June 15, 2015
While apportionment issues present challenges they also present opportunities. Proper planning can help to manage your overall tax liabilities, and knowledge of these issues can help mitigate potential exposures and combat aggressive taxing authorities on audit.
Very often we have service companies, maybe software as a service, a certain revenue, certain software companies that may be selling a service, but they're delivering it via software. Well, an auditor may look at your contract and just see a software license and say, well, I'm going to source this and reports and software license rules as opposed to in accordance with service sourcing rules, and they might be totally different. One, they might just say, well, we see where you're billing the customer and go by market sourcing as opposed to looking at where the costs are actually incurred and maybe it should be under a cost to performance.