ATB Upholds Single-Factor Apportionment For Manufacturer

On November 17, 2014, the Appellate Tax Board released its Findings of Fact and Report in Genentech v. Commissioner which held that a pharmaceutical company qualified as a "manufacturer" under Massachusetts law, and was required to apportion its corporate excise tax base using the single sales factor formula for manufacturing corporations, instead of the three factor formula.

Genentech produces medicines using genetically modified cells.  It argued that its activities were not manufacturing, analogizing them to a farmer harvesting crops, and thus, it claimed the right to apportion its tax base under the three factor formula.  On the contrary, the Commissioner argued that Genentech was a manufacturer and that its manufacturing activities were "substantial" and therefore, it was required under the statute to use the single sales factor.  The ATB agreed with the Department and affirmed Department of Revenue assessments totaling over $3 million for the 1998-2004 tax