Taxpayer is an out-of-state
media and marketing services business. Taxpayer measures the number and
characteristics of the audience members listening to radio programs, television
programs, and other media. Taxpayer acquires this information by conducting
surveys. Taxpayer compiles the survey results and sells this information to
various interested parties.
Taxpayer formerly
maintained an Indiana office until 2008. After the Indiana office closed,
Taxpayer's Indiana employees worked from home offices. The Department of
Revenue ("Department") conducted an audit review of Taxpayer's
business records and tax returns. …
The audit found that
Taxpayer did not include certain receipts in its "sales factor."
Taxpayer included money received from selling software to Indiana customers but
did not include money received from selling audience and polling information to
Indiana customers. The audit made a correction to include in the sales factor
money received from selling audience and polling information to Indiana
customers. The "correction" resulted in the assessment of additional
tax. Taxpayer disagrees stating that "zero service income" should be
attributed to Indiana. Taxpayer concludes that it should pay no Indiana income
tax on this income.
Taxpayer maintains that the
additional assessment is incorrect. …
Taxpayer explains that its
"core business is conducting public opinion surveys." Taxpayer explains
that it did not spend time in Indiana conducting public opinion surveys.
Taxpayer further cites to a specific example which states:
The taxpayer, a public
opinion survey corporation, conducted a poll by its employees in State C and in
this state for the sum of $9,000. The project required 600 man hours to obtain
the basic data and prepare the survey report. Two hundred of the 600 man hours
were expended in this state. The receipts attributable to this state are:
$3,000.45 IAC 3.1-1-55(d) example 2.
Although the Department
does not discount Taxpayer's reliance on the example cited, it should be noted
that the Department does not regard an "example" as having the force
of law.
...
The Department must
respectfully disagree with Taxpayer's assertion that the money was earned by
conducting surveys at out-of-state locations. The surveys provided the raw data
upon which Taxpayer's saleable information was compiled, but Taxpayer did not
earn the money from conducting surveys; it earned money because it compiled and
analyzed that data and sold the compilations of data to Indiana customers. In
this case, Taxpayer's reliance on 45 IAC 3.1-1-55(d) example 2 is unfounded. In
the example cited, the taxpayer earned money from conducting a survey; it
conducted a survey and was paid $9,000 for doing so. Part of the work to earn
the $9,000 took place in Indiana, part of the work took place outside Indiana,
and the $9,000 was properly apportioned between the income producing activity
in one state and the income producing activity in another state. In Taxpayer's
case, the out-of-state surveys it conducted did not produce income because
Taxpayer was not paid money to conduct surveys in this state or any other
state. It was paid money because it sold compilations of data based on the
surveys to Indiana customers.
The money earned from
selling compilations of audience data was properly sourced to Indiana and
should have been included in the sales factor. The "income producing
activity" took place in Indiana because Indiana is the place where
services were provided to Indiana customers and the place where Taxpayer
derived this income. 45 IAC 3.1-1-55.
