The Multistate Tax Commission proposed a pickup-and-delivery method for assigning ground transportation revenue to states, potentially replacing mileage-based sourcing where individual states chose to adopt the model.
In 2022, the MTC Uniformity Committee began reviewing its model receipts-sourcing regulations. Although the project initially covered both general and special-industry rules, attention quickly focused on transportation.
The Existing Mileage Method
MTC regulations and most state sourcing laws generally assigned a transportation company's revenue using the proportion of miles driven in each state.
The review was influenced by two UPS cases involving Montana and New Mexico, both MTC member states that had incorporated model rules into state law. The decisions noted that mileage sourcing could distort receipts in geographically large states with relatively small populations.
The Pickup-and-Delivery Proposal
On March 28, 2024, the MTC released draft language for a new “Ground Transportation and Product Delivery” subsection.
For transportation of tangible personal property, the draft would determine a state's receipts by multiplying the taxpayer's total receipts by:
Pickups and deliveries in the state / Pickups and deliveries everywhere
The MTC argued that this method better followed market-based sourcing because it looked to the location where the transportation service began or where the customer received delivery.
Concerns and Public Comment
Before the draft was released, state organizations, state representatives, and industry practitioners submitted comments expressing concern about changing the sourcing method.
The MTC held an open public-comment session on April 3, 2024, and continued accepting comments after the meeting.
What Transportation Companies Needed To Watch
MTC regulations do not automatically become law, even in member states. The potential effect therefore depended on whether and how individual states adopted the proposal.
Transportation companies needed to monitor state action closely because a move from route miles to pickup-and-delivery counts could materially change where receipts were assigned and, consequently, the state income-tax apportionment result.