Sales Subject to Indiana Throwback Rule

A corporate income taxpayer was properly subject to Indiana throwback sales rule because it failed to establish that its sales to other states and foreign locations were taxable. As per the “throwback rule,” if sales are not taxable in the state of the purchaser then the sale is attributed to Indiana, provided that the property is shipped from an office, store, warehouse, factory, or another place of storage in this state. In this matter, the Department of Revenue adjusted the taxpayer’s income to include throwback sales calculation to 14 additional states and two foreign jurisdictions. The taxpayer argued that its activities in the 14 states provided sufficient nexus to subject it to net income tax in those states, and therefore, it should not be subject to the throwback rule or the additional Indiana adjusted gross income tax. However, it was noted that the taxpayer had failed to file tax returns or pay tax in the 14 states, and therefore, the taxpayer’s Indiana income was adjusted to throw back those sales to Indiana. The taxpayer only provided expense reports of employees, to show that it is taxable under each states’ law. Also, the taxpayer failed to provide any tax returns or registration to do business in the listed states. Moreover, the taxpayer’s representative’s protest letter stated that the only business conducted in the state is the “solicitation of sales.” Lastly, the taxpayer failed to provide evidence or documentation that its businesses were taxable in the two foreign jurisdictions. Accordingly, the taxpayer was properly subject to Indiana throwback sales rules.

Letter of Findings No. 02-20170298, Indiana Department of Revenue, January 31, 2018, ¶402-830

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