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Single Sales Factor Apportionment: Market-Based Sourcing vs. Cost of Performance, Business Dispositions, State Nuances

Recording of a 110-minute CPE webinar with Q&A

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Conducted on Thursday, June 22, 2023

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This webinar will review the nuances and calculations of single sales factor apportionment. Our panel of state income tax consultants will explain differences in market-based sourcing and cost of performance, outline the impact of the sales factor on the disposition of a business, and point out variances in states' application of single sales factor apportionment to avoid unexpected tax and minimize overall state tax paid by multistate companies.


Multistate businesses must apportion income in the states where they have nexus. Earlier states often used a three-factor apportionment method, including sales, payroll, and property. Now, more than 30 states use single sales factor apportionment to determine taxable income within their state. Most recently, Montana and Vermont have joined these states, beginning in 2025 and 2023, respectively. At first glance, these calculations appear simple, with businesses paying tax on the percentage of income generated in each state; however, the nuances of these calculations are complex.

Most states that utilize single sales factor apportionment use market-based sourcing, dividing income based on the location of the customer receiving the benefit. However, many of these states still use the three-factor apportionment method. Adding to this complication, in New York, service businesses that are C and S corporations must use market-based sourcing, while partnerships and LLCs must use the three-factor method. Virginia has historically used the three-factor apportionment method, with double-weighted sales, but, beginning Jan. 1, 2023, will allow retailers to elect to use single-factor apportionment for consolidated retail groups that include other types of entities.

Listen as our panel of SALT technical experts explains the critical considerations of single sales factor apportionment in particular states and by business type. These calculations have a dramatic impact on taxes paid by multistate businesses. SALT practitioners working with these taxpayers need to understand the intricacies of these rules.



  1. Single sales factor apportionment: introduction
  2. Compared to other methods
    1. Three-factor vs. single sales factor apportionment
    2. Cost of performance vs. market-based sourcing
    3. Other trends
  3. Impact on disposition of a business or business assets
  4. Caveats
    1. State methodology differences
    2. Treatment differences by partner type
    3. Other caveats
  5. States requiring elections to use single sales factor
  6. Examples
    1. Specific states
    2. Specific business types


The panel will review these and other critical issues:

  • States requiring elections to use single factor sales apportionment
  • Impact of the sales factor on business and asset sales
  • Specific state methodology differences in the application of single sales factor apportionment
  • Differences in cost of performance and market-based sourcing


Smith, Scott
Scott Smith, JD

Managing Director, National Tax Office, Technical Leader State & Local Tax

Mr. Smith is national technical leader of BDO’s State & Local Tax (SALT) practice. He sets BDO's policies...  |  Read More

Spengler, Richard
Richard W. Spengler, CPA

Managing Director - Multi State Tax Consulting

Mr. Spengler's main area of focus is state income and franchise taxes with significant experience in the design and...  |  Read More

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