receipts from providing trucking or transportation services of tangible personal property, the following conditions apply: (dd) For receipts from construction contracts, the receipts from those contracts are in this state if the construction project is in this state, subject to the following conditions: (ee) For newspaper and magazine publishers, the following conditions apply: (ff) For receipts from lottery or gambling, the following conditions apply: (gg) Receipts from the sale, exchange, or assignment of tax credits, or from the refundable portion of a tax credit includible as income for federal tax purposes, are in this state if: (hh) Receipts described in IC 6-5.5-4-3 through IC 6-5.5-4-13 are attributable to this state in the same manner as provided in those citations, except as specifically provided in this rule, IC 6-3-2-2, or IC 6-3-2-2.2.