Another Taxing Trend: Single-Sales Factor and Market-Based Sourcing

Another state, Idaho, has joined the ranks of those states that have adopted single-sales factor and market-based sourcing for taxing multi-state income. Under a single sales factor formula, the share of a corporation’s total profit that a particular state tax would be based solely on the share of the corporation’s nationwide sales occurring in the state. Many states including New Jersey and Pennsylvania require the single sales factor method of apportionment. Market-based sourcing is a method of sourcing revenues from services to a state based on where the benefit of the service is received. Idaho Gov. Brad Little signed H.B. 563 into law Wednesday, March 16th, replacing the state's cost-of-performance method for taxing multi-state income for sales other than tangible property. The market-based sourcing method assigns the sales revenue from services to the location receiving or benefiting from the services. Idaho had been using a three-factor method to apportion business income, including property, payroll, and double-weighted sales. Proponents of the new legislation contend a single-sales factor with market-based sourcing will simplify the process and create uniformity with other states. The new law applies retroactively to Jan. 1, 2022.

The proper interpretation and application of a state’s apportionment methods can often be complex with substantial financial consequences. In today’s complex multi-state landscape, it’s important to surround yourself with trusted State and Local Tax advisors. If your business has questions about the new regulation, HBK’s SALT practice can assist you. You can contact HBK’s SALT Advisory group at

About the Author(s)

Bryan M. Holm, CPA, MST, Manager, State and Local Tax

Bryan Holm is a Manager in the Cherry Hill, NJ office of HBK CPA's and Consultants. He joined the firm in 2021 as a member of the HBK State and Local Tax (SALT) team. His background includes work with top 10 accounting firms. Prior to specializing in state and local taxation, Bryan worked in tax resolution for the Internal Revenue Service. He has served clients in a variety of industries including private equity firms, manufacturing, the restaurant industry, retail, construction, and the banking industry.

Bryan has provided a variety of state and local tax services to clients, including; Audit Defense, Refund Reviews, Nexus Reviews, Voluntary Disclosure Agreements, Income/Franchise Tax Compliance, M&A Due Diligence, and SALT Consulting and Advisory Services. Bryan has also been a speaker and writer on state and local tax matters.

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