Tax News

CCH (cch.taxgroup.com) reports:

  For Colorado corporate income tax purposes, the taxpayer, a marketer and processor of prepaid debit cards and prepaid debit card services, was considered a financial institution and required to apportion income accordingly. In Colorado, income generated by credit card operations of financial institutions is apportioned between and among states based on the billing address of the cardholder or the commercial domicile of the merchant, and not on the location of the infrastructure and labor costs incurred by the taxpayer to provide those credit card services. Although 1 CCR 201-3(l)(2)(h)(10) does not specifically address debit cards or prepaid card operations, the taxpayer was determined to be a financial institution under the regulation because the debit cards at issue operate and generate fees in substantially the same manner as credit card operation. The taxpayer also issues debit cards carrying the Visa or MasterCard acceptance mark and the fees the taxpayer charges cardholders are similar to the fees typically charged to credit cardholders. The differences between the operations of debit/prepaid cards and credit cards did not warrant the use of a fundamentally different apportionment methodology. However, it is important to note that the Colorado Department of Revenue is in the process of modifying the current financial institution regulation to be consistent with the single factor methodology adopted for tax years beginning on or after January 1, 2009, and will use the receipts factor methodology of the current regulation for apportioning income in the interim.

PLR-2009-002 , Colorado Department of Revenue, March 25, 2009, ¶200-892

  Other References:

  Explanations at ¶11-540