Maryland enacts single-sales factor apportionment

Apr 30, 2018
Apr 30, 2018
0 min. read

On April 24, 2018, Maryland Governor Larry Hogan signed House Bill 1794 and Senate Bill 1090, enacting single-sales factor apportionment for determining the Maryland corporate income tax. The single-sales factor will be phased-in over a five-year period beginning with 2018 tax years. Accordingly, the phase-in is scheduled as follows:

  • 2018 tax year: Triple-weighted sales factor with a denominator of five
  • 2019 tax year: Four-times sales factor with a denominator of six
  • 2020 tax year: Five-times sales factor with a denominator of seven
  • 2021 tax year: Six-times sales factor with a denominator of eight
  • 2022 tax year: 100 percent sales factor                    

A corporation qualifying as a ‘worldwide headquarter company’ may elect to use a three-factor formula with a double-weighted sales factor. A ‘worldwide headquartered company’ means a corporation included in a group of corporations including a parent corporation that: 1) filed a Form 10-Q with the SEC for the quarterly period ending June 30, 2017; 2) has its principal executive office in Maryland; and 3) employs at all times between July 1, 2017, and June 30, 2020, at least 500 full-time employees at the parent corporation’s principle executive office located in Maryland. Gross income from intangible investments including dividends, interest, royalties, and capital gains from the sale of intangible property should be included in the calculation of the numerator based on the average of the property and payroll factors.


The single-sales factor phase-in is only applicable to C corporations. Maryland law previously provided for a single-sales factor for certain manufacturing corporations.  

Maryland has considered adopting single-sales factor apportionment for a number of years. In 2016, a legislative commission recommended single-sales factor apportionment after a study of the state’s business climate.

Maryland is not the only state to consider a single sales-factor in 2018. Recently, the Kentucky legislature overrode Governor Matt Bevin’s veto of the commonwealth’s tax bill which, in part, provided for single-sales factor apportionment and market-based sourcing for tax years beginning Jan. 1, 2018. Utah also enacted a phased-in single-sales factor for taxable years beginning Jan. 1, 2019. The sales factor will be fully phased-in for tax years beginning after 2020.

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