Authors: Michael A. Jacobs

New rules that change the way numerous multi-state businesses will determine their Massachusetts corporate taxes go into effect for tax returns filed in 2015.

The rules require that many sales, for example sales of services, be sourced to a taxpayer’s “market.” Under the old rules, these sales were sourced to the location where the taxpayer incurred its costs in making the sale. Combined with a “throwout” rule, this new tax regime can dramatically change the formula a multi-state business uses to determine the portion of its income Massachusetts can subject to tax.

Over the past year, the Massachusetts Department of Revenue (DOR) has been drafting revised regulations that interpret the new rules and guide taxpayers attempting to implement them. DOR issued a first draft in March and then a revised draft in October. The draft regulations now include more than seventy pages of complex rules that taxpayers will have to apply in short order.

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