IRS denies delivery company’s Section 199 deduction

Tax Hot Topics newsletter The IRS issued a General Legal Advice Memorandum (GLAM 2020-007) addressing whether a delivery service company qualified for a domestic production activities deduction under Section 199 (a section repealed for taxable years beginning after 2017).

The taxpayer in the GLAM took the position that gross receipts related to software used by customers over the internet to track shipments and gross receipts related to software used by customers over the internet to insure goods being shipped qualified as domestic production gross receipts for purposes of Section 199. The GLAM noted the taxpayer did not separately charge its customers for use of the software.

The GLAM concluded that the taxpayer’s gross receipts were derived from services and not by providing customers access to online software. Therefore, none of taxpayer’s gross receipts qualified for purposes of Section 199.

David Auclair
National Managing Principal
Washington National Tax Office
T +1 202 521 1515

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