N.Y. Comp. Codes R. & Regs. Tit. 20 §§ 4-4.11
For purposes of these examples, it can be assumed that the corporation has met all the requirements of due diligence, unless otherwise provided, and that the business address presumption does not apply.
Example 1: Audit Corp is located in New York and provides accounting and tax services. Audit Corp contracts with Client Corp to audit the books and records of Client Corp's three locations in State A, State B and New York. Client Corp's managers of the three locations make several visits to Audit Corp to provide their respective locations" books and records to the auditors assigned to the respective audits and to address periodic inquiries. In its books and records, Audit Corp tracks the hours each of its auditors spent on the respective audits of the three locations. Audit Corp bills Client Corp for its services using the same hourly rate for each of its auditors.
Audit Corp's services are not considered an in-person service because, although there was in-person contact, it was not required for Audit Corp to be able to perform its service. Therefore, Audit Corp must apply the general rule for determining where the benefit is received. It determines the benefit is received by Client Corp at each location based on Audit Corp's books and records. The amount Audit Corp includes in its New York receipts is the hourly charge spent on audits of the New York State location. All of Audit Corp's receipts from Client Corp are included in everywhere receipts.
Example 2: Teaching Corp provides in-person seminars in New York to individuals and business customers. The seminars and the materials used in connection with the seminars are prepared outside New York, the teachers who teach the seminars include teachers that are not New York residents, and the students who attend the seminars include students that are not New York residents. Since the customers are in the same location as Teaching Corp when the service is provided, it is deemed to be an in-person service and the special rule for determining where the benefit is received applies. As such, it is presumed that the benefit is received at the location where the service is performed, which is New York State. 100% of such receipts are included in New York receipts and everywhere receipts.
Example 3: Watch Corp is a watch repair corporation with retail locations in multiple states including New York. The repair work is performed at Watch Corp's New York location. In some instances, the customer takes back possession of the watch in New York State. In other instances, the customer requests that the repaired watch be shipped to the customer's home address. Since the repair is completed on the customer's watch, which is tangible personal property, it is considered a service related to tangible personal property. Therefore, the special rule for determining where the benefit is received for services related to tangible personal property applies and it is presumed that the benefit is received at the location where the property is received after the service is performed. In those instances where the customer takes back possession of the watch in New York State, the benefit is received in New York State because the customer receives the repaired watch in New York State and the receipts for the repair work are included in New York receipts. In those instances where the watch is shipped to the customer's home address, the benefit is received in New York State only if the watch is shipped to a home address in New York. In both instances, all of the receipts are included in everywhere receipts.
Example 4: Troubleshooting Corp operates a call center located in New York State that provides troubleshooting services for use of home appliances over the telephone to individual customers located throughout the United States. The contract between Troubleshooting Corp and its customers provides that, for a fee per call, the customer can call Troubleshooting Corp and the call center employee will walk the customer through troubleshooting the appliance. Although provided over the telephone, this service includes a level of human interaction and, therefore, it is not a digital service and must be apportioned under the rules in this Subpart.
Home appliances are tangible personal property so the service Troubleshooting Corp is providing is related to tangible personal property.
Under the special rule for determining where the benefit is received for services related to tangible personal property, the benefit is presumed to be received at the location where the property is received after the service is performed. However, Troubleshooting Corp does not have information on where the tangible personal property was received by the customer or where it is currently located. It only has the billing address of its customer. Therefore, Troubleshooting Corp uses the billing addresses of its customers to reasonably approximate where the tangible personal property is located and will include receipts in New York receipts to the extent that customers have billing addresses located in New York State. Troubleshooting Corp must include 100% of its receipts from troubleshooting services in everywhere receipts.
Example 5: Law Corp, located in State C, is hired by Client Corp to handle a major litigation matter concerning the sale of its manufacturing plant located in New York State. Client Corp has manufacturing plants in New York and State B. The trial takes place in State C, which is the location of the opposing party in the lawsuit. The court documents, which are public records, reflect that the subject matter is the manufacturing plant located in New York. Because Law Corp's entire service is related to the manufacturing plant, which is real property, the special rule for determining where the benefit is received for services related to real property applies. Therefore, the benefit is presumed to be received by Client Corp at the location of the manufacturing plant. Therefore, Law Corp must include 100% of its receipts from Client Corp in both New York receipts and everywhere receipts.
Example 6: Consulting Corp provides two main types of facility consulting services - licensing requirements and environmental compliance. Consulting Corp has 60 business customers who have hired them to obtain applicable permits and licenses and 200 business customers who have hired them to provide environmental compliance services. No more than 5% of Consulting Corp's receipts are from any particular business customer. Despite the differing subject matter, the consulting services are substantially similar enough that the business address presumption applies.
Example 7: Consulting Corp provides consulting services to determine the safety of train tracks to 200 business customers, including Train Corp. Consulting Corp provides consulting services to Train Corp in relation to a portion of train service that runs through New York and 5 other states for a flat fee. As this is a service related to real property, the special rule for determining where the benefit is received for services related to real property applies. Under that rule, the benefit is presumed to be received at the location of the property. Because the real property involved is located within six states, it is necessary to look to Consulting Corp's books and records to determine the share of the benefit received at the real property located in New York State.
Some areas of the track are more heavily traveled than others, requiring more attention, and some portions of the track require special attention, such as where signals are located. Consulting Corp's books and records indicate only the location of the tracks its services relate to and how many miles of track are located in New York State and each of the 5 other states. Upon reasonable inquiries, Consulting Corp cannot obtain additional information to determine specifically where Train Corp receives the benefit of its service. Consulting Corp should reasonably approximate based on customer information where the benefit is received by multiplying the total receipts it receives from Train Corp by a fraction, the numerator of which is the miles of track its service relates to located within New York State and the denominator of which is the total miles of track its service relates to located within and without New York State. Consulting Corp must include 100% of its receipts from Train Corp in everywhere receipts.
Example 8: Furniture Sales Corp owns showroom locations in various states and acts as a sales agent of Couch Corp. Pursuant to the agreement between the two parties, Furniture Sales Corp receives a commission on each piece of furniture it sells. A salesperson at Furniture Sales Corp's State A location received an order for a couch from a customer and, as part of the process, documents that the customer would like the couch delivered in New York State. Furniture Corp's commission is earned for a service related to tangible personal property (the couch) and the special rule for determining where the benefit is received applies. As such, the benefit of its service is presumed to be received at the location where the tangible personal property is received after the service is performed. Therefore, the commission is apportioned to the delivery address. 100% of Furniture Sales Corp's commission is included in both New York receipts and everywhere receipts.
Example 9: Architect Corp, located in New York, provides architectural services to Developer Corp, located in State A, to design the floor plan of homes to be built at one of the development sites owned by Developer Corp. Developer Corp knows the floorplan will be used at one of its developments, but Developer Corp will not know which floorplan goes to which site until it enters into contracts with homebuyers. Architect Corp is providing a service related to real property. Therefore, the special rule for determining where the benefit is received for services related to real property provides that the benefit of the service is presumed to be received at the location of the real property. As Architect Corp does not know where the real property is located to apportion the receipt based on the special rule for services related to real property and reasonable inquiries to the Developer Corp do not yield that information, it must use reasonable approximation based on customer information to determine the real property location. The books and records, including the contract with Developer Corp, indicate that Developer Corp owns two development sites, one in New York State and one in State A. Therefore, Architect Corp must use reasonable approximation to apportion the receipt between these two locations and include 50% of the receipt in New York receipts. 100% of the receipts are included in everywhere receipts.
Example 10: Retail Corp offers extended warranties on computers purchased by individual customers for personal use for a flat fee. The extended warranty covers both the computer hardware and any software installed on the computer. To utilize the warranty, customers bring the computer to any of Retail Corp's locations for repair. Once the repair is complete, customers have the choice to take back possession of the computer at Retail Corp's location where the repair was completed or request that the repaired computer be shipped to the customer's address.
The amount Retail Corp receives for the extended warranty does not separately state the portion of the receipt that is for hardware repairs (subject to the rules in this section) and software repairs (otherwise subject to the rules for receipts from digital products and digital services). As a result, the entire amount is properly apportioned under the rules in this section. The sale of the warranty is the sale of an obligation to perform a service at an undetermined future date. Therefore, the receipt does not qualify as a sale of a service related to tangible personal property and instead must be apportioned under the general rule for determining where the benefit is received. Retail Corp's customers are individuals, so the benefit is presumed to be received at the customers' billing addresses.
Retail Corp includes receipts from sales of extended warranties to customers with billing addresses in New York State in New York receipts. 100% of its receipts from the sales of extended warranties are included in everywhere receipts.
Example 11: Model Agency Corp contracts with individual models to connect the models with modeling jobs in exchange for a commission. The contract between Model Agency Corp and the model specifies the commission that Model Agency Corp receives for each modeling job it books. In addition, such contract requires that Model Agency Corp receives all payments the model is entitled to for modeling services and provides that Model Agency Corp must retain its commission from the payments and pass the remainder on to the model.
Modeling Agency Corp contracts with two such models, Model 1 who lives in New York and Model 2 who lives in State Z. Modeling Agency Corp books both models for a photoshoot in New York with ClothesCo. ClothesCo pays the models" fees to Modeling Agency Corp, which keeps a portion as its commissions and remits the remainder to the models. Although Modeling Agency Corp collected the fees from ClothesCo, it is receiving a commission from its contract with each Model. The service provided by Modeling Agency Corp is booking the models for the photoshoot. The models are providing an in-person service to ClothesCo because they must be physically present for the photoshoot.
Therefore, the receipt received by Modeling Agency Corp is a commission for the facilitation of an in-person service. Therefore, the special rule for determining where the benefit is received for in-person services provides that the benefit is presumed to be received at the location where the in-person service is performed, which is the location of the photoshoot. The commissions Model Agency Corp receives from Model 1 and Model 2 are included in New York receipts. 100% of its receipts from commissions it receives are included in everywhere receipts.
Example 12: Statistics Corp provides data compilation and analysis services that will be used in policymaking for TUV, a Federal government agency, which has regional offices throughout the United States. Statistics Corp's only contact with TUV is with its main office located in State A, and Statistics Corp does not know the locations of TUV's other offices, nor which of TUV's offices focus on policymaking and which focus on direct client services. After reasonable inquiries, Statistics Corp does not have any additional information as to which regional offices will use the data compilation and analysis services. Furthermore, a general information measurement such as population information would not be relevant because the compilation and analysis services are used by employees rather than the general public. Because no special rules for determining where the benefit is received apply and Statistics Corp does not have adequate information to determine where the benefit is received, or even to apply reasonable approximation, Statistics Corp is required to apportion the receipts based on the delivery destination of its services. Since the contract of sale is managed by TUV's main office in State A, the receipts are not included in New York receipts. 100% of the receipts are included in everywhere receipts.
Example 13: Sales Corp provides only one type of service to approximately 200 business customers and the service is not subject to the special rules for determining where the benefit is received. In tax year 2021, all of its receipts were apportioned under this Subpart, and, as a result 45% of Sales Corp's receipts were included in New York receipts. In tax year 2022, Sales Corp continues to provide only one type of service to its customers. At the end of tax year 2022, Sales Corp's computer system crashes and it is unable to recover information it had obtained on where the benefit of its services were received or where the services were delivered. Upon reasonable inquiries to its known customers, Sales Corp still cannot obtain information on where the benefits were received or where the services were delivered. Therefore, using the preceding taxable year method, Sales Corp must include 45% of its 2022 receipts in New York receipts. 100% of receipts are included in everywhere receipts.
Example 14: Taxpayer A has $10,000 in receipts from a new type of service subject to this Subpart. Since the service is not subject to any of the special rules for determining where the benefit is received, Taxpayer A must exercise due diligence to determine where the customer received the benefit or where the service was delivered. As Taxpayer A cannot determine those locations, it must determine the portion of the $10,000 to include in New York receipts based on the current taxable year method. In the current tax year, Taxpayer A has $80,000 in other business receipts apportioned using the where benefit received method, of which $20,000 is included in New York receipts. In addition, Taxpayer A has $70,000 in other business receipts apportioned using the delivery destination method, of which $55,000 are New York receipts. Therefore, under the current taxable year method, Taxpayer A would include 50% of the $10,000, or $5,000, of receipts from the new type of service in New York receipts. 100% of receipts from the new type of service are included in everywhere receipts.
Taxpayer B also has $10,000 in receipts from a new type of service that, after exercising due diligence, it cannot source using either the where benefit received method or the delivery destination method. However, unlike Taxpayer A, Taxpayer B has been able to source all its receipts from other business activities using the where benefit received method and has determined that 40 percent of all those other receipts are New York receipts. Therefore, under the current taxable year method, $4000, or 40%, of the receipts from this new service are included in Taxpayer B's New York receipts. Taxpayer B includes 100% of the receipts from the new type of digital product in everywhere receipts.
Example 15: Loan Corp (the taxpayer) is based in New York and operates offices whereby individuals and businesses can discuss loan options and obtain a loan from unrelated lenders. Loan Corp also will service the loans it procures. Bank Corp (the business customer) enters into a contract with Loan Corp whereby Bank Corp will pay Loan Corp a fee to procure borrowers (consumers) and a fee to handle servicing of loans financed by Bank Corp. Loan Corp handles all interactions with the consumers, who have no contact or interaction with Bank Corp directly.
Loan Corp assists a business consumer in obtaining a mortgage loan from Bank Corp to purchase an office building in State C. Because this service is related to real property, Loan Corp must use the special rule for determining where the benefit is received for services related to real property. The benefit of both the procurement fee and the servicing fee is presumed to be received at the location of the real property.
Loan Corp assists an individual who is a resident of State D, in obtaining a personal loan from Bank Corp. Loan Corp sends monthly bills to the borrower during the term of the loan. Loan Corp's receipts from Bank Corp for procuring the borrower and servicing the loan is an intermediary transaction because, pursuant to its contract, Loan Corp is providing a service at the direction of Bank Corp directly to the location of the consumer. These receipts are not included in New York receipts because the individual's billing address is in State D. 100% of such receipts are included in everywhere receipts.
Example 16: Debt Collection Corp (the taxpayer) has offices in New York and State A. Student Loan Corp (the business customer), which is located in State C, enters into a contract with Debt Collection Corp whereby Student Loan Corp will pay Debt Collection Corp a fee to collect outstanding debt owed to Student Loan Corp by borrowers (consumers). Debt Collection Corp communicates with borrowers by phone and email, and collects outstanding debt directly from borrowers who make debt payments online to Debt Collection Corp. After retaining a portion of the payment as its fee, Debt Collection Corp remits the remainder of the collected money to Student Loan Corp electronically. Despite the electronic means to perform its work and transfer funds, the service has not been fully automated and there is a non-incidental level of human interaction, thus Debt Collection Corp's activities do not satisfy the definition of a digital service. Therefore, the receipt is to be apportioned using the rules in this Subpart. Debt Collection Corp is providing a service to Student Loan Corp, who instructs Debt Collection Corp to collect from borrowers on its behalf. This service is provided directly to the location of the consumers at Student Loan Corp's direction, which meets the definition of an intermediary transaction. Therefore, Debt Collection Corp must apportion the receipt from the fee earned from Student Loan Corp to the location of the consumers.
Debt Collection Corp uses the billing addresses of the consumers to include receipts in New York receipts to the extent that consumers have billing addresses located in New York. Debt Collection Corp must include 100% of its receipts from the service provided to Student Loan Corp in everywhere receipts.
Example 17: Credit Score Corp has a contract with Credit Card Corp to provide credit rating services to Credit Card Corp for individuals applying for credit cards. Credit Card Corp receives all credit rating services at its corporate office in State A where it makes determinations on whether or not to issue credit cards to applicants. Applicants from all over the country submit applications to Credit Card Corp, who then provides information about the applicants to Credit Score Corp to receive a credit rating. Credit Score Corp issues the rating for each applicant to Credit Card Corp, who utilizes this information to make a determination as to whether or not Credit Card Corp will issue the applicant a credit card. This is not an intermediary transaction because the service is provided by Credit Score Corp directly to Credit Card Corp and is not passed on to the applicants applying for the credit cards. Because Credit Card Corp utilizes the service entirely in State A, where it makes credit determinations on credit card applications, Credit Score Corp does not include the receipt in New York receipts. 100% of such receipt is included in Credit Score Corp's everywhere receipts.
Example 18: Production Corp enters into a contract with Cable Network Corp to provide the service of producing a made-for-television movie. Production Corp delivers the television production to Cable Network Corp's New York State office, which is the office location responsible for contracting for the production and determining its usage. The production service receipt is not considered an intermediary transaction because the production service is not provided by Production Corp directly to Cable Network Corp's consumers at the direction of Cable Network Corp and the production service is completed prior to Cable Network Corp determining if and when the production will be aired.
As Cable Network Corp receives the benefit of this service at its New York State office, the entire receipt is included in both New York receipts and everywhere receipts.
Example 19: Credit Ratings Corp, located in New York, has a contract with Debt Issuer Corp whereby Credit Ratings Corp opines, via the assignment of a letter grade, on the creditworthiness of Debt Issuer Corp's debt obligation. The rating does not constitute a recommendation of the suitability of an investment for any particular investor. Credit Ratings Corp may issue the rating via press release, which allows potential investors to consider the rating/letter grade. Credit Ratings Corp also includes the rating in its database of ratings on its website, which allows for public viewing. However, the principal element of the service is the development of the rating; any dissemination via digital means is incidental to such service. Therefore, the receipt is apportioned under the rules in this Subpart. Furthermore, this service does not constitute an intermediary transaction because the rating is not provided by Credit Ratings Corp directly to individual investors at Debt Issuer's direction. In addition, the rating is not provided to Debt Issuer Corp to pass along directly to individual investors. For this reason, the receipt must be apportioned to the location at which Debt Issuer Corp receives the benefit of the service. Credit Rating Corp's books and records indicate that the rating is being sought on the advice of Debt Issuer's corporate finance division, which is responsible for overall fiscal strategy and execution and is located in State A. Therefore, the receipt is not included in Credit Rating Corp's New York receipts. 100% of such receipt is included in Credit Rating Corp's everywhere receipts.
N.Y. Comp. Codes R. & Regs. Tit. 20 §§ 4-4.11