Rhode Island Code of Regulations
Title 280 - Department of Revenue
Chapter 20 - Division of Taxation
Subchapter 25 - Business Corporation Tax
Part 9 - Apportionment of Net Income (280-RICR-20-25-9)
Section 280-RICR-20-25-9.15 - Appendix - Additional Examples

1. Camera Corp provides camera repair services at an in-state retail location to walk-in individual and business customers. In some cases, Camera Corp actually repairs a camera that is brought to its in-state location at a facility that is in another state. In such cases, the repaired camera is then returned to the customer at Camera Corp's in-state location. The receipts from sale of such services are in Rhode Island.

2. Same facts as in Example 1 above, except that a customer located in Rhode Island mails the camera directly to the out-of-state facility owned by Camera Corp to be fixed, and receives the repaired camera back in Rhode Island by mail. The receipts from sale of the service are in Rhode Island.

3. Teaching Corp provides seminars in Rhode Island to individual and business customers. The seminars and the materials used in connection with the seminars are prepared outside the state, the teachers who teach the seminars include teachers that are resident outside the state, and the students who attend the seminars include students that are resident outside the state. Because the seminars are taught in Rhode Island the receipts from sales of the services are in Rhode Island.

1. Fulfillment Corp, a corporation based outside Rhode Island, provides product delivery fulfillment services in Rhode Island and in neighboring states to Sales Corp, a corporation located outside Rhode Island that sells tangible personal property through a mail order catalog and over the Internet to customers. In some cases when a customer purchases tangible personal property from Sales Corp to be delivered in Rhode Island, Fulfillment Corp will, pursuant to its contract with Sales Corp, deliver that property from its fulfillment warehouse located outside Rhode Island. The receipts from the sale of the fulfillment services of Fulfillment Corp to Sales Corp are assigned to Rhode Island to the extent that Fulfillment Corp's deliveries on behalf of Sales Corp are to recipients in Rhode Island.

2. Software Corp, a software development corporation, enters into a contract with a business customer, Buyer Corp, which is physically located in Rhode Island, to develop custom software to be used in Buyer Corp's business. Software Corp develops the custom software outside Rhode Island, and then physically installs the software on Buyer Corp's computer hardware located in Rhode Island. The development and sale of the custom software is properly characterized as a service transaction, and the receipts from the sale are assigned to Rhode Island because the software is physically delivered to the customer in Rhode Island.

3. Same facts as Example 5, except that Buyer Corp has offices in Rhode Island and several other states, but is commercially domiciled outside Rhode Island and orders the software from a location outside Rhode Island. The receipts from the development and sale of the custom software service are assigned to Rhode Island because the software is physically delivered to the customer in Rhode Island.

1. Net Corp, a corporation based outside Rhode Island, provides web-based services to a business customer, Business Corp, a company with offices in Rhode Island and two neighboring states. Particular employees of Business Corp access the services from computers in each Business Corp office. Assume that Net Corp determines that Business Corp employees in Rhode Island were responsible for 75% of Business Corp's use of Net Corp's services, and Business Corp employees in other states were responsible for 25% of Business Corp's use of Net Corp's services. In such case, 75% of the receipts from the sale are received in Rhode Island. Assume alternatively that Net Corp lacks sufficient information regarding the location or locations where Business Corp's employees used the services to determine or reasonably approximate such location or locations. Under these circumstances, if Net Corp derives 5% or less of its receipts from sales to Business Corp, Net Corp must assign the receipts to the state where Business Corp principally managed the contract, or if that state is not reasonably determinable, to the state where Business Corp placed the order for the services, or if that state is not reasonably determinable, to the state of Business Corp's billing address. If Net Corp derives more than 5% of its receipts from sales of services to Business Corp, Net Corp is required to identify the state in which its contract of sale is principally managed by Business Corp and must assign the receipts to that state.

2. Net Corp, a corporation based outside Rhode Island, provides web-based services through the means of the Internet to more than 250 individual and business customers in Rhode Island and in other states. Assume that for each customer Net Corp cannot determine the state or states where its web services are actually received, and lacks sufficient information regarding the place of receipt to reasonably approximate such state or states. Also assume that Net Corp does not derive more than 5% of its receipts from sales of services to any single customer. Net Corp may apply the safe harbor provision and may assign its receipts using each customer's billing address.

1. Web Corp, a corporation that is based outside Rhode Island, provides Internet content to viewers in Rhode Island and other states. Web Corp sells advertising space to business customers pursuant to which the customers' advertisements will appear in connection with Web Corp's Internet content. Web Corp receives a fee for running the advertisements that is determined by reference to the number of times the advertisement is viewed or clicked upon by the viewers of its website. The receipts from Web Corp's sale of advertising space to its business customers are assigned to Rhode Island to the extent that the viewers of the Internet content are in Rhode Island, as measured by viewings or clicks. If Web Corp is unable to determine the actual location of its viewers, and lacks sufficient information regarding the location of its viewers to reasonably approximate such location, Web Corp must approximate the amount of its Rhode Island receipts by multiplying the amount of receipts from sales of advertising by a percentage that reflects the Rhode Island population in the specific geographic area in which the content containing the advertising is delivered relative to the total population in such area.

2. Retail Corp, a corporation that is based outside of Rhode Island, sells tangible property through its retail stores located in Rhode Island and other states, and through a mail order catalog. Answer Co, a corporation that operates call centers in multiple states, contracts with Retail Corp to answer telephone calls from individuals placing orders for products found in Retail Corp's catalogs. In this case, the phone answering services of Answer Co are being delivered to Retail Corp's customers and prospective customers. Therefore, Answer Co is delivering a service electronically to Retail Corp's customers or prospective customers on behalf of Retail Corp, and must assign the proceeds from this service to the state or states from which the phone calls are placed by such customers or prospective customers. If Answer Co cannot determine the actual locations from which phone calls are placed, and lacks sufficient information regarding the locations to reasonably approximate such locations, Answer Co must approximate the amount of its Rhode Island receipts by multiplying the amount of its fee from Retail Corp by a percentage that reflects the Rhode Island population in the specific geographic area from which the calls are placed relative to the total population in such area.

3. Web Corp, a corporation that is based outside of Rhode Island, sells tangible property to customers via its Internet website. Design Co. designed and maintains Web Corp's website, including making changes to the site based on customer feedback received through the site. Design Co.'s services are delivered to Web Corp. The fact that Web Corp's customers and prospective customers incidentally benefit from Design Co.'s services, and may even interact with Design Co in the course of providing feedback, does not transform the service into one delivered "on behalf of" Web Corp to Web Corp's customers and prospective customers.

4. Wholesale Corp, a corporation that is based outside Rhode Island, develops an Internet-based information database outside Rhode Island and enters into a contract with Retail Corp whereby Retail Corp will market and sell access to this database to end users. Depending on the facts, the provision of database access may be either the sale of a service or the license of intangible property or may have elements of both. Assume that on the particular facts applicable in this example Wholesale Corp is selling database access in transactions properly characterized as involving the performance of a service. When an end user purchases access to Wholesale Corp's database from Retail Corp, Retail Corp in turn compensates Wholesale Corp in connection with that transaction. In this case, Wholesale Corp's services are being delivered through Retail Corp to the end user. Wholesale Corp must assign its receipts from sales to Retail Corp to the state or states in which the end users receive access to Wholesale Corp's database. If Wholesale Corp cannot determine the state or states where the end users actually receive access to Wholesale Corp's database, and lacks sufficient information regarding the location from which the end users access the database to reasonably approximate such location, Wholesale Corp must approximate the extent to which its services are received by end users in Rhode Island by using a percentage that reflects the ratio of the Rhode Island population in the specific geographic area in which Retail Corp regularly markets and sells Wholesale Corp's database relative to the total population in such area. Note that it does not matter for purposes of the analysis whether Wholesale Corp's sale of database access constitutes a service or a license of intangible property, or some combination of both.

1. Consulting Corp, a company that provides consulting services to law firms and other customers, is hired by Law Corp in connection with legal representation that Law Corp provides to Client Co. Specifically, Consulting Corp is hired to provide expert testimony at a trial being conducted by Law Corp on behalf of Client Co. Client Co pays for Consulting Corp's services directly. Assuming that Consulting Corp knows that its agreement with Law Co is principally managed by Law Corp in Rhode Island, the receipts from the sale of Consulting Corp's services shall be assigned to Rhode Island. It is not relevant for purposes of the analysis that Client Co is the ultimate beneficiary of Consulting Corp's services, or that Client Co pays for Consulting Corp's services directly.

2. Design Corp is a corporation based outside Rhode Island that provides graphic design and similar services in Rhode Island and in neighboring states. Design Corp enters into a contract at a location outside Rhode Island with an individual customer to design fliers for the customer. Assume that Design Corp does not know the individual customer's state of primary residence and does not derive more than 5% of its receipts from sales of services from the individual customer. All of the design work is performed outside Rhode Island. Receipts from the sale are in Rhode Island if the customer's billing address is in Rhode Island.

1. Axel Corp enters into a license agreement with Biker Co in which Biker Co is granted the right to produce motor scooters using patented technology owned by Axel Corp, and also to sell such scooters by marketing the fact that the scooters were manufactured using the special technology. The contract is a license of both a marketing and production intangible, i.e., a mixed intangible. The scooters are manufactured outside Rhode Island. Assume that Axel Corp lacks actual information regarding the proportion of Biker Co.'s receipts that are derived from Rhode Island customers. Also assume that Biker Co is granted the right to sell the scooters in a U.S. geographic region in which the Rhode Island population constitutes 25% of the total population during the period in question. The licensing contract requires an upfront licensing fee to be paid by Biker Co to Axel Corp and does not specify what percentage of the fee derives from Biker Co's right to use Axel Corp's patented technology. Because the fees for the license of the marketing and production intangible are not separately and reasonably stated in the contract, it is presumed that the licensing fees are paid entirely for the license of a marketing intangible, unless either the taxpayer or Division of Taxation reasonably establishes otherwise. Assuming that neither party establishes otherwise, 25% of the licensing fee constitutes Rhode Island receipts.

2. Same facts as Example 5, except that the license contract specifies separate fees to be paid for the right to produce the motor scooters and for the right to sell the scooters by marketing the fact that the scooters were manufactured using the special technology. The licensing contract constitutes both the license of a marketing intangible and the license of a production intangible. Assuming that the separately stated fees are reasonable, the Division of Taxation will:

3. Super Burger Corp, which is based outside Rhode Island, enters into franchise contracts with franchisees who agree to operate Better Burger restaurants as franchisees in various states. Several of the Super Burger Corp franchises are in Rhode Island. In each case, the franchise contract between the individual and Super Burger provides that the franchisee is to pay Super Burger Corp an upfront fee for the receipt of the franchise and monthly franchise fees, which cover, among other things, the right to use the Super Burger name and service marks, food processes and cooking know-how, as well as fees for management services. The upfront fees for the receipt of the Rhode Island franchises constitute fees paid for the licensing of a marketing intangible. These fees constitute Rhode Island receipts because the franchises are for the right to make Rhode Island sales. The monthly franchise fees paid by Rhode Island franchisees constitute fees paid for:

4. Online Corp, a corporation based outside Rhode Island, licenses an information database through the means of the Internet to individual customers that are resident in Rhode Island and in other states. These customers access Online Corp's information database primarily in their states of residence, and sometimes, while traveling, in other states. The license is a license of intangible property that resembles a sale of goods or services. If Online Corp can determine or reasonably approximate the state or states where its database is accessed, then it must do so. Assuming that Online Corp cannot determine or reasonably approximate the location where its database is accessed, Online Corp must assign the receipts made to the individual customers using the customers' billing addresses to the extent known. Assume for purposes of this example that Online Corp knows the billing address for each of its customers. In this case, Online Corp's receipts from sales made to its individual customers are in Rhode Island in any case in which the customer's billing address is in Rhode Island.

5. Net Corp, a corporation based outside Rhode Island, licenses an information database through the means of the Internet to a business customer, Business Corp, a company with offices in Rhode Island and two neighboring states. The license is a license of intangible property that resembles a sale of goods or services. Assume that Net Corp cannot determine where its database is accessed but reasonably approximates that 75% of Business Corp's database access took place in Rhode Island, and 25% of Business Corp's database access took place in other states. In such case, 75% of the receipts from database access is in Rhode Island. Assume alternatively that Net Corp lacks sufficient information regarding the location where its database is accessed to reasonably approximate such location. Under these circumstances, if Net Corp derives 5% or less of its receipts from database access from Business Corp, Net Corp must assign the receipts to the state where Business Corp principally managed the contract, or if that state is not reasonably determinable to the state where Business Corp placed the order for the services, or if that state is not reasonably determinable to the state of Business Corp's billing address. If Net Corp derives more than 5% of its receipts from database access from Business Corp, Net Corp is required to identify the state in which its contract of sale is principally managed by Business Corp and must assign the receipts to that state.

6. Net Corp, a corporation based outside Rhode Island, licenses an information database through the means of the Internet to more than 250 individual and business customers in Rhode Island and in other states. The license is a license of intangible property that resembles a sale of goods or services. Assume that Net Corp cannot determine or reasonably approximate the location where its information database is accessed. Also assume that Net Corp does not derive more than 5% of its receipts from sales of database access from any single customer. Net Corp may apply the safe harbor provision, and may assign its receipts to a state or states using each customer's billing address.

7. Web Corp, a corporation based outside of Rhode Island, licenses an Internet-based information database to business customers who then sublicense the database to individual end users that are resident in Rhode Island and in other states. These end users access Web Corp's information database primarily in their states of residence, and sometimes, while traveling, in other states. Web Corp's license of the database to its customers includes the right to sublicense the database to end users, while the sublicenses provide that the rights to access and use the database are limited to the end users' own use and prohibit the individual end users from further sublicensing the database. Web Corp receives a fee from each customer based upon the number of sublicenses issued to end users. The license is a license of intangible property that resembles a sale of goods or services. If Web Corp can determine or reasonably approximate the state or states where its database is accessed by end users, then it must do so. Assuming that Web Corp lacks sufficient information from which it can determine or reasonably approximate the location where its database is accessed by end users, Web Corp must approximate the extent to which its database is accessed in Rhode Island using a percentage that represents the ratio of the Rhode Island population in the specific geographic area in which Web Corp's customer sublicenses the database access relative to the total population in such area.