Don’t work in tax at all but joined this bowl to ask a quick tax question hopefully someone can help with: Is there transfer pricing considerations for business you do with a controlled entity across state lines (all in the US)? Basically is state + local tax transfer pricing a thing?

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Yes, it is a thing. It's uncommon for most companies to be interested in any sort of state TP.

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NY and CA both do not recognize legal entity distinctions for the purpose of determining income taxes owed by the group. So it's not similar to a consolidated filing on the federal level. Apportionment, and thus, state taxable income, is based on the business activity engaged in. It's possible for a single federal consolidated group to have more than one combined filing in those states.

Maybe I’m not understanding your question but TP isn’t necessarily a state issue. It doesn’t matter where the two related entities are located, there should still be TP policies in place. One could be in NY and one could be in FL or Europe, the same TP policy should be in place.

M1 is correct, I’m an idiot.

uplifting

I’m assuming you’re moving sales around but I thought TP was about costs being reallocated / paid back to get companies to specific margin requirements. What other state considerations are there other than nexus and apportionment? Or is the TP issue planning your federal footprint to be isolated outside of entities filing in states that would be subject to decoupling?

Got it, so really just shifting taxable income around your combined structure. I’ve seen that but it’s been hammered on audit.

Thanks for the insight!

There would be minimal in states that require unitary/combined filings right ? The starting point is federal taxable income and the apportionment factors aren’t really affected by TP policies? (Unless shifting sales between states is part of TP too)

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