For the purposes of the sales factor of the apportionment
formula for each trade or business of the taxpayer, the term "sales" means all
gross receipts derived by the taxpayer from transactions and activity in the
regular course of such trade or business. The following are rules for
determining "sales":
(a) In the case
of a taxpayer engaged in manufacturing and selling or purchasing and reselling
goods or products, "sales" includes all gross receipts from the sales of such
goods or products (or other property of a kind which would properly be included
in the inventory of the taxpayer if on hand at the close of the tax period)
held by the taxpayer primarily for sale to customers in the ordinary course of
its trade or business. Gross receipts for this purpose means gross sales less
returns and allowances, and includes all interest income, service charges,
carrying charges, or time-price differential charges incidental to such sales.
Federal and state excise taxes (including sales taxes) shall be included as
part of such receipts if such taxes are passed on to the buyer or included as
part of the selling price of the product.
(b) In the case of cost plus fixed fee
contracts, such as the operation of a government-owned plant for a fee, "sales"
includes the entire reimbursed cost, plus the fee.
(c) In the case of a taxpayer engaged in
providing services, such as the operation of an advertising agency, or the
performance of equipment service contracts, research and development contracts,
"sales" includes the gross receipts from the performance of such services
including fees, commissions, and similar items.
(d) In the case of a taxpayer engaged in
renting real or tangible property, "sales" includes the gross receipts from the
rental, lease, or licensing the use of the property.
(e) In the case of a taxpayer engaged in the
sale, assignment, or licensing of intangible personal property such as patents
and copyrights, "sales" includes the gross receipts therefrom.
(f) If a taxpayer derives receipts from the
sale of equipment used in its business, such receipts constitute "sales."
In some cases certain gross receipts should be disregarded in
determining the sales factor in order that the apportionment formula will
operate fairly to apportion to this state the income of the taxpayer's trade or
business.
In filing returns with this state, if the taxpayer departs from
or modifies the basis for excluding or including gross receipts in the sales
factor used in returns for prior years, the taxpayer shall disclose in the
return for the current year the nature and extent of the modification.
If the returns or reports filed by the taxpayer with all states
to which the taxpayer reports under the multistate tax compact or the uniform
division of income for tax purposes act are not uniform in the inclusion or
exclusion of gross receipts, the taxpayer shall disclose in its return to this
state the nature and extent of the variance.
