Apportionment for Multistate Business Market-Based Sourcing


The Nebraska Legislature’s enactment of LB 872 (2012), for tax years beginning on or after January 1, 2014, requires taxpayers who must apportion income to use a market-based sourcing method to apportion income derived from sales other than the sales of tangible personal property. Market-based sourcing replaces the former costs of performance method of apportionment used for tax years beginning before January 1, 2014.

Under the former costs of performance method, sales other than the sales of tangible personal property were sourced to the location where the income-producing activity was performed. Sales were only apportioned to Nebraska if a greater proportion of the income-producing activity was performed in Nebraska. 

Market-based sourcing generally sources sales to the location where the market is, primarily where the service is received or the intangible is used. Market-based sourcing does not require a specific percentage of the market to be in Nebraska. Sales are apportioned to Nebraska based on the proportion of the receipt or use in Nebraska of the service, intangible, or any other sale other than sales of tangible personal property.

The provisions of LB 872 are found in Neb. Rev. Stat. §§ 77-2734.04 and 77-2734.14. These statute sections contain a more detailed set of sourcing guidance than previously provided in statute for costs of performance.



Market-based sourcing applies to business entities generating income from business activity that is taxable within Nebraska and subject to tax in at least one other state. Market-based sourcing will impact corporations located in Nebraska with customers outside of Nebraska, as well as corporations located outside Nebraska with customers in Nebraska.

Sales Factor and Combined Reporting

The requirement to use a single factor, sales only, apportionment formula and combined reporting in Nebraska remain unchanged by LB 872. For more information on these topics, see Frequently Asked Questions About Nebraska Business Income Taxes and Neb. Rev. Stat. §§ 77-2734.0277-2734.0477-2734.05, and 77-2734.06.


The enactment of LB 872 does not change Nebraska’s corporate income tax nexus policy. Nexus and apportionment are separate considerations which should be analyzed independently from one another.

Forms and Regulations

Business forms and regulations are being updated to reflect the change to market-based sourcing and to provide any necessary clarification and guidance. Until updates are completed, current forms and regulations are in effect to the extent they are not in conflict with the new statutory provisions.

Contact Information

Tom Milburn
Revenue Tax Specialist


LB 872 (2012)
Neb. Rev. Stat. § 77-2734.04 (Definitions)
Neb. Rev. Stat. § 77-2734.14 (Sourcing Rules)
FAQ #2 – Nebraska Business Income Tax (unitary group/combined reporting)
FAQ #4 – Nebraska Business Income Tax (apportionment)

Back to Top