NYC ALJ Holds That Consulting Firm May Source Receipts Based on Location of Independent Contractors -

The nature of the services performed by a corporation, and how that corporation should source its receipts from those services for New York City general corporation tax purposes, are the subjects of an interesting recent decision of a New York City Administrative Law Judge. The ALJ held in favor of the taxpayer that it was engaged in the performance of consulting services, and could source receipts from those services based in part on the location of independent contractor consultants who performed the services. Matter of Gerson Lehrman Group, Inc., TAT(H) 08-79(GC), et al. (N.Y.C. Tax App. Trib., Admin. Law Judge Div., Oct. 4, 2016).

Services Provided by the Taxpayer. Gerson Lehrman Group, Inc. (“GLG”), headquartered in New York City and with offices throughout the world, provides consulting services to clients. It engages expert “consultants”— typically, medical doctors, research scientists, engineers, and attorneys — as independent contractors who provide the expertise sought by GLG’s clients. Those clients worked with GLG’s employee “research managers” to identify the appropriate consultants, focus on research questions, and obtain expert views. GLG’s employee “consultant managers” recruited and managed the independent consultants, who were selected from GLG’s computer database of as many as 283,000 potential experts.