AZ HB2850

Extends the current sales-factor-only apportionment method for business income through December 31, 2025, after which taxpayers must use the equal-weighted three-factor method (property, payroll, and sales factors).

Modifies the situs rules for sales of intangible and service property beginning January 1, 2026, establishing a market-based approach that determines where sales occur based on where the customer/property is located or where services are delivered.

Implements new market-based sales sourcing rules effective after December 31, 2025, including specific provisions for real property leases, transportation property, loans, investment assets, and intangible property.

Allows multistate service providers to elect market-based sales treatment through December 31, 2025, with the election binding for at least five consecutive taxable years and renewable thereafter.

Requires the Department of Revenue to adopt rules implementing the new sales sourcing provisions for intangible property and services.