(1) A taxpayer may have more than one "trade
or business". In such cases, it is necessary to determine the apportionable
income attributable to each separate trade or business. The income of each
business is then apportioned by an apportionment formula that takes into
consideration the factors, both in and out of state that relate to the trade or
business, the income of which is being apportioned.
Example: The taxpayer is a conglomerate with three
operating divisions. One division is engaged in manufacturing aerospace items
for the federal government. Another division is engaged in growing tobacco
products. The third division produces and distributes motion pictures for
theaters and television. There is no strong central management as each division
operates independently of one another. Each division operates in this state as
well as in other jurisdictions. In this case, it could be concluded that the
taxpayer is engaged in three separate "trades or businesses." Accordingly, the
amount of apportionable income attributable to the taxpayer's trade or business
activities in this state is determined by applying an apportionment formula to
the apportionable income of each business.
(2) The determination of whether the
activities of the taxpayer constitute a unitary business will turn on the facts
of each case. In general, the activities of the taxpayer will be considered
unitary if there is evidence to indicate that the divisions under consideration
are integrated with, dependent upon, or contribute to each other and to the
operations of the taxpayer as a whole (see OAR
150-314-0349). The following
factors are considered to be good indicia of a unitary business; and the
presence of any of these factors creates a strong presumption that the
activities of the taxpayer constitute a unitary business:
(a) Same type of business. A taxpayer is
generally engaged in a unitary business when all of its activities are in the
same general line. For example, a taxpayer operating a chain of retail grocery
stores will most always be engaged in a unitary business.
(b) Steps in a vertical process. A taxpayer
is almost always engaged in a unitary business when its various divisions are
engaged in different steps in a large vertically structured enterprise. For
example, a taxpayer that explores for and mines copper ores; concentrates,
smelts, and refines the copper ores; and fabricates the refined copper into
consumer products, is engaged in a unitary business regardless of the fact that
the various steps in the process are operated substantially independently of
each other with only general supervision from the taxpayer's executive
offices.
(c) Strong centralized
management. A taxpayer which might otherwise be considered as engaged in more
than one trade or business is properly considered a unitary business when there
is a strong central management coupled with the existence of centralized
departments for such functions as financing, advertising, research, or
purchasing. Thus, some conglomerates may properly be considered a unitary
business when the central executive officers are involved in the operations of
the various divisions and there are centralized offices which perform for the
divisions the normal matters which a truly independent business would perform
for itself, such as accounting, personnel, insurance, legal, purchasing,
advertising, or financing.
