Florida Corporate Income Tax Lawsuits Quiet Through Fall as COP Cases Put on Hold

Florida’s most closely watched corporate income tax apportionment cases are now on pause until fall 2025. Lawsuits by Apple, BillMatrix, and CheckFree—each contesting how the Florida Department of Revenue (DOR) sources service revenue under the cost-of-performance (COP) rule—have all been formally stayed through September 15, 2025. With court activity frozen and interest waived in at least two of the cases, stakeholders are left waiting for developments expected later this year.

What Is Florida’s Cost-of-Performance (COP) Rule?

Florida uses an apportionment formula to determine how much of a multistate corporation’s income is taxable in the state. For service businesses, Rule 12C-1.0155(2)(l), Florida Administrative Code, requires that sales be sourced to Florida only if the income-producing activity is conducted primarily in Florida, based on where the costs are incurred.

This is known as the “cost-of-performance” (COP) method. It stands in contrast to “market-based sourcing,” where states tax revenue based on the location of the customer. While Florida has not formally adopted market-based sourcing, many taxpayers argue that DOR effectively applies it in audits, especially when dealing with remote or digital services.

The resulting tension has led to multiple lawsuits in which companies claim Florida is improperly taxing revenue from out-of-state activities, in violation of its own rules and constitutional standards.

Which Cases Are Stayed?

Apple Inc. v. Florida Department of Revenue

Case No.: 2024-CA-001111

Apple challenges a $14.8 million corporate income tax assessment (plus $2.3 million in interest) related to digital services such as iTunes, App Store, iCloud, and Apple Music. Apple argues that the income-producing activities for these services occur primarily outside of Florida, and that the Department’s use of customer location to source the revenue violates Florida’s COP rule.

The court entered a stay through September 15, 2025. Interest has been waived during the stay period, and a case management conference is expected this fall.

BillMatrix Corporation v. Florida Department of Revenue

Case No.: 2024-CA-001484

BillMatrix, a Fiserv subsidiary, provides electronic payment processing services. The Department issued a relatively small tax assessment (just over $43,000) but used the “interactive database” sourcing provision to assign revenue to Florida. BillMatrix contends that its services do not fit this provision and that the income should be sourced using the standard COP rule. Like Apple, BillMatrix’s case is stayed through September 15, 2025, with interest paused.

CheckFree Services Corporation v. Florida Department of Revenue

Case No.: 2024-CA-001026

CheckFree, another Fiserv entity, is disputing an assessment of approximately $3.39 million (including interest) for tax years 2018–2020. CheckFree’s bill payment services are performed primarily outside of Florida, and the company argues that applying market-based sourcing is both incorrect and unconstitutional. This case is also stayed through September 15, 2025.

In addition to these three, there are likely other COP cases which are or will be stayed as well. 

Why These Cases Matter

Florida’s sourcing rule is a major issue for multistate taxpayers, especially those in digital or service-based industries. The lawsuits raise several key concerns:

• Regulatory conflict: Florida has a published COP rule, but DOR is often accused of applying market-based sourcing in practice.
• Audit implications: Many companies are facing assessments based on customer location rather than the location of operations.
• Refund potential: A win for any of these taxpayers could open the door to significant refund claims from other similarly situated businesses.
• Constitutional questions: Some plaintiffs raise due process and commerce clause claims based on taxation of out-of-state activity.

Audit Practice vs. the Rule: A Growing Divide

While Florida’s COP rule remains on the books, the Department’s audit approach has drifted toward a market-based method. This gap has placed taxpayers in a precarious position: comply with the written rule and risk audit adjustments, or follow audit trends and risk later challenges or penalties.

These lawsuits could determine whether the Department’s evolving sourcing practices hold up in court—or whether Florida will be forced to more clearly align policy with published law.

What Should Taxpayers Be Doing Now?

• Review your Florida sales factor sourcing for services from prior tax years.
• Consider whether to file protective refund claims if your company used COP sourcing and was later audited under a market-based theory.
• Monitor the outcomes of these cases for precedent-setting decisions or settlement frameworks.
• Document your cost-of-performance calculations and service delivery structures in the event of future audit scrutiny.

No Updates Expected Until Fall 2025

With all three cases stayed through September 15, 2025, no further activity—motions, discovery, or hearings—is expected in the meantime. Each case will reconvene in the fall with a new case management conference, at which point litigation or resolution may resume.

For now, Florida’s cost-of-performance controversy remains unresolved—but not forgotten.