United States: Missouri Adopts Rule Interpreting New Single Sales Factor Apportionment Method Election

The Missouri Department of Revenue has adopted a rule, effective March 30, 2014, implementing the provisions of H.B. 128, which contains a new apportionment method election for corporate income tax purposes.1 This election, which allows taxpayers to utilize a single sales factor method based on total sales from transactions in Missouri divided by total sales everywhere, is effective for original corporate income tax returns filed on or after August 28, 2013.

Corporate Income Tax Apportionment Election

Missouri historically has provided taxpayers with the option to apportion income using either an equally-weighted three-factor formula including sales, property and payroll factors or a modified single-sales factor method.2 Under the modified single-sales factor method, the numerator of the sales factor includes all the taxpayer's sales or business transacted wholly within Missouri and half of its sales or business transacted partly within and partly without Missouri, while the denominator includes total sales.3

The election to use the new single sales factor method may be made on original corporate income tax returns filed on or after August 28, 2013 (the date on which H.B. 128 became effective), regardless of the year for which the original income tax return is filed.4 The election is not available on any amended return.5 The new single sales factor method is based on total sales from transactions in Missouri divided by total sales everywhere.6 For purposes of determining sourcing of sales of tangible personal property, if the purchaser's destination point is outside Missouri, the sale is not considered a Missouri sale.7

The new rules: (i) specify that the election is only available to a corporation that is eligible to apportion income; (ii) define key terms; and (iii) provide relevant examples of corporations eligible to make the election.8 Of note, the term "original return" is defined as "the initial income tax return filed for a taxable year, and does not mean an amended income tax return filed for a taxable year for which a corporation has previously filed any income tax return."9 In addition, an example confirms that the election may be made on a 2012 calendar year tax return if the original extended return were filed with the Department on or after August 28, 2013.


Enactment of the new apportionment election provides Missouri-based companies selling tangible personal property outside the state with an even more attractive option for computing Missouri taxable income than their historic choice of apportionment formulas. Given that many companies are likely to use this new election, it is interesting to note that Missouri law remains silent regarding how to source sales of services and intangibles for sales factor purposes, which may comprise a large component of the sales factor in many cases.

It is also intriguing that the rule does not specifically address taxpayers who have not yet filed corporate income tax returns for previous years. For taxpayers with Missouri nexus who have not yet complied with corporate income tax filing requirements for tax years prior to 2013, the possibility exists that the new single sales factor apportionment election could be available, in contrast to taxpayers that have timely filed corporate income tax returns.


1 MO. CODE REGS. ANN. tit. 12, §10-2.052, effective March 30, 2014. During the rulemaking process, the Department changed the title of the rule from "New Single Sales Factor" to "Optional Single Sales Factor." However, this is still commonly known as the "new single sales factor."

2 MO. REV. STAT. §§ 143.451.2; 32.200(IV)(9).

3 MO. REV. STAT. § 143.451.2(2)(b).

4 MO. CODE REGS. ANN. tit. 12, §10-2.052(1). See GT SALT Alert: Missouri Enacts Legislation Providing New Single Sales Factor Apportionment Election, Expanding Sales and Use Tax Nexus.

5 MO. CODE REGS. ANN. tit. 12, §10-2.052(4).

6 MO. REV. STAT. § 143.451.2(3)(b).

7 MO. REV. STAT. § 143.451.2(3)(c).

8 MO. CODE REGS. ANN. tit. 12, §§10-2.052(2), (4), (5).

9 MO. CODE REGS. ANN. tit. 12, §10-2.052(2)(D).

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