N.Y. Comp. Codes R. & Regs. Tit. 20 §§ 4-4.2

Current through Register Vol. 46, No. 51, December 18, 2024

Section 4-4.2 - General Principles

(a) Receipts and net gains (not less than zero) from services and other business activities not otherwise enumerated in section 210-A, such as net gains (not less than zero) from the sale of intangible property, as well as receipts from the compensation for certain services, such as commissions, finder's fees, loan servicing fees, and fees for professional services are included in New York receipts if the location where the customers derives value from the service or other business activity, according to the hierarchy of methods set forth in section 210-A and paragraphs (1) through (4) of subdivision (b) of this section, is in New York State. The corporation must exercise due diligence under each method described in subdivision (b) of this section before rejecting it and proceeding to the next method in the hierarchy, and must base its determination on information known to the corporation or information that would be known to the corporation upon reasonable inquiry. 100% of such receipts are included in everywhere receipts.

(b) The hierarchy of methods referenced in paragraphs (1) through (4) of this subdivision used to apportion the receipt from the service or other business activity must be applied sequentially. A corporation may abandon a method only if, after exercising due diligence, it lacks sufficient information to apply that method.

(1) A corporation must apportion the receipt to the location where the benefit of the service or other business activity is received ("where benefit received method"; see sections 4-4.3 through 4-4.6 of this Subpart).

(2) A corporation must apportion the receipt to the delivery destination ("delivery destination method"; see section 4-4.7 of this Subpart).

(3) A corporation must apportion the receipt in the same way as those receipts from that type of other business activity or service were apportioned in the preceding taxable year ("preceding taxable year method"; see section 4-4.9 of this Subpart).

(4) A corporation must apportion the receipts from that service or other business activity to New York in the same way as its receipts from other services or business activities in the current taxable year are apportioned using the where benefit received method and delivery destination method referenced in paragraphs (1) and (2) of this subdivision ("current taxable year method"; see section 4-4.10 of this Subpart).

(c) Corporations should refer first to the special rules for determining where the benefit is received in section 4-4.3 of this Subpart prior to determining if a transaction qualifies as an intermediary transaction. Unless a special rule in section 4-4.3 of this Subpart applies, a corporation should then determine if the rules for intermediary transactions in section 4-4.8 of this Subpart apply before applying the other rules in this Subpart.

(d) In exercising due diligence, the following standards apply:

(1)

(i) In applying the rules in this Subpart, if the required information is not readily available to the corporation, the corporation must make reasonable inquiries to a business customer to determine the information required by these rules.

(ii) If the corporation has more than 250 business customers purchasing substantially similar services or activities as purchased by the particular customer that would be apportioned under this Subpart and no more than 5% of receipts from such services or activities are from that particular customer, then the benefit from such service or activity is presumed to be received at the customer's billing address ("business address presumption").

(2) Corporations must document the steps taken before abandoning each method of the hierarchy or step within a level of the hierarchy, such as moving from a special rule for determining where the benefit is received to the general rule for determining where the benefit is received, including documentation of reasonable inquiries made.

(3) When the commissioner determines that the corporation had access to, or could have obtained upon reasonable inquiries when required, information at the time it filed its original return to apply a method of apportionment that comes earlier in the hierarchy than the method utilized by the corporation, the commissioner may require the corporation to use such method.

(e) If there is a presumption in applying a method in the hierarchy, the presumption may be overcome by either the corporation or the Department.

(1) The presumption may be overcome by the corporation if the corporation can prove, by clear and convincing evidence, that the method it proposes to use better reflects the location where the customer derives value from the service or other business activity. In such a case, the location to which the receipts from the service or other business activity will be apportioned will be based on the evidence accumulated by the corporation. If the corporation believes it has overcome the presumption and uses an alternative method, upon audit the Department may examine the corporation's alternative method to determine if the presumption has been overcome and, if so, whether it was applied in a consistent manner for similar transactions.

(2) The presumption may be overcome by the Department if the Department can prove, by clear and convincing evidence, that the method it proposes to use better reflects the location where the customer derives value from the service or other business activity, and that the corporation had access to, or could have obtained upon reasonable inquiries when required, information at the time it filed its original return that could have been used to apply the Department's method.

N.Y. Comp. Codes R. & Regs. Tit. 20 §§ 4-4.2

Adopted New York State Register December 27, 2023/Volume XLV, Issue 52, eff. 12/27/2023