Contents - AL-Tax

7.5 Analysis Under Alternative Regime 1136. Keyword = “Nano”; Industry Segment = “Business Services”7. Keyword = “Materials Science”; Industry Segment = “Business Services”8. Keywords = “Engineering” and “Molecular”; Industry Segment = “Unspecified”9. Keyword = “Deposition or Sputtering”; Industry Segment = “Unspecified”10. Keywords = “Engineering Services” and “Materials Science”; IndustrySegment = “Unspecified”11. Keyword = “Process Engineering Services Agreement”; Industry Segment =“Unspecified”12. Keyword = “Engineering Services Fees”; Industry Segment = “Unspecified”13. Keywords = “Engineering Services” and “Nano”; Industry Segment =“Unspecified”We reviewed descriptions of business for all of the companies identified by theabove keyword and industry segment searches. Firms were excluded from our samplefor four principal reasons: Firm specialized in construction-related design–build–operate engineering services,which differ significantly from the product and process development engineeringservices that USS renders; Firm offered services unrelated to engineering and product development (e.g.,storage services, bank card payment processing services, marketing services,grading and authentication services, drug development and clinical testing services,network services and testing and inspection services); Firm engaged in activities other than services (e.g., the auctioning of transportationand industrial equipment; the manufacture and sale of apparel; R&D relatingto hybrid engines for commercialization; the design, development, manufactureand sale of ceramic components; the development of lithium batteries and fuelcell components; the development of applications software; and, the operation ofa semiconductor foundry); or, Firm was in a start-up phase.Following this process of elimination, six engineering services providersremained in our sample. These companies reported markups over total cost rangingfrom a low of 0.91% to a high of 14.78% in 2007, a low of (0.24)% to a high of16.64% in 2006 and a low of 1.64% to a high of 16.11% in 2005. The medianmarkup for our engineering services sample was 6.84% in 2007, 7.59% in 2006 and6.18% in 2005. Based on these results, USS should charge FP a markup over totalassociated costs of 7.0%–8.0% for engineering services rendered.7.5 Analysis Under Alternative RegimeAs with our second case study, we would analyze this case by application ofthe numerical standards approach under the proposed alternative transfer pricingregime. With two distinct types of services, which differ significantly with respect