Section I-1136 - Exclusion of Certain Sales of Tangible Personal Property from the Sales Factor (Louisiana Code of Regulations)

§ I-1136. Exclusion of Certain Sales of Tangible Personal Property from the Sales Factor

A. General sourcing rule for sales of tangible personal property. Generally, for purposes of determining a taxpayers Louisiana Apportionment Percent, sales of tangible personal property are sourced to the location where the tangible personal property is ultimately received by the purchaser.

B. Exclusion. Pursuant to R.S. 47:287.95(M), sales, including sales of tangible personal property, shall be excluded from both the numerator and the denominator of the sales factor if either of the following conditions apply:

1. the taxpayer is not taxable in a state to which a sale is assigned; or

2. the state of assignment cannot be determined or reasonably approximated pursuant to R.S. 47:287.95 and the regulations thereunder.

C. Taxable in Another State. A taxpayer is taxable within another state if it meets either one of two tests:

1. by reason of business activity in another state, the taxpayer is subject to one of the following types of taxes: A net income tax, a franchise tax measured by net income, a franchise tax for the privilege of doing business, or a corporate stock tax; or

2. by reason of such business activity, another state has jurisdiction to subject the taxpayer to a net income tax, regardless of whether or not the state imposes such a tax on the taxpayer.

D. State. For purposes of this regulation, state means a State of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands, or any territory or insular possession subject to the jurisdiction of the United States.

E. Reasonable Approximation, Generally. In a case in which a taxpayer cannot ascertain the state or states to which sales are to be assigned pursuant to the applicable rules set forth in this regulation, (including through the use of a method of reasonable approximation, where relevant) using a reasonable amount of effort undertaken in good faith, the receipts must be excluded from the numerator and denominator of the taxpayers sales factor pursuant to R.S. 47:287.95(M).

F. Rules of Reasonable Approximation

1. Approximation Based Upon Known Sales. In an instance where, applying the applicable rules set forth for sales of tangible personal property, a taxpayer can ascertain the state or states of assignment of a substantial portion of its sales from sales of substantially similar tangible personal property, (assigned sales), but not all of those sales, and the taxpayer reasonably believes, based on all available information, that the geographic distribution of some or all of the remainder of those sales generally tracks that of the assigned sales, it shall include those sales which it believes tracks the geographic distribution of the assigned sales in its sales factor in the same proportion as its assigned sales.

2. Related-Party Transactions-Information Imputed from Customer to Taxpayer. Where a taxpayer has sales subject to this regulation from transactions with a related-party customer, information that the customer has that is relevant to the sourcing of receipts from these transactions is imputed to the taxpayer.

3. Approximation Based on Place of Sale. In an instance in which the state or states where tangible personal property is actually received cannot be determined, but the taxpayer has sufficient information regarding the place of sale from which it can reasonably approximate the state or states where the tangible personal property is received, the taxpayer shall reasonably approximate such state or states as the place of sale.

(Promulgated by the Department of Revenue, LR 442221 (December 2018).)

AUTHORITY NOTE: Promulgated in accordance with R.S. 47:1511 and R.S. 47:287.95.

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