For a company that books trips and tours, what share of its service receipts is allocated to New York for the Article 9-A receipts factor when the booking agents are in New York but the back office is elsewhere?

Plain-English summary

Alan Langer, CPA, asked how to determine the New York share of gross receipts from services for a company (Taxpayer A) that "books" trips and tours, for the numerator of the receipts factor in the Article 9-A business allocation percentage.

Taxpayer A's setup: its main location is outside New York, where purchasing agents package the tours and negotiate pricing with hotels and carriers, all marketing is directed, the main booking computer sits, and administrative staff work. In New York, a "booking agent" accesses that out-of-state system to advise customers on options and records the sale.

The answer: 100% to New York. Under 20 NYCRR 4-4.3, receipts from services performed in New York are allocated to New York, regardless of where the receipts are payable or received. The key is where the income-generating activity occurs. Here, the out-of-state packaging, marketing, computer, and administrative work does not generate income -- no revenue arises until a customer buys a trip at the New York booking agent's location. It is the booking agent's sale in New York that generates the receipts. So 100% of the receipts from the booking service are in the New York numerator.

The out-of-state activities are not ignored -- they are reflected in the property and payroll factors of the business allocation percentage.

What this means for you

Service receipts follow where the income-producing sale happens

For a booking/sales service, the receipts are sourced to the location where the agent actually makes the sale -- here, New York -- not to where the back-office support sits.

Back-office support work shows up in the other two factors, not receipts

Out-of-state purchasing, marketing, computing, and administration are captured through the property and payroll factors, so they still affect overall allocation -- just not the receipts factor.

Where receipts are billed or collected does not matter

Section 4-4.3 expressly disregards where the receipts are payable or received; what controls is where the service is performed.

Common questions

Q: If the computer and buyers are out of state, why is all the revenue sourced to New York?
A: Because the income is generated by the New York booking agent's sale -- no revenue exists until the customer buys at the New York location.

Q: Does the out-of-state work count for anything?
A: Yes -- it is reflected in the property and payroll factors, just not in the receipts factor.

Q: Does it matter where the customer pays or where the money is received?
A: No. Under 20 NYCRR 4-4.3, the place of payment or receipt is immaterial; the service location controls.

Citations and references

Statutes, regulations, and authorities:
- Tax Law section 210.3 (business allocation percentage)
- 20 NYCRR 4-4.3 (receipts from services performed in New York State)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/corporation_ao_1992.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/corporation/a92_9c.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-92 (9) C
Corporation Tax
May 20, 1992

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. C920306A

On March 6, 1992, a Petition for Advisory Opinion was received from Alan Langer, CPA,
c/o Richard A. Eisner & Company, 575 Madison Avenue, New York, New York 10022-2511.
The issue raised by Petitioner, Alan Langer, is how to determine the percentage of gross
receipts from services rendered by a company that "books" trips and tours that is attributable to New
York when computing the numerator of the receipts factor for purposes of the business allocation
percentage under Article 9-A of the Tax Law.
Taxpayer A's offices consist of wholesale and retail locations, open to the general public,
which "book" trips and tours. It's main location, which is outside New York, functions as follows:
its purchasing agents, who deal with hotels and carriers, package the tours and arrange pricing with
the various vendors; all marketing efforts are directed therefrom; its main computer, which processes
all hotel and carrier booking, is physically located there; and all administrative personnel are there.
In effect, the 'booking agent" in New York merely calls up the computer outside of New York to
advise the clients as to options for the trip, and then records the "sale" through that system. Thus,
the "service' provided in New York is merely to access the information gathered by employees
located outside of New York and pass that on to the consumer.
Section 4-4.3 of the Business Corporation Franchise Tax Regulations provides:
(a) The receipts from services performed in New York State are allocable to
New York State. All receipts from such services are allocated to New York State,
whether the services were performed by employees, agents or subcontractors of the
taxpayer, or by any other persons. It is immaterial where such receipts are payable
or where they are actually received.
(b) Commissions received by a taxpayer are allocated to New York State if
the services for which the commissions were paid were performed in New York
State. If the services for which the commissions were paid were performed for the
taxpayer by salesmen attached to or working out of a New York State office of the
taxpayer, the services will be deemed to have been performed in New York State.
Herein, Taxpayer A's purchasing agents and administrative personnel are located outside
New York State and the 'booking agent" or sales agent is located in New York State. Taxpayer A's
activities through the efforts of the purchasing agents in packaging the tours and arranging pricing

TP-9 (9/88)

-2­
TSB-A-92 (9) C
Corporation Tax
May 20, 1992

with the various vendors; the marketing efforts; the computer operation and the activities of the
administrative personnel, all of which are conducted outside New York State, do not generate any
income. The generation of income is based on the booking agent's efforts in New York State in
selling, to a customer, a trip or tour "packaged" by the purchasing agent. No revenue is generated
until a customer buys a ticket or tour package at the booking agent's New York location. It is the
booking agent's efforts in making the sale that generates Taxpayer A's receipts from services.
Accordingly, since the booking agents are located in New York State, 100% of Taxpayer A's
receipts from services rendered would be attributable to New York State pursuant to section 4-4.3
of the Regulations and would be included in the numerator of the receipts factor of the business
allocation percentage under Article 9-A of the Tax Law.
It should be noted that Taxpayer A's activities outside New York State, that is, the efforts of
its purchasing agents and its administrative personnel, and the marketing efforts and the computer
operation would be reflected in the property and payroll factors of the business allocation percentage
under Article 9-A of the Tax Law.

DATED: May 20, 1992

s/PAUL B. COBURN
Deputy Director
Taxpayer Services Division

NOTE: The opinions expressed in Advisory Opinions
are limited to the facts set forth therein.