2., 141.121, 141.901
NECESSITY, FUNCTION, AND CONFORMITY:
require business or apportionable income of multi-state corporations to be
apportioned to Kentucky by multiplying the income by a fraction.
131.130(1) authorizes the
department to promulgate administrative regulations to administer and enforce
Kentucky's tax laws. This administrative regulation provides a detailed
explanation of the payroll apportionment factor.
Compensation shall not include payments to an independent contractor or any
other person not properly classifiable as an employee.
(b) Only amounts paid directly to employees
shall be included in the payroll factor. Amounts considered paid directly shall
include the value of board, rent, housing, lodging, and other benefits or
services furnished to employees by the corporation in return for personal
services, if the amounts constitute income to the recipient under
total amount paid or payable for compensation during the taxable year shall be
determined by the corporation's accounting method and shall be the same method
used by the corporation for federal taxation purposes. If the corporation has
adopted the accrual method of accounting, all compensation properly accrued
shall be deemed to have been paid.
(b) The corporation shall be consistent in
the treatment of compensation paid in filing returns or reports to all states.
If the corporation is not consistent in its reporting, it shall disclose in its
Kentucky return the nature and extent of the inconsistency.
Compensation paid to employees
whose services are performed entirely in a state where the corporation is
exempt from taxation, for example, by Pub. L. 86-272
, codified as
15 U.S.C. §§
, shall be
included in the denominator of the payroll factor.
An individual shall be considered an
employee if the individual is included by the corporation as an employee for
purposes of the payroll taxes imposed by
contractors shall not be considered employees.
(1) The total wages reported by the
corporation to Kentucky for unemployment compensation purposes, except for
compensation excluded by this administrative regulation, shall be considered as
a factor in determining if an employee's compensation is properly reportable to
(2) In determining if a
service performed without Kentucky is incidental to the employee's service in
Kentucky, a service which is temporary or transitory in nature, or which is
rendered in connection with an isolated transaction, shall be considered an
determining where the employee's base of operations is located, the place of
more or less permanent nature from which the employee starts work and to which
the employee customarily returns in order to receive instructions from the
corporation or communications from customers or other persons, or to replenish
stock or other materials, repair equipment, or perform any other functions
necessary to the exercise of the employee's trade or profession at some other
point or points, shall be considered to be the base of operations.
(4) The place from which the power to direct
or control is exercised by the corporation shall be the place from which the
service is directed or controlled.
Section 3. This administrative regulation
shall be effective for tax periods beginning on or after January 1,