On a vote of 93-4 on Wednesday, May 4, the Alabama House of Representatives approved House Bill 434, which would amend Article IV of Alabama Code § 40-27-1, i.e., Alabama’s version of the Multistate Tax Compact, to double-weight the sales factor in the currently equally-weighted three factor formula used to apportion business income to Alabama. In addition, the bill would amend Alabama’s apportionment methodology by converting Alabama from a “cost of performance” state to a “market source” state for certain receipts from intangibles or services. This bill provides that sales of services and other intangible property would be sourced to Alabama if the taxpayer’s market for the sales is in Alabama (e.g., the customer is located in Alabama, regardless of where the service is performed). According to officials from the Department of Revenue (the “Department”), the market sourcing rule in this bill closely tracks the MTC’s model provision.
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