Application.
(1) In General. Receipts (other than from
sales of tangible personal property) in respect to a particular
income-producing activity are in this state if:
(A) the income-producing activity is
performed wholly within this state; or
(B) the income-producing activity is
performed both in and outside this state and a greater proportion of the
income-producing activity is performed in this state than in any other state,
based on costs of performance.
(2) Special Rules. The following are special
rules for determining when receipts from the income-producing activities
described below are in this state:
(A) Gross
receipts from the sale, lease, rental or licensing of real property are in this
state if the real property is located in this state.
(B) Gross receipts from the rental, lease or
licensing of tangible personal property are in this state if the property is
located in this state. The rental, lease, licensing or other use of tangible
personal property in this state is a separate income-producing activity from
the rental, lease, licensing or other use of the same property while located in
another state; consequently, if property is within and without this state
during the rental, lease or licensing period, gross receipts attributable to
this state shall be measured by the ratio which the time the property was
physically present or was used in this state bears to the total time or use of
the property everywhere during such period.
EXAMPLE:
Taxpayer is the owner of 10 railroad cars. During the
year, the total of the days each railroad car was present in this state was 50
days. The receipts attributable to the use of each of the railroad cars in this
state are a separate item of income and shall be determined as follows:
(10 x 50) = (500/3650) x Total Receipts = Receipts
Attributable to this State
(C) Gross receipts for the performance of
personal services are attributable to this state to the extent such services
are performed in this state. If services relating to a single item of income
are performed partly within and partly without this state, the gross receipts
for the performance of such services shall be attributable to this state only
if a greater portion of the services were performed in this state, based on
costs of performance. Usually where services are performed partly within and
partly without this state the services performed in each state will constitute
a separate income-producing activity; in such cases, the gross receipts from
the performance of services attributable to this state shall be measured by the
ratio which the time spent in performing such services in this state bears to
the total time spent in performing such services everywhere. Time spent in
performing services includes the amount of time expended in the performance of
a contract or other obligation which gives rise to such gross receipts.
Personal services not directly connected with the performance of the contract
or other obligation, as for example, time expended in negotiating the
contract,is excluded from the computations.
EXAMPLE (i):
Taxpayer, a road show, gave theatrical performances at
various locations in State X and in this state during the tax period. All gross
receipts from performances given in this state are attributed to this
state.
EXAMPLE (ii):
The taxpayer, a public opinion survey corporation,
conducted a poll by its employees in State X and in this state for a sum of
$9,000.The project required 600 person hours to obtain the basic data and
prepare the survey report. Two hundred of the 600 person hours were expended in
this state. The receipts attributable to this state are $3,000.
(200 person hours x $9,000)/600 person
hours
(3) Services
on Behalf of Taxpayer. An income-producing activity performed on behalf of a
taxpayer by an agent or independent contractor is attributed to a state if such
income-producing activity is in such state.
(A) Such income-producing activity is in a
state if
the taxpayer can reasonably determine at the time of filing its return
that all of the income-producing activity is actually performed in such state
by the agent or independent contractor.
EXAMPLE:
The taxpayer, a satellite TV provider, contracts with its
customer, an owner of apartment buildings, to provide and install satellite
dishes for $1,000,000 in this state. The taxpayer then subcontracts with and
pays agent or independent contractor X to install the satellite dishes in this
state for $750,000. The taxpayer can reasonably determine at the time of filing
its return that its cost of performance is in this state because that is the
only location where installation services were performed. The taxpayer's cost
of performance of $750,000 paid to X will be assigned to this state pursuant to
subsection (d)(3)(A) for purposes of assigning the $1,000,000 receipt to the
numerator of the sales factor.
(B) If the income-producing activity occurs
in more than one state, subsection (d)(3)(A) does not apply. The
income-producing activity is in a state to the extent that the contract between
the taxpayer and the agent or independent contractor or
the taxpayer's records
indicate it is to be performed in such state and the portion of
the taxpayer's
payment to the agent or independent contractor associated with the performance
in such state is determinable under the contract.
EXAMPLE:
The taxpayer, a satellite TV provider, contracts with its
customer, an owner of apartment buildings, to provide and install satellite
dishes for $1,000,000 in this state and States A and B on an as needed basis.
The taxpayer then subcontracts with and pays agent or independent contractor X
to install the satellite dishes in this state and States A and B for $200 per
installation. The taxpayer's records show that X installed 1,000 satellite
dishes each in this state and State A and 1,750 satellite dishes in State B.
The taxpayer can reasonably determine at the time of filing its return the
costs of performing installation services in each state because the taxpayer's
records indicate the number of installations in each state and the taxpayer's
contract with X indicate the cost of each installation. The taxpayer's cost of
performance is $200,000 in both this State and State A and is $350,000 in State
B. The taxpayer's greater cost of performance is $350,000 in State B ($200 x
1,750) and will be assigned to State B pursuant to subsection (d)(3)((B) for
purposes of assigning the $1,000,000 receipt to the numerator of the sales
factor.
(C) If the location
of the income-producing activity cannot be assigned pursuant to subsection
(d)(3)(A) or (B), the income-producing activity is in a state to the extent the
contract between
the taxpayer and
the taxpayer's customer or
the taxpayer's
records indicate it is to be performed in such state and the portion of
the
taxpayer's payment to the agent or independent contractor associated with the
performance in such state is determinable under the contract.
EXAMPLE:
The taxpayer, a satellite TV provider, contracts with its
customer, an owner of apartment buildings, to provide and install satellite
dishes for $1,000,000 in this state and States A and B on an as needed basis.
The taxpayer then subcontracts with and pays agent or independent contractor X
to install the satellite dishes in this state and States A and B for $200 per
installation. The taxpayer's records show that X installed 1,000 satellite
dishes each in this state and State A and 1,750 satellite dishes in State B.
The contract between the taxpayer and X does not indicate the taxpayer's costs
associated with X's installation of the satellite dishes in each state.
However, the taxpayer's contract with its customer indicates that the activity
will take place in this state and States A and B, and the taxpayer's records
indicate the number of installations in each state. Accordingly, the taxpayer
can reasonably determine at the time of filing its return the costs of
performing installation services in each state. The taxpayer's cost of
performance is $200,000 in both this State and State A and is $350,000 in State
B. The taxpayer's greater cost of performance of $350,000 will be assigned to
State B pursuant to subsection (d)(3)(C) for purposes of assigning the
$1,000,000 receipt to the numerator of the sales factor.
(D) If the location of the income-producing
activity cannot be assigned pursuant to subsections (d)(3)(A), (B), or (C), the
income-producing activity is in a state if the domicile of
the taxpayer's
customer is in that state. If
the taxpayer's customer is not an individual,
"domicile" means commercial domicile.
EXAMPLE:
The taxpayer, a satellite TV provider, contracts with its
customer, an owner of apartment buildings that is domiciled in State A, to
provide and install satellite dishes for $1,000,000 in this state and States A
and B. The taxpayer subcontracts with and pays X to install the satellite
dishes in this state and States A and B for $750,000. The contract between the
taxpayer and X and the contract between the taxpayer and its customer do not
indicate the taxpayer's costs associated with X's installation of the satellite
dishes in each state. The $750,000 cost of X's performance of its contractual
duties will be assigned to State A pursuant to subsection (d)(3)(D) for
purposes of assigning the $1,000,000 receipt to the sales factor
numerator.
(E) If the
location of the income-producing activity cannot be assigned pursuant to
subsections (d)(3)(A), (B), or (C), or the customer's domicile cannot be
determined, or such income-producing activity is in a state in which
the
taxpayer is not taxable, such income-producing activity shall be disregarded in
determining
the taxpayer's income-producing activity.
EXAMPLE:
The taxpayer, a satellite TV provider, contracts with its
customer, an owner of apartment buildings, to provide and install satellite
dishes in this state and States A and B for $1,000,000. The taxpayer contracts
with X to install the satellite dishes in this state and States A and B for
$750,000. The contract between the taxpayer and X and the contract between the
taxpayer and its customer do not indicate the taxpayer's costs associated with
X's installation of the satellite dishes in each state. The customer's domicile
is not determinable. The $750,000 cost of performance paid to X will not be
taken into account pursuant to subsection (d)(3)(E) for purposes of assigning
the $1,000,000 to the numerator of the sales
factor.
