You better stop the things you do. Jay Hawkins (1929-2000), “I Put a Spell on You.”
US-listed retailers data show that a simple formula can be used to provide reliable estimates of a controlled retailer’s operating profits for transfer pricing purposes.
To enhance tax certainty, I recommend that US state tax authorities allow retailers to use the profit margin based on this formula as a transfer pricing safe harbor.
The regression method proposed here can be applied to any industry, including to provide safe harbors for inbound controlled wholesale distributors or to provide safe harbors for outbound controlled suppliers or for outbound controlled service providers.