On January 21, 2021, the Idaho House Committee on Taxation introduced a market-based sourcing bill, which if enacted would change the state’s approach to sourcing the sales of certain multistate businesses. The state currently sources sales other than sales of tangible property to Idaho if the income-producing activity is performed in the state, or if the income-producing activity takes place in multiple states, based on the costs of performance. Idaho continues to utilize a three-factor apportionment formula with double-weighted sales.
The proposed legislation, HB 19, would implement the Multistate Tax Commission’s market-based approach for sourcing sales receipts:
- Sales, rental, licenses, or leases of real property are sourced to Idaho if the property is within the state.
- Similarly, the rental, licensing, or leasing of tangible personal property is sourced to Idaho if the property is within the state.
- The sale of a service is sourced to Idaho if and to the extent the service is delivered to a location in the state.
- Intangible personal property that is rented, leased, or licensed is sourced to Idaho to the extent that the property is used within the state. Sales of intangible personal property that are contingent on the productivity, use or disposition of the property are treated the same way.
- Sales of intangible personal property are sourced to Idaho if the contract right, government license, or similar intangible property authorizes the holder to conduct a business activity in a geographic area that includes part of the state.
- All other receipts from the sale of intangible property are excluded from the numerator and denominator of the receipts factor.
The bill also includes a “throw out” provision, which would require taxpayers to exclude receipts from the denominator where the source state cannot be determined or if the taxpayer is not taxable in the state where the receipts are assigned. This provision is opposed by business groups. The bill would retroactively apply to January 1, 2021.