CAT Sourcing and Combined / Consolidated Groups

Transcription

1 CAT Sourcing and Combined / Consolidated Groups Michael R. Baker, McGladrey LLP David A. Perry, KPMG LLP Richard B. Fry III, Buckingham, Doolittle & Burroughs, LLC

2 CAT Sourcing Tangible personal property Ultimate destination Services Where the purchaser receives the benefit Rents and royalties Location of the property being used. R.C

3 Souring TPP Sales In the case of delivery of tangible personal property by motor carrier or by other means of transportation, the place at which such property is ultimately received after all transportation has been completed shall be considered the place where the purchaser receives the property. R.C (E)

4 Sourcing TPP Sales If relying upon subsequent deliver, vendor must know the ultimate destination at the time of sale. Info. Release CAT , p. 9. Dock sales - purchaser or purchaser s agent takes possession of property at vendor s dock and transports the property to Ohio.

5 Direct Delivery Direct deliver in this state, other than for purposes of transportation, to a person or firm designated by a purchaser constitutes delivery to the purchaser in this state, and direct delivery outside this state to a person or firm designated by a purchaser does not constitute delivery to the purchaser in this state, regardless of where title passes or other conditions of sale. R.C (E). Drop Shipments are sitused to where the property is received by the consumer. Is this consistent with treatment of dock sales?

6 Sourcing Services Sitused to Ohio in the proportion that the purchaser s benefit in this state with respect to what was purchased bears to the purchaser s benefit everywhere with respect to what was purchased. Significant factor: The physical location where the purchaser uses or receives what is purchased. R.C (I).

7 Sourcing Services General Guidelines: If the service pertains to specific property, then situs receipts to the property s location. If no specific property, look to where the purchaser s employees using / benefitting from the service are located.

8 O.A.C Describes examples of 54 different types of services. Services pertaining to specific property Appraisal Architectural Construction Engineering Facility Management Real estate broker Security

9 Services Benefitting Multiple Locations / Employees Situs to Ohio based upon the proportion of the benefit received in Ohio. Purchaser is a multi-state business. Does the service pertain to specific locations, or does it generally benefit the purchaser? If related to multiple locations, vendor may use a reasonable, consistent, and uniform method to apportion the receipts. Examples: Accounting Cable / Satellite Call Center Computer Programming Data Processing Internet / Web Hosting Legal Management Consulting Payroll Telecommunications

10 Principal Place of Business A vendor may elect to source receipts from the following services to the purchaser s principal place of business, as long as applied in a reasonable, consistent, and uniform manner: Accounting Advertising Agency (other than agents for athletes / entertainers) Collection Data Processing Internet / Web Hosting Legal Management Consulting Market Research Membership Fees Tax Preparation Technical Assistance

11 Situsing Factors The following are considered in sequential order: The branch, division, or business unit where the purchaser primarily receives the service. The primarily location of the management operations for the purchaser s business unit receiving the services. Billing address, if accepted in good faith and the purchaser conducts actual operations at such address.

12 Group Reporting Combined Groups Required for taxpayers with more than 50% common ownership Certain excluded persons and nonnexus person not included. Intercompany receipts are not excluded. Consolidated Groups Election available to taxpayers with 50% or 80% common ownership. May choose to exclude foreign entities. Intercompany receipts excluded. Election binding for eight quarters.

13 General Ownership Rules Vertical ownership test based upon voting rights. Corporations Value of voting equity interest Partnerships and LLCs Fair market value of voting interest Limited Partnerships Only consider general partnership interest. Grantor Trust Grantor is the common owner. Trusts treated as corporation Beneficiaries are treated as the owners. Family attribution rules do not apply.

14 Examples Info. Release CAT , Example 2.

15 Examples Info. Release CAT , Example 7.

16 Examples Info. Release CAT , Example 8.

17 Examples Info. Release CAT , Example 18.

18 Questions? Michael R. Baker McGladrey LLP Director, State & Local Tax Services (216) David A. Perry KPMG LLP Manager, State & Local Tax (513) Richard B. Fry III Buckingham, Doolittle & Burroughs, LLC (330)