Cal. Code Regs. Tit. 18, §§ 25137-11 - Allocation and Apportionment of Income of Trucking Companies

(a) In General.

(1) When a trucking company has income from sources both within and without this state, the amount of business income from sources within this state shall be determined pursuant to this regulation. In such cases, the first step is to determine what portion of the trucking company's income constitutes "business" income and what portion constitutes "nonbusiness" under Revenue and Taxation Code, Section 25120 and Title 18, California Code of Regulations, Section 25120. Nonbusiness income is directly allocable to this state pursuant to the provisions of Revenue and Taxation Code Sections 25123 through 25127, inclusive. Business income is apportioned to this state pursuant to the property, payroll and sales apportionment factors set forth in this regulation. The sum of the items of nonbusiness income directly allocated to this state plus the amount of business income attributable to this state constitutes the amount of the taxpayer's entire net income which is subject to tax in this state.

(2) When a taxpayer, or an affiliate of a taxpayer, other than a trucking company conducts trucking activities and the apportionment factors directly related to such activities are separately identified, such factor shall be assigned to the apportionment formula pursuant to subsection (c) herein.

(3) When a trucking company employs property, other than mobile property as defined herein, for the transport of goods between states, such property, and the personnel which operate or maintain it during the course of such movement, shall be assigned to the numerator of the property and payroll factors respectively pursuant to Regulations 25137-7 and 25137-9, in the circumstances of an air transport or railroad business, respectively, or Regulations 25129 and 25133 otherwise.

(4) This regulation shall be applicable to income years beginning on or after January 1, 1991.

(b) Definitions.

(1) As used in this regulation, the term "trucking company"means a motor common carrier, a motor contract carrier, or an express carrier which primarily transports tangible personal property of others by motor vehicle for compensation.

(2) "Mobile property" means all motor vehicles, including trailers, engaged directly in the movement of tangible personal property.

(3) A "mobile property mile" is the movement of a unit of mobile property a distance of one mile whether loaded or unloaded.

(4) A "unit of mobile property" includes a tractor and/or trailer or trailers which are connected together for movement.

(5) The "interstate ratio" is the ratio which the aggregate of the mobile property miles traveled in this state by units of mobile property which are located within more than a single state during the year bears to the aggregate of the total mobile property miles traveled by such property everywhere during the year.

Example:

A taxpayer has 10 units of mobile property all of which operate in more than a single state during the year. One mobile property unit travels 40 miles within this state and 60 miles out of this state for total miles of 100. The other nine units of mobile property travel a total of 50 miles each, none of which is in this state. The interstate ratio assigned to this state is

40	=	40	=	7.273%
100 + (9 x 50)		550

(c) Apportionment of business income.

(1) In general. The property factor shall be determined in accordance with Regulation Sections 25129 to 25131, inclusive, the payroll factor in accordance with Regulation Sections 25132 to 25133, and the sales factor in accordance with Regulation Sections 25134 to 25136, inclusive, except as modified by this regulation and by Regulation Section 25137.

(2) Property factor. Numerator.

(A) Mobile property, as defined in this regulation, which is located solely within this state during the income year shall be included in the numerator of the property factor.

(B) Mobile property, as defined in this regulation, which is located within more than a single state during the income year shall be included in the numerator of the property factor on the basis of the interstate ratio.

(3) Payroll factor. Numerator.

(A) Compensation paid to personnel which operate or maintain mobile property for services performed solely within this state shall be assigned to this state.

(B) Compensation paid to personnel which operate or maintain mobile property for services performed within more than a single state shall be assigned to this state on the basis of the interstate ratio.

(4) Sales factor. Numerator from freight, mail and express. The total revenue of the taxpayer attributable to this state during the income year from hauling freight, mail, and express shall be the total of:

(A) all receipts from any shipment which both originates and terminates within this state; and

(B) that portion of the receipts from movements or shipments which originate in one state and terminate in another state as determined on the basis of the interstate ratio.

(5) For taxable years beginning on or after January 1, 2013, pursuant to Section 25128.7, Revenue and Taxation Code, only the sales factor references in this regulation are applicable, unless subdivision (b) of Section 25128, Revenue and Taxation Code, applies.

(d) Records. The taxpayer shall maintain the records necessary to identify mobile property which operate in more than a single state and to enumerate by state the miles traveled by such mobile property as those terms are used in this regulation. Such records are subject to review by the Franchise Tax Board or its agents.

(e) De minimis nexus standard.

Notwithstanding any provision contained herein, this regulation shall not apply to require the apportionment of income to this state if the trucking company during the course of the income year neither:

(1) owns nor rents any real or personal property in this state, except mobile property which is operated within and without this state during the income year; nor

(2) makes any pick-ups or deliveries within this state; nor

(3) travels more than twenty-five thousand mobile property miles within this state; provided that the total mobile property miles traveled within this state during the income year does not exceed 3 percent of the total mobile property miles traveled in all states by the trucking company during that period; nor

(4) makes more than 12 trips into this state.

Notes

Cal. Code Regs. Tit. 18, §§ 25137-11

1. New section filed 12-6-91; operative 1-6-92 (Register 92, No. 9).
2. Change without regulatory effect adding subsection (c)(5) and amending NOTE filed 12-9-2013 pursuant to section 100, title 1, California Code of Regulations (Register 2013, No. 50).

Note: Authority cited: Section 19503, Revenue and Taxation Code. Reference: Section 25137, Revenue and Taxation Code.

1. New section filed 12-6-91; operative 1-6-92 (Register 92, No. 9).
2. Change without regulatory effect adding subsection (c)(5) and amending Note filed 12-9-2013 pursuant to section 100, title 1, California Code of Regulations (Register 2013, No. 50).