Maine Revenue Services Proposes Amended Rule to Adopt Look-Through Apportionment

On December 6, 2024, Maine Revenue Service (MRS) published a proposed amendment to its apportionment regulation, Rule 801, which would effectively adopt look-through apportionment of certain service receipts, apparently retroactive to January 1, 2010.

Maine law generally requires receipts from the performance of services to be sourced to the state “where the services are received.” MRS Rule 801 currently mirrors this statutory language.

The proposal would amend the sourcing rule, requiring services to be sourced to the state “where the services are received, that is, where the services are acquired or experienced.” The proposal then appends the following:

• Services may be received by a person other than the person who contracted for or paid for the services. The determination of where services are received is based on all available facts and is not limited to the books and records of the taxpayer or any person related to the taxpayer.
• The determination of where a service is received is distinct from the determination of the amount of gross receipts [included in the sales factor], from the performance of services that are attributed to Maine. A taxpayer’s inability or difficulty in determining the amount of receipts from the performance of services is distinct from a determination that the state where the services are received is not readily determinable.

The proposed amendment additionally sets out several examples, applying the amended regulation to in-person services, services concerning real property, services concerning tangible personal property, services concerning teaching/training, advertising and related services, cable TV services, and pharmacy benefits management services.

These examples expressly adopt a look-through approach for sourcing advertising services and cable TV services (based on an audience/viewer factor) and for sourcing pharmacy benefits management services (based on pharmacy or insured member location).

MRS has styled its proposal as a “clarification,” and it appears that MRS intends for the change to apply retroactively to January 1, 2010. See Rule 801.12. MRS is treating the amendment as a routine technical rule that does not require a public hearing; however, a public hearing is required under Maine’s Administrative Procedure Act if requested by five interested persons (or if the amendment were to be treated as a major substantive rule). Comments on the proposal are due by January 17, 2025.

We encourage businesses and industry groups with any questions about or interest in commenting on the proposed revised rule to contact Pierce Atwood tax attorneys Jonathan Block or Olga Goldberg.