The Oregon Tax Court rejected the taxpayer’s operational approach to cost of performance in determining sales factor receipts for apportionment purposes. The taxpayer, AT&T Corp., filed a claim for refund after recalculating its Oregon sales factor based on the theory that a greater portion of its income producing activities were performed (cost of performance) outside of Oregon than within the state. AT&T used the operational approach (viewing the enterprise as whole) to calculate the costs of performance. The other widely accepted approach to calculating costs of performance is the transactional approach (considering each income producing transaction). The Oregon Tax Court rejected the AT&T’s arguments and the application of the operational approach. The refund claim was denied.
Read the opinion here:
AT&T Corp. v. Department of Revenue, TC 4814 (June 28, 2011)