Alabama Administrative Code
Title 810 - ALABAMA DEPARTMENT OF REVENUE
Chapter 810-27-1-4 - MULTISTATE TAX COMPACT
Section 810-27-1-4-.09.01 - Apportionment Formula: Double Weighting The Sales Factor

Universal Citation: AL Admin Code R 810-27-1-4-.09.01

Current through Register Vol. 42, No. 11, August 30, 2024

(1) The provisions of this regulation are effective for taxable years beginning on or after December 31, 2010.

(2) All business income of the taxpayer shall be apportioned to this state by use of the three factor apportionment formula set forth in section 40-27-1, Article IV.9. The elements of the apportionment formula are the property factor (see Regulation 810-27-1-4-.10.), the payroll factor (see Regulation 810-27-1-4-.13.) and the sales factor (see Regulation 810-27-1-4-.15.). The apportionment formula gives double-weight to the sales factor and equal weight to both the property and payroll factors. If any factor is not utilized in the production of business income, it shall be eliminated and the denominator reduced accordingly. The taxpayer may request, or the Commissioner may require, the use of a replacement factor in lieu of the eliminated factor where appropriate. See regulation 810-27-1-4-.18.

(a) EXAMPLE: Company D is a multistate entity which does business both within and without the state. Company D shall apportion its income using the three factor apportionment formula as follows:

Alabama

Everywhere

Property

500,000

600,000

Payroll

1,500,000

2,000,000

Sales

2,500,000

7,000,000

C must compute its apportionment formula as follows:

Property

(500,000)/600,000)

83.3333%

Payroll

(l,500,000)/2,000,000)

75.0000%

Sales

(2,500,000)/7,000,000)

71.4286% = (35.7143% * 2)

Sum of Factor Percentages

229.7619%

Divide by Number of Factors Used

÷4

Apportionment Factor Average

Percentage:

57.4405%

(b) Company D is a multistate entity which does business both within and without the state. Company D has property and sales within the State but does not have any payroll within the State. Therefore, Company D shall eliminate the payroll factor and reduce the denominator. Company D shall apportion its income by doing the following:

Alabama

Everywhere

Property

500,000

600,000

Payroll

000,000

000,000

Sales

2,500,000

7,000,000

C must compute its apportionment formula as follows:

Property (500,000)/600,000)

83.3333%

Payroll (0/0)

00.0000%

Sales (2,500,000)/7,000,000)

71.4286% = (35.7143% x 2)

Sum of Factor Percentages

154.7619%

Divide by Number of Factors Used

÷3

Apportionment Factor Average

Percentage:

51.5873%

(3) For taxpayers with a business interest in an unincorporated entity (e.g., partnership, unincorporated joint-venture, limited liability company taxed as a partnership, etc.), the apportionment formula shall include the pro rata share of the unincorporated entity's factor data.

(a) EXAMPLE: Corporation C has a 20% distributive share of Partnership P's income which is included in C's apportionable business income. There are no transactions between C and P. C shall apportion his income as follows:

Alabama

Everywhere

Property

550,000

600,000

Payroll

1,800,000

2,000,000

Sales

1,500,000

7,000,000

Using the regulations for computing the elements of the apportionment formula at the partnership level, C's 20% share of P's apportionment factor data is as follows:

Alabama

Everywhere

Property

(20% of 100,000)

20,000

(20% of 275,000)

55,000

Payroll

(20% of 50,000)

10,000

(20% of 125,000)

25,000

Sales

(20% of 75,000)

15,000

(20% of 350,000)

70,000

C must compute its apportionment formula as follows:

Alabama

Everywhere

Property

(550,000 + 20,000)

570,000

(600,000 + 55,000)

655,000

Payroll

(1,800,000 + 10,000)

1,810,000

(2,000,000 + 25,000)

2,025,000

Sales

(1,500,000 + 15,000)

1,515,000

(7,000,000 + 70,000)

7,070,000

Property

(570,000)/ 655,000)

87.0229%

Payroll

(1,810,000)/2,025,000)

89.3827%

Sales

(1,515,000)/7,070,000)

42.8572% = (21.4286% x 2)

Sum of Factor Percentages

219.2628%

Divide by Number of Factors Used

÷4

Apportionment Factor Average

Percentage

54.8157%

Author: Dennice L. Hi Hard

Statutory Authority: Code of Ala. 1975, §§ 40-2A-7(a)(5), 40-18-57.

Disclaimer: These regulations may not be the most recent version. Alabama may have more current or accurate information. We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information contained on this site or the information linked to on the state site. Please check official sources.
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