Income/Franchise:
Indiana DOR Proposes New Rule on Market-Based Sourcing with Comments Due by December 13

Proposed New Regulation section 45 IAC 3.1-1-55.5 and Repeal of Regulation section 45 IAC 3.1-1-55, Ind. Dept. of Rev. (11/13/24); Notice of Public Hearing: LSA Document #24-432, Ind. Dept. of Rev. (11/13/24). The Indiana Department of Revenue (Department) proposed a new rule reflecting legislation enacted in 2019 that retroactive to January 1, 2019, adopted market-based sourcing for apportionment of most receipts from services and intangibles [see S.B. 563 (2019), and previously issued Multistate Tax Alert for more details on this 2019 legislation]. According to the Department, this proposed new rule “will provide certainty to businesses regarding Indiana’s treatment of most services and intangible transactions” and “simplify the determination of whether receipts are sourced to Indiana or elsewhere.” The proposed new rule includes guidance on how the Department intends to treat certain transactions, as well as highlights when the Department varies from Multistate Tax Commission model regulations. The Department also explains that the proposed new rule will provide benefits to businesses “by minimizing the scope of disputes regarding sourcing methodology and the location of receipts.” Simultaneously, the Department is also proposing to repeal its “costs of performance” sourcing rule. Comments on the proposed new rule are due by December 13, 2024, and a public hearing (to be held live and virtually) is scheduled for December 18, 2024. Please contact us with any questions.