Bruce Fort is Senior Counsel to the Multistate Tax Commission. In this article, originally published in Law 360’s State and Local newsletter on March 28 and 29, 2023, Fort describes two recent appellate decisions that took very different approaches to construing UDITPA. The Virginia Supreme Court in Virginia Department of Taxation v. R.J. Reynolds Company applied a “textualist” approach to construing UDITPA’s property factor, holding that the taxpayer was not “using” tobacco as it aged in a Virginia warehouse. The legislative history of UDITPA and model regulations developed by the MTC suggested a far broader application of the phrase “used in the state.”
The Pennsylvania Supreme Court took a very different approach to construing UDITPA in Synthes USA HQ, Inc. v. Commonwealth, holding that the Act’s sales factor provisions should be construed so that such sales would be apportioned to the state where services were delivered, in furtherance of the legislature’s overall intent, despite objections that the principal “costs of performance” for such activity may have occurred within the state.