Risks of Apportionment

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.


Gary Bingel:

So under a lot of these traditional cost to performance methods, there was a lot of record keeping that was required. You had to keep very detailed record of where your costs are, where your people were, where your property was you had to keep records possibly on a job by job basis, customer by customer basis, project by project or contract by contract, and it got very difficult to often keep those records, especially with states having different rules and regulations because some states would include third party costs, some states would include indirect costs like overhead and SG&A and how do you include those in specific contracts and such. So there was a lot of record keeping with that. The problem with the market sourcing, unfortunately is that while there's less record keeping, you also just may have less information available to you. Specifically, if you're selling things like software or some other sort of intangible, you may be told to deliver it via the Internet to a file transfer protocol site.

Gary Bingel's expertise focuses on state and local income taxation, and sales and use tax consulting. He has significant experience serving clients in the manufacturing, retail, pharmaceutical, biotechnology, technology and service industries.

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More Videos in This Series
Apportionment Opportunities

In this Apportionment overview, Gary Bingel discusses challenges and opportunities and how planning can help manage overall tax liabilities, and knowledge can help mitigate potential exposures and combat aggressive taxing authorities on audit.

Apportionment Overview

Apportionment is the manner in which income is divided between various taxing jurisdictions. A number of states have moved to receipts receiving more emphasis. Our video overview sets the stage for our pitfalls, risks and opportunities discussions.

Nexus Opportunities

Defensively, your tax team wants to avoid pitfalls associated with nexus. On the other hand, understanding nexus can open the door for opportunities such as Voluntary Disclosure Agreements or amnesty.

Nexus Pitfalls

A major nexus pitfall includes unpaid taxes, uncollected sales tax and flow-through entity issues are sometimes missed. Avoiding sticky situations requires an understanding of what creates nexus for different taxes, and in different jurisdictions.

Nexus Overview

In this Nexus overview, Gary Bingel discusses how Nexus varies state by state, the contacts required to generate taxes, "physical presence" and other key focus areas including remote employees, and new sourcing rules among others.