Effective January 1, 2019, Indiana has adopted a market-based sourcing approach for sales other than the sale of tangible property. This significant shift from the previous cost of performance approach bears some significant tax consequences for service providers whose markets stretch across state lines. Sales of tangible personal property continue to be sourced to where the goods are physically shipped or delivered.
Sales of services are now attributable to Indiana to the extent that the benefit of the service is received in Indiana, rather than where the service was performed. For example, an Indiana-based company performing a service for a customer located in New York is no longer required to apportion the sales from that service to Indiana. The opposite holds true, however, in that a New York firm providing services to a customer in Indiana will be required to source those sales to Indiana.
This shift has the potential to provide a tax benefit to Indiana companies performing service work in other states, while also potentially drawing in revenue from out-of-state service companies. Keep in mind that these new sourcing rules may conflict with the rules in other states, so it is important to consult your tax advisor in these matters to come up with an optimal result.
For more information on how your company will be impacted by the new sourcing rules contactJohn Rittichier, CPA at 800.880.7800 ext. 8484 or at jrittichier@hsccpa.com.
