STATE AND LOCAL TAXATION

September 2000

CHANGES TO THE NEW YORK STATE CORPORATION FRANCHISE TAX

By Kathleen Swift, Ernst & Young LLP and James Duggan, Ernst & Young LLP

The New York State Department of Taxation and Finance has amended the receipts factor allocation rule to exclude certain sales of tangible personal property from the numerator of the receipts factor for business corporations. Under the old rule, 100% of the receipts from the sale of tangible personal property shipped to New York State were included in the numerator of the receipts factor. Tangible personal property was considered shipped to New York State if the property was transported via a common carrier or the taxpayer’s vehicle to a point in New York, regardless of the shipment’s origination. It was also considered shipped to New York State if the property was delivered to a purchaser at a destination in New York, regardless of the domicile of the purchaser. Consequently, New York receipts included sales to customers that picked up property in New York, even if the property was immediately removed to the purchaser’s domicile state.

The New Rule

The New York State Department of Taxation and Finance has amended the destination rule so that the final destination of the shipment determines whether the receipt is included in the numerator of the receipts factor for business corporations. Under the new rule, a sale of tangible personal property that is picked up in New York and transported to another state by the customer is not included in the numerator of the receipts factor. Sufficient evidence of the final shipping destination can consist of the following documents:

  • Bills of lading
  • Other shipping documents identifying the destination regardless of the F.O.B. point
  • Purchase invoices designating the destination.

    This change to the receipts factor allocation rule should result in tax relief to manufacturers with loading docks in New York State that transport their products to other states by reducing their New York State receipts factor.

    Editors:
    State and Local Editor:
    Barry H. Horowitz, CPA
    Eisner & Lubin LLP

    Interstate Editor:
    Nicholas Nesi, CPA
    BDO Seidman LLP

    Contributing Editors:
    Henry Goldwasser, CPA
    M.R. Weiser & Co. LLP

    Steven M. Kaplan, CPA
    Kahn, Hoffman, Nonenmacher & Hochman, LLP

    John J. Fielding, CPA
    PricewaterhouseCoopers LLP

    Warren Weinstock, CPA
    Marks Paneth Shron LLP


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