Utah State Tax Comm’n v. See’s Candies, Inc., 2018 UT 57 (Oct. 5, 2018)

The court held that section 59-7-113 of the Utah Tax Code is ambiguous regarding when it is “necessary” for the Tax Commission to allocate deductions between related entities to clearly reflect income.  The court relied on federal case law interpreting a similar provision in the Internal Revenue Code to conclude that allocation is “necessary” in circumstances when related companies enter into transactions that do not resemble what unrelated companies dealing at arm’s length would agree to do.  Applying this standard, the court concluded that See’s was entitled to deduct royalty payments it made to a sister company.