| (February 2, 2005. Manchester, NH.) - Mike Harvell and John-Mark Turner recently won a summary judgment decision in an appeal of a business profits tax apportionment case. In a decision with significant implications for apportionment of business profits tax, Attorneys Harvell and Turner successfully persuaded the Rockingham County Superior Court to reverse the Department of Revenue Administration's (DRA) assessment of tax, interest and penalties for their client. Paymentech, L.P. v. Barbara Reid, Acting Commissioner, N.H. Dept. of Revenue Administration, Docket No. 03-E-0151 (Rockingham County Superior Court, 2004). The taxpayer was a group of unitary businesses who conducted business both within and outside New Hampshire. To apportion the tax among the states in which a multi-state taxpayer does business, the New Hampshire Business Profits Tax requires, among other things, a determination of which sales should be considered New Hampshire sales. For sales of services, that determination requires a comparison of the costs of providing the service. If more costs are incurred in a state other than New Hampshire, the sale is not considered a New Hampshire sale. In comparing the so-called "costs of performance," the taxpayer had considered the costs incurred by all members of its unitary group of business. While generally agreeing that most factors in the apportionment formula should include income generated by out-of-state members of the group, the DRA took the position that for purposes of costs of performance, only the costs incurred by the New Hampshire-based members of the group should be evaluated. Judge McHugh, in both a nine- and five-page decision, agreed with the taxpayer that the plain language of the Business Profits Tax statute required the costs of all members of the group, including out-of-state members, to be considered.
As a result of the successful summary judgment decision, which was received as Attorneys Harvell and Turner were negotiating a settlement with the DRA, they were able to reach a much more favorable settlement of their client's business profits tax liability returns. |
