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“‘Cost of Performance’ Confusion”

May 15, 2023

Jennifer Karpchuk’s article, “‘Cost of Performance’ Confusion,” in Tax Notes

Tax Notes

In a May 15, 2023, Tax Notes article, Philadelphia-based Shareholder and S.A.L.T Practice Co-Chair Jennifer Karpchuk discusses the lack of consistency in state courts’ interpretations of “cost of performance” language in state statutes, leading to unpredictable results in sourcing cases.

“Over the past year, courts around the country have been interpreting various “cost of performance” (COP) language in state statutes and coming to unpredictable conclusions,” explains Karpchuk.

She further outlines three recent cases that call attention to the consistency of revenue departments’ frustration with — and attempts to alter the result of — “standard” COP language in their state’s statutes, and the inconsistency of state courts’ interpretations of similar language.

“While these decisions highlight the lack of consistency across state courts in analyzing similar language, they also highlight the desire of revenue departments in COP states to achieve market, or similar, results,” writes Karpchuk. “Taxpayers should be on the lookout for other COP jurisdictions that may closely examine the Pennsylvania Supreme Court’s decision and its potential applicability in their state.”

To learn more, subscribers may view the full article here.