Changes in U.S. tax laws also impact various cross-border U.S. taxpayers, and although it is easy to keep track of federal tax laws, state tax laws are often not given similar importance. However, state tax laws are equally important for U.S. resident taxpayers and cross-border taxpayers, especially if they are carrying out business activities in a particular U.S. state.
Louisiana Single Sales Factor Apportionment Program
On May 31, 2012, Governor Bobby Jindal signed House Bill 729 (H.B. 729) into law allowing qualified businesses to use single sales factor apportionment as part of the Corporate Tax Apportionment Program (“CTAP”). The CTAP is effective for income tax periods beginning on or after January 1, 2013 and for corporation franchise tax periods beginning on or after January 1, 2014.
Existing State Apportionment Law
Under existing law, multistate corporations with nexus in Louisiana must generally apportion their income using an equally weighted three-factor apportionment formula based on property, payroll and sales. For a discussion of nexus, please see our article on this subject on our website. Multistate corporations primarily engaged in manufacturing and merchandising are required to use a double weighted sales factor in the computation of their apportionment percentage.
Qualifications for new Apportionment Rules
The ability to use the new single sales factor apportionment is not automatically allowed for all corporations. Multistate corporations seeking to adopt this method of apportionment must apply for and receive approval from the Secretary of the Louisiana Department of Economic Development. The requirements for eligibility in the program are;
- At least fifty percent (50%) of the total annual sales of the business from a Louisiana site or sites is to out-of-state customers or buyers, or to in-state customers or buyers who resell the product or service to an out-of-state customer or buyer for ultimate use, or the federal government, or any combination thereof.
- The activities of the business at a Louisiana site or sites includes corporate headquarters, logistics, warehousing, data center, clean technology, destination health care, research and development, renewable energy, digital media and software development, or other business sector targeted by the Secretary as a focus of the department’s economic development efforts.
At the Secretary’s discretion, sales by affiliates of the business may be included in determining the percentage of sales meeting the requirements of the CTAP. Additionally, unless a business provides at least twenty-five new headquarter jobs or shared service center jobs, businesses primarily engaged in retail sales, real estate, professional services, natural resource extraction or exploration, financial services, or venture capital funds are not eligible for the CTAP.
Application for CTAP
At the invitation of the Secretary, a business may apply for participation in the program by submitting certified statements and substantiating documents to the Department of Economic Development. The Secretary is authorized to certify the eligibility of the business and request that a contract providing for participation in the CTAP be approved by the Joint Legislative Committee on the Budget if, in addition to meeting the above requirements, the Secretary determines that participation is needed encourage a new business to locate in the state or to encourage an existing business to expand in the state and that securing the project will result in significant positive economic benefit to the state.
The initial term of the contract is for a term of up to twenty years with a provision that the contract may be extended for up to an additional twenty years. Businesses are required to recertify annually that they continue to meet the criteria for inclusion in this program.
Taxpayers should understand that the eligibility requirements are quite restrictive and only those businesses invited by the Secretary will be permitted to participate in CTAP.
AG TAX LLP Can Help
If you have any other tax-related queries, and/or need assistance with tax planning/filing please contact AG Tax. Our tax professionals are highly-experienced with U.S. and Canadian tax laws and can provide you the right guidance to handle your tax situation.
Aylett Grant Tax LLP is a full service accounting firm with a dedicated team of experts, who are highly-qualified and experienced in handling situations related to U.S., Canada and other international tax laws.
We can assist with:
- Canadian Personal and corporate tax returns
- Cross Border Taxation and Business Planning
- Personal and Corporate Taxation
- Disclosure of Foreign Assets and other information filings
- Retirement planning
- Estate Planning, Inheritance tax advice
To obtain a quote or to arrange for a consultation to discuss your tax related queries, please contact us at:
- 416-238-5920 (Greater Toronto Area, ON)
- 604-538-8735 (Greater Vancouver Area, BC)
- 780-702-2732 (Greater Edmonton Area, AB)
Disclaimer: The information in this publication is accurate as of the time of its publication. AG Tax assumes no responsibility for changes to tax legislation subsequent to the publication of this document. The information provided is for general information purposes only and should not be acted upon without seeking professional advice. If you would like to engage our services, please contact our staff and obtain authorization to send our firm confidential information. A client relationship is not created by the transmission of information. A client relationship is only formed with our firm when a scope and engagement letter signed by the firm and the potential client detailing the terms of engagement is present.