New York Advisory Opinion TSB-A-12(2)C: How should an out-of-state company apportion to New York its receipts from educational travel programs, some of which are conducted in New York?

Plain-English summary

The petitioner is a Washington-headquartered corporation that organizes and runs about week-long educational travel programs for students and others, in locations around the country and the world, including New York. It develops programs, prepares materials, trains chaperones and presenters, and handles registration and customer service mostly from headquarters and a Virginia satellite office. It asked how to apportion its program receipts to New York.

The Department treated the receipts as service receipts. For tax years beginning on or after January 1, 2007, New York uses a single receipts factor to allocate income (Tax Law § 210.3(a)(10)(A)(ii)). Service receipts are sourced to where the services are performed (Tax Law § 210.3(a)(2)(B); 20 NYCRR § 4-4.3) -- regardless of where the work is done through employees, agents, or subcontractors, and regardless of where payment is received. So the petitioner sources its receipts based on where the tours are conducted: a tour held entirely in New York produces New York receipts, and a tour conducted partly in New York is split using New York tour-days over total tour-days (or another reasonable method), with full details filed with the return.

What this means for you

Service businesses operating in multiple states

For a service, New York looks to where the service is actually delivered, not where you're headquartered, where you market, or where you collect payment. A travel or events company sources to the location of each tour or event; multi-location engagements get split on a reasonable basis like days-in-state.

Accountants and tax professionals

Use a defensible day-count: New York tour-days divided by total tour-days is the method the Department endorsed, but another reasonable method (or relative time/value for lump sums under 20 NYCRR § 4-4.3(d)) is allowed if documented. Back-office activities at headquarters don't pull the receipts out of New York when the tour itself happens here.

Common questions

Q: Where are educational-tour receipts sourced?
A: To where the tour is performed. Tours conducted in New York are New York receipts (Tax Law § 210.3(a)(2)(B)).

Q: How do you handle a tour that's partly in New York?
A: Split it -- for example, New York tour-days over total tour-days, or another reasonable method, with full details filed.

Q: Does it matter where the company is headquartered or paid?
A: No. Service receipts are sourced to where the service is performed, not where payment is received or where the company is based.

Citations and references

• Tax Law § 210.3(a)(2)(B) (service receipts sourced where the service is performed); 20 NYCRR § 4-4.3 (service-receipt sourcing; lump-sum apportionment)
• Tax Law § 210.3(a)(10)(A)(ii) (single receipts-factor business allocation)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/corporation_ao_2012.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/corporation/a12_2c.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-12(2)C
Corporation Tax
March 2, 2012

Office of Counsel
Advisory Opinion Unit
STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. C110720A

The Department of Taxation and Finance received a Petition for Advisory Opinion from name
redacted. Petitioner, a corporation, is headquartered in the state of Washington and organizes and
promotes worldwide travel programs. Petitioner asks how its receipts from educational travel programs
should be apportioned to New York. Petitioner should source its receipts to New York when the tours are
conducted in New York.
Facts
Petitioner offers educational travel programs (typically about one week in length) to students and
other participants on an annual and ongoing basis. Programs are conducted in various locations around
the country and the world, including New York. Petitioner has over 200 full-time employees, including
approximately seven employees based at a satellite office located in the state of Virginia. The personnel
based in the satellite office are program coordinators, program managers and support specialists involved
in the development and operation of educational programs. Most of Petitioner’s other personnel are
located at its headquarters location in Washington. The employees at headquarters include program
coordinators and program managers as well as management, administrative support personnel and others
as described below.
Petitioner organizes educational travel programs, prepares materials for participants and provides
training for program chaperones. Petitioner tailors programs for attending participants by conducting
research and ensuring programs and materials are current and regularly updated. Petitioner also trains
program presenters on a regular basis.
Petitioner’s costs associated with its travel programs include costs described as “on the ground
costs” for meals, housing, transportation, tickets, and various fees for program participants. Petitioner
also incurs general and administrative costs for human resources, accounting, information technology and
management, marketing and customer service. Marketing costs include designing promotional materials,
direct-mailings, and online marketing to create interest in Petitioner’s programs and identify program
participants. Marketing activities are generally performed by Petitioner’s employees based outside of
New York; however, Petitioner does hold periodic informational meetings and seminars in all states.
Petitioner also provides customer service before, during, and after program participation through its
website or by phone. Most customer service activities are completed at the company’s headquarters
location.
Once participants decide to attend one of Petitioner’s programs, there is a registration process
which includes an application and approval process, the payment of program fees and expenses, and
participants receipt of program materials. All of these activities are performed at the company’s
headquarters.

-2-

TSB-A-12(2)C
Corporation Tax
March 2, 2012

Analysis
For taxable years beginning on or after January 1, 2007, the receipts factor alone is used to
determine a taxpayer’s business allocation percentage. Tax Law § 210.3(a)(10)(A)(ii). Section
210.3(a)(2) of the Tax Law provides that the receipts factor is determined by ascertaining the ratio of the
taxpayer’s New York receipts during the taxable year, which are receipts arising from various enumerated
activities or transactions that are sourced to New York, to the total amount of the taxpayer’s receipts for
the period. Receipts generated from performing services are sourced according to where the services are
performed. see Tax Law § 210(3)(a)(2)(B); 20 NYCRR § 4-4.3. This sourcing rule applies regardless of
whether the taxpayer performs services through its employees, agents or subcontractors, or by any other
persons. Also, it is immaterial where such receipts are payable or where they are actually received. see
20 NYCRR § 4-4.3. Where a lump sum payment is received by a taxpayer for payment of services
performed within and without New York, the portion of the payment attributable to services performed
within New York is based on the relative values of, or amounts of time spent in performance of such
services within and without New York, or by some other reasonable method. Full details must be
submitted with the Taxpayer’s report. see 20 NYCRR § 4-4.3(d).
In this case, Petitioner’s receipts are generated by providing educational tours to participants
through-out the world, including New York. Receipts from Petitioner’s activities are receipts from
services and will be apportioned to New York based on where the tour services are performed. In this
case, Petitioner conducts tours in New York. Therefore, Petitioner should source its receipts from the
tour services to New York when the tours are conducted solely in New York. If a tour is conducted in
both New York and elsewhere, the portion of the receipts sourced to New York may be based on the
number of tour days in New York over the number of tour days everywhere, or by some other reasonable
method. Petitioner must provide full details when it files its New York general business corporation
franchise tax return.

DATED: March 2, 2012

NOTE:

/S/
DEBORAH R. LIEBMAN
Deputy Counsel

An Advisory Opinion is issued at the request of a person or entity. It is limited to the facts set
forth therein and is binding on the Department only with respect to the person or entity to
whom it is issued and only if the person or entity fully and accurately describes all relevant
facts. An Advisory Opinion is based on the law, regulations, and Department policies in
effect as of the date the Opinion is issued or for the specific time period at issue in the
Opinion. The information provided in this document does not cover every situation and is
not intended to replace the law or change its meaning.