South Carolina ALJ holds apportionment of service income is neither costs of performance nor market based, it is a flexible standard based on industry

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May 2016


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.

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Peter Michalowski

Peter Michalowski

State and Local Tax Leader, PwC US

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