Maine Expressly Requires Express Scripts to Apportion Services Receipts Using a Look-Through Approach

On November 7, 2023, the Supreme Judicial Court of Maine held a taxpayer’s receipts from the performance of pharmacy benefit management (PBM) services should be apportioned using a look-through approach.  Specifically, the court held such services receipts should be apportioned to the state where the prescription drug is dispensed by retail pharmacies to individual members (i.e., the market member method), rather than the state where the taxpayer’s client’s primary commercial and administrative headquarters is located (i.e., the market client method).


The taxpayer sold prescription drugs by mail order delivery and sold claims adjudication and other PBM services throughout the United States, including Maine.  The taxpayer’s clients included health insurers, health maintenance organizations, employers, governmental health programs, and union-sponsored benefits plans.  The clients’ members were the primary recipients of the taxpayer’s services.

The taxpayer argued its PBM services should be apportioned to Maine based on a market client method because the services are received at a client’s commercial and administrative headquarters, not at the location of the retail pharmacies where member prescriptions are filled.  The State Tax Assessor of the Maine Revenue Services (Assessor), in contrast, argued the receipts should be apportioned under the market member method.  Under the Assessor’s theory, the retail pharmacy is the location where the service is received, and income generated from the performance of that service should be attributed to that retail pharmacy location.  The taxpayer argued the market client method would be more appropriate because the taxpayer contracted only with its clients, not individual members, so the ultimate recipient of its services was the client even if the member initiated the claim at the retail pharmacy.

The court sided with the Assessor, concluding the members rather than the clients received the claims processing services.  The court reasoned that “if members had not gone to pharmacies to fill their prescriptions, Express Scripts would not have been entitled to that revenue.”  In sum, because claims-processing services were deemed by the court to be received by members at retail pharmacies in Maine, and that the receipts at issue were derived from the performance of these claims processing services, the court held in favor of the Assessor.

The case is Express Scripts Inc. v. State Tax Assessor, Me. Sup. Jud. Ct., Dkt. No. BCD-22-331 (November 7, 2023).  The opinion is available here.