MoFo New York Tax Insights - Volume 9, Issue 3

NYC TRIBUNAL IMPOSES ITS OWN SOURCING METHODOLOGY FOR RECEIPTS FROM SERVICES -

In a case involving the sourcing of lump sum payments for the performance of services, the New York City Tax Appeals Tribunal took the unusual step of rejecting not only the respective sourcing methods being urged by the taxpayer and the Department of Finance, but also the methodology adopted by an Administrative Law Judge, and determined on its own a receipts factor based on a methodology that was not advanced by either party. Matter of Gerson Lehrman Group, Inc., TAT(E) 08-79 (GC) (N.Y.C. Tax App. Trib., Dec. 28, 2017, released Jan. 24, 2018). The decision serves as an important reminder of the scope of the City Tribunal’s authority.

Facts. Gerson Lehrman Group, Inc. (“GLG”), has its headquarters and major sales office in New York City and also has offices worldwide. It enters into subscription agreements with clients, largely in the financial services industry, in which GLG provides access to a network of independent contractor expert consultants (termed “Council Members”) in a variety of fields. In the vast majority of cases, clients access Council Members through telephone conference calls, in which clients typically pose questions developed with the assistance of GLG’s Research Manager employees. The subscription agreements provide, however, that GLG is “not responsible for the content of consultations and Projects arranged by [GLG].” Clients pay GLG a fixed upfront fee, which varies based on the scope of the topics and industries sought by each client.