§ 5833. Allocation and apportionment of income
(a) If the income of a taxable corporation is derived from any trade, business, or activity
conducted entirely within this State, the Vermont net income of the corporation shall
be allocated to this State in full. If the income of a taxable corporation is derived
from any trade, business, or activity conducted both within and outside this State,
the amount of the corporation’s Vermont net income that shall be apportioned to this
State, so as to allocate to this State a fair and equitable portion of that income,
shall be determined by multiplying that Vermont net income by the gross sales, or
charges for services performed, within this State, expressed as a percentage of such
sales or charges whether within or outside this State.
(1) Sales of tangible personal property are made in this State if: the property is delivered
or shipped to a purchaser, other than the U.S. government, who takes possession within
this State, regardless of f.o.b. point or other conditions of sale.
(2) Sales, other than the sale of tangible personal property, are in this State if the
taxpayer’s market for the sales is in this State. The taxpayer’s market for sales
is in this State:
(A) in the case of sale, rental, lease, or license of real property, if and to the extent
the property is located in this State;
(B) in the case of rental, lease, or license of tangible personal property, if and to
the extent the property is located in this State;
(C) in the case of sale of a service, if and to the extent the service is delivered to
a location in this State; and
(D) in the case of intangible property:
(i) that is rented, leased, or licensed, if and to the extent the property is used in
this State, provided that intangible property utilized in marketing a good or service
to a consumer is “used in this State” if that good or service is purchased by a consumer
who is in this State; and
(ii) that is sold, if and to the extent the property is used in this State, provided that:
(I) a contract right, government license, or similar intangible property that authorizes
the holder to conduct a business activity in a specific geographic area is “used in
this State” if the geographic area includes all or part of this State;
(II) receipts from intangible property sales that are contingent on the productivity, use,
or disposition of the intangible property shall be treated as receipts from the rental,
lease, or licensing of such intangible property under subdivision (i) of this subdivision
(2)(D); and
(III) all other receipts from a sale of intangible property shall be excluded from the numerator
and denominator of the receipts factor.
(3) If the state or states of assignment under subdivision (2) of this subsection cannot
be determined, the state or states of assignment shall be reasonably approximated.
(4) If the taxpayer is not taxable in a state to which a receipt is assigned under subdivision
(2) or (3) of this subsection, or if the state of assignment cannot be determined
under subdivision (2) of this subsection or reasonably approximated under subdivision
(3) of this subsection, such receipt shall be excluded from the denominator of the
receipts factor.
(5) The Commissioner of Taxes shall adopt rules as necessary to carry out the purposes
of this section.
(6) A taxable corporation subject to apportionment under this section shall report to
the Commissioner of Taxes:
(A) the average of the value of all the real and tangible property within this State at
the beginning of the taxable year and at the end of the taxable year, provided the
Commissioner may require the use of the average of the value on the 15th or other
day of each month in cases where the Commissioner determines that the computation
is necessary to more accurately reflect the average value of property within Vermont
during the taxable year, expressed as a percentage of all property both within and
outside this State; and
(B) the total wages, salaries, and other personal service compensation paid to employees
within this State during the taxable year, expressed as a percentage of all compensation
paid, whether within or outside this State.
(b) If the application of the provisions of this section does not fairly represent the
extent of the business activities of a corporation within this State, the corporation
may petition for, or the Commissioner may require, with respect to all or any part
of the corporation’s business activity, if reasonable:
(1) separate accounting;
(2) the exclusion or modification of any or all of the factors;
(3) the inclusion of one or more additional factors that will fairly represent the corporation’s
business activity in this State; or
(4) the employment of any other method to effectuate an equitable allocation and apportionment
of the corporation’s income. (Added 1966, No. 61 (Sp. Sess.), § 1, eff. Jan. 1, 1966; amended 1971, No. 73, §§ 15, 16, eff. April 16, 1971; 1987, No. 82, § 6, eff. June 9, 1987; 2003, No. 152 (Adj. Sess.), § 5, eff. June 7, 2004; amended 2019, No. 51, § 8, eff. Jan. 1, 2020; 2021, No. 148 (Adj. Sess.), § 3, eff. January 1, 2023; 2023, No. 6, § 378, eff. July 1, 2023.)