Curly fries and conjunctive tests: Business income, explained

In this episode of the SALT Shaker Podcast, Partners Jeremy Gove and Chelsea Marmor break down the business versus non-business income divide. They also explore how the Multistate Tax Commission’s recommended shift in terminology – from business/non-business income to apportionable/non-apportionable income – refocuses the analysis on whether income is constitutionally apportionable.

Chelsea and Jeremy then walk through the two key tests used in determining business income: the transactional test and the functional test, and how these tests often overlap.

Their discussion centers on the Arkansas Supreme Court’s recent decision in Hudson v. US Beef, involving the sale of franchise operations. The court found the gains from the sale were non-business income under the three requirements in Arkansas’ business income definition. Chelsea and Jeremy also unpack the dissent, which argued the majority improperly blended the functional and transactional tests, underscoring how fact-specific – and potentially blurred – this analysis can be.

The episode concludes with key takeaways on applying these tests across jurisdictions, along with an overrated/underrated debate on summer staples.