N.J. Admin. Code § 18:7-8.10A - Receipts from services in the State; allocation for certain special industries

(a) For privilege periods ending on and after July 31, 2019, receipts from service transactions shall be allocated to New Jersey in accordance with this section. The receipts of the taxpayer must be computed according to the method of accounting used in the computation of the taxpayer's net income for Federal tax purposes, arising during such period. The taxpayer must follow a consistent year-to-year application, unless the taxpayer changes their Federal accounting method; however, in the year of the Federal accounting change, the taxpayer must attach an explanation to their New Jersey CBT return explaining the accounting change. See N.J.A.C. 18:7-21 for additional information on combined groups filing New Jersey combined returns.

1. The numerator of the sales fraction developed in accordance with this section includes receipts from services not otherwise apportioned, if the benefit of the service is received by the customer at a location within this State.

2. In determining whether the benefit of the services is received within this State, a taxpayer shall include in the numerator of the sales fraction receipts derived from customers within this State as provided in this paragraph.

i. For purposes of this subparagraph, a customer is considered located within this State if a recipient is either:

(1) Engaged in a trade or business and maintains a place of business in this State; or

(2) Is an individual that is not a sole proprietor, who is located in this State. If the location of the individual cannot be determined, the benefit of the services will be deemed to be received at the individual's billing address.

ii. A place of business in this State is not limited to the principal place of business of the customer and includes any office, factory, warehouse, or other business location in this State where the customer conducts business in a regular and systematic manner or maintains property or employees.

iii. A billing address is the location indicated in the pertinent customer order or records of the taxpayer as the address of record where notices, statements, or bills relating to the customer's account are mailed, or the location where services are provided to the customer.

3. In the event that services are provided to a recipient engaged in a trade or business for use in that trade or business located in this State and another state(s), a taxpayer shall include in the numerator of the sales fraction receipts based on the percentage of the total value of the benefit of the services received in all locations both within and outside of this State, as determined in this paragraph, or a reasonable approximation as defined at (a)3iv(1) below.

i. For purposes of this paragraph, receipts are attributable to this State if the recipient of the service(s) receives all of the benefit of the service(s) in this State.

ii. If the recipient of the service(s) receives some of the benefit of the service(s) in this State, receipts arising from the service(s) shall be attributable to this State in proportion to the extent to which the recipient receives the benefit of the service(s) in this State.

iii. In determining the "proportion to the extent to which the recipient receives the benefit of the service(s) in this State," a taxpayer may use the terms of a contract, the taxpayer's books and records kept in the normal course of business, or the nature of the taxpayer's or recipient's business and/or the service(s) at issue, to determine how much of the benefit of the service(s) is received in this State.

iv. In determining the "proportion to the extent to which the recipient receives the benefit of the service(s) in this State," a taxpayer may use a reasonable approximation to attribute the location of receipts if none of the items listed at (a)3iii above provide the information necessary to determine how much of the benefit of the service(s) is received in this State.

(1) A "reasonable approximation" for attributing receipts under this subparagraph means that, considering all sources of information other than the terms of a contract, the taxpayer's books and records kept in the normal course of business, or the nature of the taxpayer's or recipient's business and/or the service(s) at issue, the location where the benefit of the service(s) is received is determined in a manner that is consistent with the activities of the recipient to the extent such information is available to the taxpayer. "Reasonable approximation" shall be limited to the jurisdictions or geographic areas where the recipient, at the time of purchase, will receive the benefit of the service(s), to the extent such information is available to the taxpayer. Information that is verifiable and specific in nature is preferred over unverifiable information that is general in nature. However, if the taxpayer is disproportionately affected, the taxpayer may request Section 8 relief pursuant to the procedures prescribed at N.J.A.C. 18:7-10.1. The following are some methods that are acceptable reasonable approximations to the Division of Taxation:

(A) If population is a reasonable approximation, the population used shall be the U.S. population as determined by the most recent U.S. census data. If it can be shown by the taxpayer that the benefit of the service(s) is being substantially received outside the U.S., then the populations of the countries where the benefit of the service(s) is being substantially received shall be added to the U.S. population for purposes of determining a reasonable approximation of the total value of the benefit of the services received in all locations.

(B) As an alternative reasonable approximation method to (a)3iv(1)(A) above, gross domestic product data (in U.S. dollars) is an acceptable method, as the taxpayer's situation or industry may warrant. The gross domestic product data shall be the most recent data available as described at (a)3iv(1)(H) below. If it can be shown by the taxpayer that the benefit of the service(s) is being substantially received outside the U.S., then the gross domestic product of the countries where the benefit of the service(s) is being substantially received shall be added to the U.S. gross domestic product for purposes of determining a reasonable approximation of the total value of the benefit of the services received in all locations. If the taxpayer knows, based on their business or industry, that certain countries represent a larger market share of their services and knows, based on their business or industry, that more customers are based in certain countries than others, gross domestic product data is the more acceptable approach to population data.

(C) If either the population method or the gross domestic product method, described at (a)3iv(1)(B) above, do not fully provide an accurate reasonable approximation based on the taxpayer's business and industry, but either per-capita gross domestic product or gross domestic product adjusted for the purchasing power parity provides a more accurate reasonable approximation, taxpayers may use either of these measures in the same manner as set forth for gross domestic product at (a)3iv(1)(B) above.

(D) As an alternative, if information that is verifiable and specific in nature is not readily available to the taxpayer, the taxpayer may use certain industry standard approximations. Industry standard approximations, if the taxpayer can show such approximations are more accurate than population or gross domestic product, are preferable than (a)3iv(1)(A), (B), or (C) above.

(E) Either Global Positioning System (GPS) and Internet Protocol (IP) address location data usage are acceptable methods to use if the taxpayer knows or has reason to know, based on their business or industry, that its services being offered are used in a manner where billing address is not the best indication of where the benefit of the service is received or where the product is being used. In such instances where the taxpayer has GPS or IP address location data, this method is a preferable method for determining a reasonable approximation over (a)3iv(1)(A), (B), (C), or (D) above. However, if it is determined that customers frequently use a Virtual Private Network (VPN) and the taxpayer lacks the technology to look through the VPN to determine the actual location of the customer, then the taxpayer may use the methods described at (a)3iv(1)(A), (B), (C), or (D) above.

(F) Customer data lawfully purchased from third party data-brokers by a taxpayer is an acceptable method for determining a reasonable approximation. However, customer data gathered and sold in violation of privacy, confidentially, and/or consumer protection laws by a third-party data-broker is unacceptable and cannot be used for determining a reasonable approximation.

(G) If after filing a return pursuant to (a)3iv(1)(A), (B), (C), (D), (E), or (F) above, or some combination of (a)3iv(1)(A) through (F) above, or other method providing the taxpayer with a more accurate, reasonable approximation that is only readily obtainable through the use of artificial intelligence, the taxpayer may amend its returns and file form A-3730, to claim a refund. However, as part of their request, the taxpayer must provide to the Division information about the computer code, language model, datasets used to develop and test the artificial intelligence, the data used to develop the reasonable approximation, the system rules and parameters in place when developing the approximation, the data-weights used for the approximation, and any other information that the Director determines necessary to determine that the artificial intelligence and the approximation were developed properly and not for the purpose of tax avoidance.

(H) For the purposes at (a)3iv(1)(A), (B), and (C) above, acceptable sources of GDP or population data include the International Monetary Fund, the U.S. Census Bureau, the U.S. Central Intelligence Agency Fact-book, Organisation for Economic Co-operation and Development, the World Bank, U.S. Bureau of Economic Analysis, World Economic Forum, and Federal Reserve.

(2) Examples:

Example 1: A taxpayer is in the business of providing real estate surveying services to developers and potential borrowers. A real estate development firm from another state is developing a tract of land in New Jersey. The real estate development firm from another state utilizes the services of the taxpayer to survey the land in New Jersey. The survey work is completed and the plans are drawn in New Jersey. All of the taxpayer's receipts from this survey work are attributable to New Jersey and are included in the numerator of the receipts fraction because the recipient of the service received all of the benefit of the service in New Jersey.

Example 2: A taxpayer is in the business of providing engineering services and is headquartered in another state. A corporation headquartered in another state is building an office complex in New Jersey. The corporation contracts with the taxpayer to oversee construction of the buildings on the site. The taxpayer performs some of its service in New Jersey at the building site and additional service in its home state. All of the receipts from the taxpayer's engineering service are attributable to New Jersey and are included in the numerator of the receipts fraction because the recipient of the service received all of the benefit of the service in New Jersey.

Example 3: A taxpayer headquartered outside this State enters into an agreement with a corporation from another state to develop and provide customized computer software for the corporation's business office that is located in New Jersey. The software will only be used by the business office in New Jersey. The software development occurs in another state. All of the taxpayer's receipts from the software services are attributable to New Jersey and are included in the numerator of the receipts fraction because the recipient of the service received all of the benefit of the service in New Jersey.

Example 4: A taxpayer headquartered outside this State enters into an agreement with a corporation from another state to develop and provide customized computer software for the corporation's business offices that are located in New Jersey and several other states. The software development occurs in another state. The taxpayer's receipts from the software services that are attributable to New Jersey and included in the numerator of the taxpayer's sales fraction shall be equal to the proportion of the software used in New Jersey to the software used everywhere (domestic and/or international).

Example 5: A taxpayer derives advertising revenues in the course of providing or distributing content (for example, broadcasting television or radio programs or any other content over the air, satellite, cable system, or Internet). It sets its advertising rates based upon the audience it reaches or has the potential to reach. The portion of the taxpayer's advertising revenues or receipts that is attributable to New Jersey and included in the numerator of the taxpayer's sales fraction shall be equal to the proportion of the taxpayer's audience in New Jersey to the audience everywhere (domestic and/or international).

Example 6: A taxpayer performs prescription fulfillment service. The company is headquartered in State X and manages a prescription plan on behalf of a client that is headquartered in State Y with offices in 50 states. The client's employees are located in all 50 states, including New Jersey, but frequently travel and may fill prescriptions from their home pharmacy or pharmacies on the road. For lump sum payments from the client to the fulfillment service, the sourcing may be based on the percentage of the client's employees working in New Jersey. Alternatively, for pay as you go services where there is adequate documentation of where the prescription is filled, the percentage of prescriptions filled in New Jersey would be acceptable to verify receipts to be sourced to this State. If the company is unable to track the percentage of the client's employees working in New Jersey or the percentage of prescriptions filled in New Jersey, a reasonable approximation considering all sources of information, or a population-based methodology would be acceptable.

Example 7: The taxpayer is a company that performs marketing analysis services in California and New York for a client that is headquartered in New Jersey with its advertising division offices in Florida. The project was requested from and directed by the client's advertising division located in Florida for use by the advertising division. The deliverable is a memo detailing the results of a marketing study performed by the taxpayer on behalf of the customer's advertising division, which will be sent to the advertising division leader in Florida to determine whether the information will be useful for the advertising division to incorporate into its marketing strategy. The information from the study, if useful and acceptable for the advertising division's intended purposes of the study, which would, if useful, ultimately be incorporated into an advertising strategy used companywide, nationwide by the customer, and not solely for the use of the customer's advertising division. The bill was sent to the client's accounts payable function in Illinois. This taxpayer's service would not be sourced to New Jersey since the benefit of the service is not utilized in New Jersey, nor is the benefit of the service received in New Jersey, unless the taxpayer knows or has reason to know, based on the taxpayer's business relationship with its customer or industry practices, that some of the customer's intended target consumer audience is located in New Jersey. If the taxpayer knows or has reason to know that part of the target consumer audience of the customer is in New Jersey, the taxpayer may use one of the reasonable approximation methods described at (a)3iv(1)(A) through (H) above. Otherwise, since the service was performed for the customer's advertising division located in Florida for use by the advertising division, the benefit of the services is received in Florida.

Example 8: A person purchases an in-dashboard GPS system that includes a periodic update service when the person brings the car to the dealership for periodic car maintenance. The update service ends after one year with an option for the car owner to renew the service directly with the GPS company, such that upon renewal, payments to the company are paid by the car's owner. In the first instance, where the periodic update service and GPS are bundled together the sale would be sourced to the location of the dealership. When the owner of the car renews the update service, the company's receipts from the service will be sourced to the customer's billing address.

Example 9: Taxpayer, a legal information company, provides a periodic legal research materials service. The service consists of periodic shipments of the latest statutes, regulations, and court cases based on the terms of contracts negotiated with each customer. The updates shipped to the customers consist of pocket parts for bound books or loose leaf binder inserts. A customer, with offices in New Jersey and three other states, contracts with the legal information company to receive weekly updates of the materials that are shipped to each office. The receipts included in the taxpayer's sales fraction will be sourced based on the percentage of updates that are received in the client's New Jersey office.

Example 10: Taxpayer, a payroll processing corporation, provides a payroll processing and remittance service to clients for a fee. The payroll processing corporation receives the data from clients and impounds funds from its clients for disbursing payroll checks and remitting tax monies to government agencies. The payroll processing corporation transmits the processed data back to its client that has offices and employees in New Jersey, Pennsylvania, South Carolina, California, and Ohio. The client hires the payroll processing corporation to process its payroll. The taxpayer's receipts from the payroll services will be sourced to New Jersey based on the number of the client's employees located in New Jersey since the monies for those employees are remitted to New Jersey.

Example 11: ABC is a corporation in the business of buying, selling, trading, and creating artwork, digital works, websites, animation, and designs for customer goods as a service. In addition to paintings, drawings, animations, sculptures, digital works, websites, and consumer good designs, ABC also develops non-fungible tokens (NFTs) for a fee to be sold by ABC's business customers to third-party customers. Big Shoe, located in Oklahoma, contracted with ABC to design X-shoe. Additionally, Big Shoe contracted with ABC to design NFTs featuring X-shoes being worn by major athletes to be sold to customers. Big Shoe intends to sell X-shoes across the U.S., Canada, Mexico, and Europe, and sell the X-shoe NFTs to customers in the U.S. and Canada. Big Shoe pays ABC a fee to develop the shoe design and a fee to develop the NFTs. Since the sales of the X-shoe by Big Shoe will be across the U.S., Canada, Mexico, and Europe, a reasonable approximation by ABC would be the population data from U.S., Canada, Mexico, and Europe for sourcing the fee from the shoe design. Since Big Shoe only intends to sell the NFTs in the U.S. and Canada, a reasonable approximation by ABC would be to use the population data from the U.S. and Canada for sourcing the fee for the development of the NFTs.

Example 12: Bold Co., a developer of digital services and products that are available on various augmented reality and digital platforms, but not the actual physical world, performs various services for Tech Co. in order to enhance and grow Tech Co.'s market share for Tech Co.'s digital world, Blue Green 7. Tech Co.'s digital world is available to individual customers and business customers around the world, and is on a series of servers located in the U.S. (including in New Jersey), Europe, and Asia. Bold Co. is located in Florida but has an office in New Jersey. Tech Co. has offices in New Jersey, Seattle, Paris, and Osaka. Tech Co. pays Bold Co. various fees. Since the benefit of the services are received worldwide, population data constitutes a reasonable approximation. If Bold Co. knowns certain countries represent a larger market share of Tech Co. and knows that more customers are based in certain countries than others, then gross domestic product data is the more acceptable approach compared to population data.

Example 13: Fridge Co. charges a subscription service fee to customers for its internet connected refrigerators and freezers and for services that allow customers through a software application ("app") to monitor various goods the customer has in the refrigerator or freezer. The app allows the customer to place orders with local stores or online retailers to have goods delivered when the goods run low or expire. Unless the customer selects a different option, the deliveries are made to the location the customer inputs through the app as the location of the refrigerator or freezer. When orders are placed for goods, Fridge Co. charges a processing fee. The benefit of the service is received at the physical location of the refrigerators and freezers of the customers who subscribed to the service because the refrigerators and freezers are at a physical location and the goods that are ordered to restock such refrigerators and freezers are delivered to such location. Thus, the fees charged by Fridge Co. must be sourced to such locations.

Example 14: New Money Co. is a financial technology business, not regulated by the Federal or State financial regulatory agencies. New Money Co. offers various digital assets over the internet and charges service fees for the purchasing, selling, processing, and storage of the digital assets in a virtual wallet. New Money Co. offers additional services for a fee to business customers seeking to accept digital assets as payment on their websites for their various wares. New Money Co. accepts various payment methods for its services including more traditional payment methods where the customer's actual address (i.e., the billing address) is known. They also accept-traditional payment methods such as virtual currency or other digital assets where New Money Co. does not know the location of the customer except as may be traceable through GPS data if the customer did not use a virtual private network. For the fees paid through traditional payments, the fees would be sourced based on the customer's address. For fees paid through non-traditional means, New Money Co. would source the receipts using GPS data if reliable. However, if GPS data is unreliable, population data is an acceptable method as a reasonable approximation.

Example 15: Data Co. collects and aggregates data from various businesses, which in turn collects the data from individuals through various means. Through a series of subscription service fees, Data Co. offers data analytics, security, verification, and data reports services to its customers. Data Co.'s customers use such services to send such things as target advertisements, and coupons, or to make business decisions either to accept a new customer or to hire an individual. Some of Data Co.'s customers only have customers in New Jersey, the tri-State area limited to New Jersey, New York, and Pennsylvania, or have customers in every state. For the fees generated by customers located in a limited geographic location, the benefit of the service would be the customer's billing address if the activities are being performed solely at the one office of the customer or between the states Data Co.'s customer has offices in, as applicable, and the receipts from fees paid by the customers must be sourced accordingly. For customers that have offices and customers in every state, population data would be a reasonable approximation to source the receipts from the fees paid by those customers.

Example 16: Game Co. is a company that hosts online games (not online betting) through a cloud that are offered to individual customers for a subscription service fee. Game Co. charges a basic yearly subscription fee, which allows customers to play a variety of games. Subscribers can pay additional fees for premium games. Game Co. has the billing address of its customers as part of its books and records, and the locations where the customers are playing the games based on GPS and IP data on its services. In most instances, though not all instances, the state in which the game is played is the same state as the billing address. However, based on data in its servers, Game Co. is able to identify when a customer is in a different state without overly burdening Game Co. The benefit of the service must be sourced based on GPS and IP data identifying the locations where the customers are playing the games, since it was not burdensome for Game Co. to track. However, if it had been burdensome for Game Co. to track, the benefit of the service would be sourced to the billing address of the customer.

4. All receipts obtained by the taxpayer in payment for services provided in the regular course of business are allocable, regardless of whether such services were performed by employees or agents of the taxpayer, by subcontractors, or by any other persons and regardless of whether the taxpayer reports the receipt as an item of income or a reduction in expense.

5. It is immaterial where the receipts from the sales of services were payable or where they were actually received.

6. Lump sum payments for services where the benefit is received both inside and outside of New Jersey must be apportioned in the manner described at (a)6i and ii below in order to result in a fair and reasonable receipts fraction. For transportation companies that meet the qualifications at N.J.S.A. 54:10A-4.7(b), see N.J.A.C. 18:7-21 for additional information and applicable rules for transportation combined groups filing New Jersey combined returns.

i. Transportation revenues of an airline are from services in New Jersey based on the ratio of an airline's revenue miles in New Jersey divided by an airline's total revenue miles. Where an airline is engaged in the transportation of passengers, the transportation of freight, or the rental of aircraft, the ratio shall be determined by an average of a passenger revenue mile fraction, freight revenue mile fraction, and rental revenue mile fraction weighted to reflect the taxpayer's relative gross receipts from passenger transportation, freight transportation, and rentals.

(1) "Revenue miles" means passenger revenue miles for passenger transportation, freight revenue miles for freight, or transportation rental revenue miles for aircraft rentals.

(2) The passenger revenue mile fraction is determined by multiplying the number of revenue-paying passengers aboard the aircraft by the distance traveled in New Jersey divided by the number of revenue-paying passengers aboard the aircraft multiplied by the distance traveled everywhere.

(3) The freight revenue mile fraction is determined by dividing the freight ton revenue miles in New Jersey by the freight revenue miles everywhere. A freight revenue ton mile is equal to one ton carried one mile.

(4) The rental revenue mile fraction is determined by dividing the number of rental miles flown in New Jersey by total rental miles flown.

ii. Trucking companies deriving revenues from transporting freight will calculate their receipts fraction using mileage as follows: The taxpayer's receipts are multiplied by a fraction, the numerator, which is the number of miles in New Jersey and the denominator, which is the mileage in all jurisdictions. For convenience, taxpayers required to maintain mileage records in compliance with the International Fuel Tax Agreement pursuant to N.J.S.A. 54:39A-24 and N.J.A.C. 13:18-3.12 shall make calculations using such records. For transportation companies that meet the qualifications at N.J.S.A. 54:10A-4.7(b), see N.J.A.C. 18:7-21for additional information and applicable rules for transportation combined groups filing New Jersey combined returns.

iii. Taxpayers engaged in transportation, shipping, and logistics services as intermediaries shall source their receipts in the same manner as the industries of their third- party carriers (that is, the transportation, airline, trucking, and shipping companies with whom the taxpayer subcontracts) engaged in transportation businesses in order to determine ton miles. The taxpayer's receipts are multiplied by a fraction, the numerator, which is the number of ton miles in New Jersey, and the denominator, which is the number of ton miles in all jurisdictions. For transportation companies that meet the qualifications at N.J.S.A. 54:10A-4.7(b), see N.J.A.C. 18:7-21 for additional information and applicable rules for combined groups engaged in the transportation business filing New Jersey combined returns.

iv. Taxpayers formed in a foreign nation and engaged in international shipping by sea or air shall exclude the receipts and miles that are attributable to items of income excluded from entire net income either by treaty or excluded pursuant to N.J.S.A. 54:10A-4(k)(9).

v. Taxpayers in the transport, shipping, and logistics service industry with blended transport methods shall source their receipts using the ton miles from the land (truck, cargo van, or rail), air, and sea transit, as may be applicable to the methods of transport used by the taxpayer. This includes the ton miles of the subcontractors (that is, the third-party carriers) a taxpayer may have used to transport the goods of its customers. The taxpayer's receipts are multiplied by a fraction, the numerator, which is the number of ton miles in New Jersey, and the denominator, which is the number of ton miles in all jurisdictions.

7. If a taxpayer receives a lump sum in payment for services and for materials or other property, the sum received must be apportioned on a reasonable basis by providing:

i. The part apportioned to services is includible in receipts from services;

ii. The part apportioned to materials or other property is includible in receipts from sales; and

iii. Full details must be submitted with the taxpayer's return.

8. Receipts arising from the sale of asset management services shall be allocated to New Jersey in accordance with the procedures described in this paragraph.

i. In the case of asset management services directly or indirectly provided to individuals, receipts shall be allocated to New Jersey if the domicile of the individual is in New Jersey.

ii. In the case of asset management services directly or indirectly provided to a pension plan, retirement account, or institutional investor, such as private banks, national and private investors, international traders, intermediaries, or insurance companies, receipts shall be allocated to New Jersey to the extent the domicile of the beneficiaries of the plan, beneficiaries of the account, or beneficiaries of the similar pool of assets held by the institutional investor is in New Jersey.

(1) In the event the domiciles of the beneficiaries are not or cannot be obtained, a reasonable proxy may be used to allocate receipts to New Jersey that reflects the trade or business practice and economic realities underlying the generation of receipts from the asset management services. The burden of demonstrating the reasonableness of the method rests on the taxpayer. Based on specific facts and circumstances, reasonable proxies used to allocate receipts to New Jersey may take into account, among other things, the latest available population census data of the countries the business customer does business in, the gross domestic product of the countries the business customer does business in, the per capita gross domestic product of the countries the business customer does business in, the domicile of the sponsor of the plan, account, or pool of assets, the sponsor's payroll apportionment factor, or the sponsor's ratio of New Jersey employees to total employees. The taxpayer must use the same reasonable proxy from year to year, unless the taxpayer can identify a more accurate proxy in a later year.

iii. In the case of asset management services directly or indirectly provided to a regulated investment company, receipts shall be allocated to New Jersey to the extent that shareholders of the regulated investment company are domiciled in New Jersey in accordance with:

(1) The portion of receipts deemed to arise from services within New Jersey shall be determined by multiplying the total of such receipts from the sale of such services by a fraction. The numerator of the fraction is the average of the sum of the beginning of the year and the end of year balance of shares owned by the regulated investment company shareholders domiciled in New Jersey for the regulated investment company's taxable year for Federal income tax purposes that ends within the taxable year of the taxpayer. The denominator of the fraction is the average sum of the beginning of the year and end of year balance of shares owned by the regulated investment company shareholders. A separate computation is made to determine the allocation of receipts from each regulated investment company.

iv. As used in this paragraph, the following words and terms shall have the following meanings:

(1) "Asset management services" means the rendering of investment advice, making determinations as to when sales and purchases are to be made, or the selling or purchasing of assets and related activities. As used in this sub-subparagraph, "related activities" means administration services, distribution services, management services, and other related services;

(2) "Administration services" means and includes clerical, accounting, bookkeeping, data processing, internal auditing, legal, and tax services, but does not include trust services;

(3) "Distribution services" means the services of advertising, servicing investor accounts (including redemptions), marketing shares, or selling shares of a regulated investment company;

(4) "Management services" means the rendering of investment advice, making determinations as to when sales and purchases of securities are to be made, or the selling or purchasing of securities and related activities;

(5) "Domicile" shall have the meaning ascribed to it at N.J.S.A. 54A:1-2.m in the case of an individual and under N.J.S.A. 54A:1-2.o in the case of an estate or trust and in the case of a business entity where the actual seat of management or control is located in this State; provided; however, "domicile" shall be presumed to be the mailing address of the beneficiary of the plan, account, or other similar pool of assets based upon the sponsor's records with respect to any such beneficiary or the shareholder's mailing address on the records of the regulated investment company. For purposes of (a)8iii above, in the case of a nominee holding the investment on behalf of its customers, the mailing address of the customer shall be deemed to be the domicile of the shareholder;

(6) In addition to amounts received directly from a regulated investment company, "receipts" shall also include amounts received directly from the shareholders of such regulated investment company in their capacity as such;

(7) "Regulated investment company" means a regulated investment company as defined at N.J.S.A. N.J.S.A. 54:10A-4(g) and meets the requirements of Section 851 of the Federal Internal Revenue Code; and

(8) "Sponsor" means the party that has contracted directly with the beneficiaries of the plan, account, or similar pools of assets.

v. See N.J.A.C. 18:7-1.6 regarding foreign advisors having customers in New Jersey.

9. Receipts from the services of a registered securities or commodities broker or dealer shall be sourced to New Jersey, if the customer is located within this State.

i. For purposes of this paragraph, the following words or terms shall have the following meanings:

(1) "Securities" has the meaning provided by paragraph (2) of subsection (c) of section 475 of the Federal Internal Revenue Code of 1986, 26 U.S.C. § 475;

(2) "Commodities" has the meaning provided by paragraph (2) of subsection (e) of section 475 of the Federal Internal Revenue Code of 1986, 26 U.S.C. § 475; and

(3) "Registered securities or commodities broker or dealer" means a broker or dealer registered as such by the Federal Securities and Exchange Commission or the Federal Commodities Futures Trading Commission.

10. Receipts from a broadcaster's licensing of film programming to a broadcast customer shall be sourced to New Jersey based on the broadcast customer's viewing audience in New Jersey in proportion to the viewing audience in all jurisdictions in which the broadcast customer has viewers. If the information is indeterminable, including lack of any information that is a reasonable approximation, a broadcast customer shall be deemed to receive the benefit of such license in New Jersey and the receipts from the licensing of the film programming shall be sourced based on the ratio of the population of New Jersey over the population of the other jurisdictions in which the broadcast customer has viewers. However, if a broadcaster can prove to the Director of the Division of Taxation by cogent evidence that is definite, positive, and certain in quantity and quality that the broadcast customer does not have any viewers in New Jersey, the receipts from licensing of film programming to the broadcast customer shall be sourced to the commercial domicile of the broadcast customer.

i. For purposes of this paragraph, the following words or terms shall have the following meanings:

(1) "Broadcast customer" means a person, corporation, partnership, limited liability company, or other entity, such as a platform distribution company, that has a direct connection or contractual relationship with the broadcaster under which revenue is derived by the broadcaster. The term "broadcast customer" includes, but is not limited to, a licensee of film programming (for example, a platform distribution company paying a licensing fee to the broadcaster to air the broadcaster's film programing);

(2) "Broadcaster" means a taxpayer that is engaged in the business of broadcasting, and includes a television broadcast network, a cable program network, or a television distribution company. The term "broadcaster" does not include a platform distribution company;

(3) "Broadcasting" means the transmission of film programming by an electronic or other signal conducted by microwaves, wires, lines, coaxial cables, wave guides, fiber optics, satellite transmissions, or through any other means of communication directly or indirectly to viewers and listeners;

(4) "Commercial domicile" means, in the case of a business entity, the principal place where the actual seat of management or control is located;

(5) "Film programming" means one or more performances, events, or productions (or segments of performances, events, or productions) intended to be distributed for visual and auditory perception, including, but not limited to, news, entertainment, sporting events, plays, stories, or other literary, commercial, educational, or artistic works; and

(6) "Platform distribution company" means a cable service provider, a direct broadcast satellite system, an Internet content distributor (domestic and/or international), or any other distributor that directly charges viewers for access to any film programming.

Example: Taxpayer Network Corp. is a broadcaster that licenses rights to its film programming to platform distribution companies (broadcast customers). Broadcast Customer A pays licensing fees to Network Corp. for the rights to distribute Network Corp.'s film programming to Broadcast Customer A's customers who are located inside and outside of New Jersey. Broadcast Customer A broadcasts to viewers in New Jersey, Pennsylvania, New York, and Maine. If Network Corp. is unable to source such receipts based on the broadcast customer's viewing audience and it has no other information that is a reasonable approximation, then Network Corp.'s receipts from Broadcast Customer A will be sourced to New Jersey based on a ratio of the New Jersey population over the population of New Jersey, Pennsylvania, New York, and Maine.

11. Taxpayers in the gaming industry (that is, a casino, online gambling business, etc.) shall report and include their receipts in the same manner as reported for Federal tax purposes in accordance with U.S. G.A.A.P. or I.F.R.S. (as applicable).

i. Gaming receipts that are derived from New Jersey sources are includable in the numerator of the allocation factor for corporation business tax purposes. The receipt amounts reported on Schedule J of the taxpayer's New Jersey CBT return must reflect the amounts that are in the taxpayer's tax base. Accordingly, the receipts reported on Schedule J of the taxpayer's New Jersey CBT return in both the numerator and denominator must reflect the sales receipts reported on line 1c of the taxpayer's Federal return. For gaming receipts, this would mean net gaming receipts (that is, the total of the gross amount wagered less the payout from any transaction with a casino patron, less returns, bonuses, and chargebacks) as reported for Federal tax return purposes in accordance with U.S. G.A.A.P. or I.F.R.S.

ii. With regard to a combined group that contains entities in the gaming industry, net gaming receipts are sourced as reported for Federal tax return purposes in accordance with U.S. G.A.A.P. or I.F.R.S. However, if the accounting period (privilege period) of the entities within the combined group are not identical, then the net gaming receipts will be sourced in accordance with the accounting period (privilege period) of the combined group.

iii. If there are material differences in accounting methods between U.S. G.A.A.P. and I.F.R.S. that cause material numerical differences, the taxpayer must include an explanation in their books, records, and work papers. Information supporting the material differences must be made available to the Division of Taxation upon request.

iv. With regard to sourcing receipts for online gaming activity captured on New Jersey-based servers and I.P. address data (that is, data captured as part of the taxpayer's books and records using the server and I.P.), application of data so captured by such New Jersey-based servers and I.P. address data is the correct method for determining where the benefit of the service is received.

Notes

N.J. Admin. Code § 18:7-8.10A

Adopted by 52 N.J.R. 1677(c), effective 9/8/2020 Amended by 54 N.J.R. 1819(a), effective 9/19/2022 Amended by 57 N.J.R. 1303(b), effective 6/16/2025