An Administrative Law Judge determined that South Carolina requires the sourcing of service income based on the location income producing activity, which is neither a costs of performance nor a market-based approach. South Carolina does not require income producing activity to be measured using any particular method. Rather, the focus is on using a method that fairly represents the taxpayer’s business activities in South Carolina. South Carolina provides a flexible standard based upon the income-producing activity for a given industry.
In this case, a digital television provider received monthly subscription revenue for its video services. The income producing activity for this service involved the delivery of a signal into South Carolina subscribers’ homes and onto their television sets, all of which occurred within South Carolina. Accordingly, the ALJ found that 100% of the taxpayer’s South Carolina subscription receipts should be sourced to South Carolina.