Current through Register Vol. 43, No. 02, November 27, 2024
The following special rules are established with respect to
the apportionment of income derived from the publishing, sale, licensing or
other distribution of books, newspapers, magazines, periodicals, trade journals
or other printed material.
(1) In
General. Except as specifically modified by this rule, when a person in the
business of publishing, selling, licensing or distributing newspapers,
magazines, periodicals, trade journals or other printed material has income
from sources both within and without Alabama, the amount of business income
from sources within Alabama from such business activity shall be determined
pursuant to §§
40-27-1, and
40-27-1.1, Code of
Ala. 1975, and the rules promulgated thereunder.
(2) Definitions. The following definitions
are applicable to the terms contained in this rule, unless the context clearly
requires otherwise.
(a) "Outer-jurisdictional
property" means certain types of tangible personal property, such as orbiting
satellites, undersea transmission cables and the like, that are owned or rented
by the taxpayer and used in the business of publishing, licensing, selling or
otherwise distributing printed material, but which are not physically located
in any particular state.
(b) "Print
or printed material" includes, without limitation, the physical embodiment or
printed version of any thought or expression including, without limitation, a
play, story, article, column or other literary, commercial, educational,
artistic or other written or printed work. The determination of whether an item
is or consists of print or printed material shall be made without regard to its
content. Printed material may take the form of a book, newspaper, magazine,
periodical, trade journal or any other form of printed matter and may be
contained on any medium or property.
(c) "Purchaser" and "Subscriber" mean the
individual, residence, business or other outlet which is the ultimate or final
recipient of the print or printed material. Neither of such terms shall mean or
include a wholesaler or other distributor of print or printed
material.
(d) "Terrestrial
facility" shall include any telephone line, cable, fiber optic, microwave,
earth station, satellite dish, antennae or other relay system or device that is
used to receive, transmit, relay or carry any data, voice, image or other
information that is transmitted from or by any outer-jurisdictional property to
the ultimate recipient thereof.
(3) Apportionment of Business Income.
(a) All business income shall be apportioned
to Alabama in accordance with the calculation provided in §
40-27-1,
Code of Ala.
1975, and Rule
810-27-1-.09.
1. For tax periods beginning on or after
January 1, 2021, the property factor and the payroll factor are no longer
considered in calculating a taxpayer's Alabama apportionment factor.
2. The industry specific definitions and
guidance provided in this rule for property and payroll are applicable for tax
periods on or after January 1, 2021, when:
(i)
A taxpayer petitions and is granted approval from the department to employ an
alternative apportionment method in accordance with §
40-27-1, Code of Ala.
1975.
(ii) Measuring
against nexus thresholds pursuant to §
40-18-31.2, Code of
Ala. 1975.
(b) The Property Factor. For tax years prior
to January 1, 2021, or if the taxpayer is granted approval from the
Commissioner to employ an alternative apportionment method that includes the
use of the property factor, the property factor shall include:
1. Property Factor Denominator. All real and
tangible personal property, including outer-jurisdictional property, whether
owned or rented, which is used in the business shall be included in the
denominator of the property factor.
2. Property Factor Numerator.
(i) All real and tangible personal property
owned or rented by the taxpayer and used in Alabama during the tax period shall
be included in the numerator of the property factor.
(ii) Outer-jurisdictional property owned or
rented by the taxpayer and used in Alabama during the tax period shall be
included in the numerator of the property factor in the ratio which the value
of such property that is attributable to its use by the taxpayer in business
activities in Alabama bears to the total value of such property that is
attributable to its use in the taxpayer's business activities everywhere.
(I) The value of outer-jurisdictional
property to be attributed to the numerator of the property factor of Alabama
shall be determined by the ratio that the number of uplinks and downlinks
(sometimes referred to as "half-circuits") that were used during the tax period
to transmit from Alabama and to receive in Alabama any data, voice, image or
other information bears to the total number of uplinks and downlinks or
half-circuits that the taxpayer used for transmissions everywhere.
(II) Should information regarding such uplink
and downlink or half-circuit usage not be available or should such measurement
of activity not be applicable to the type of outer-jurisdictional property used
by the taxpayer, the value of such property to be attributed to the numerator
of the property factor of Alabama shall be determined by the ratio that the
amount of time (in terms of hours and minutes of use) or such other measurement
of use of outer- jurisdictional property that was used during the tax period to
transmit from Alabama and to receive in Alabama any data, voice, image or other
information bears to the total amount of time or other measurement of use that
was used for transmissions everywhere.
(III) Outer-jurisdictional property shall be
considered to have been used by the taxpayer in its business activities within
Alabama when such property, wherever located, has been employed by the taxpayer
in any manner in the publishing, sale, licensing or other distribution of
books, newspapers, magazines or other printed material and any data, voice,
image or other information is transmitted to or from Alabama either through an
earth station or terrestrial facility located in Alabama.
Example: One example of the use of outer-jurisdictional
property is where the taxpayer either owns its own communications satellite or
leases the use of uplinks, downlinks or circuits or time on a communications
satellite for the purpose of sending messages to its newspaper printing
facilities or employees in a state. The state or states in which any printing
facility that receives the satellite communications is located and the state
from which the communications were sent would, under this rule, apportion the
cost of the owned or rented satellite to their respective property factors
based upon the ratio of the in-state use of said satellite to its total usage
everywhere.
Assume that ABC Newspaper Co. owns a total of $400,000,000 of
property everywhere and that, in addition, it owns and operates a communication
satellite for the purpose of sending news articles to its printing plant in
Alabama, as well as for communicating with its printing plants and facilities
or news bureaus, employees and agents located in other states and throughout
the world. Also assume that the total value of its real and tangible personal
property that was permanently located in Alabama for the entire income year was
valued at $3,000,000. Assume also that the total original cost of the satellite
is $100,000,000 for the tax period and that of the 10,000 uplinks and downlinks
of satellite transmissions used by the taxpayer during the tax period, 200 or
2% are attributable to its satellite communications received in and sent from
Alabama. Assume further that the company's mobile property that was used
partially within Alabama, consisting of 40 delivery trucks, were determined to
have an original cost of $4,000,000 and such mobile property was used in
Alabama for 95 days. The total value of property to be attributed to Alabama
would be determined as follows:
|
Value of property permanently in
state: |
$3,000,000 |
|
Value of mobile property:
95/365 or (.260274) x $4,000,000: |
$1,041,096 |
|
Value of leased satellite property used in-state:
(.02) x 100,000,000: |
$2,000,000 |
|
Total value of property attributable to
state: |
$6,041,096 |
|
Total property factor %:
$6,041,096/($500,000,000): |
1.2082% |
(c) The Payroll Factor. For tax years prior
to January 1, 2021, or if the taxpayer is granted approval from the
Commissioner to employ an alternative apportionment method that includes the
use of the payroll factor. The payroll factor shall be determined in accordance
with rules
810-27-1-.13 and
810-27-1.14.
(d) The Sales Factor.
1. Sales Factor Denominator. The denominator
of the sales factor shall include the total gross receipts derived by the
taxpayer from transactions or activity in the regular course of its trade or
business, except receipts that may be excluded under Rules
810-27-1-.15 through
810-27-1-.18.
2. Sales Factor Numerator. The numerator of
the sales factor shall include all gross receipts of the taxpayer from sources
within Alabama, including, but not limited to, the following:
(i) Gross receipts derived from the sale of
tangible personal property, including printed materials, delivered or shipped
to a purchaser or a subscriber in Alabama.
(ii) Except as provided in subparagraph (3)
(d) 2.(iii), gross receipts derived from advertising and the sale, rental or
other use of the taxpayer's customer lists or any portion thereof shall be
attributed to Alabama as determined by the taxpayer's "circulation factor"
during the tax period. The circulation factor shall be determined for each
individual publication by the taxpayer of printed material containing
advertising and shall be equal to the ratio that the taxpayer's in-state
circulation to purchasers and subscribers of its printed material bears to its
total circulation to purchasers and subscribers everywhere. The circulation
factor for an individual publication shall be determined by reference to the
rating statistics as reflected in such sources as Audit Bureau of Circulations
or other comparable sources, provided that the source selected is consistently
used from year to year for such purpose. If none of the foregoing sources are
available, or, if available, none is in form or content sufficient for such
purposes, then the circulation factor shall be determined from the taxpayer's
books and records.
(iii) When
specific items of advertisements can be shown, upon clear and convincing
evidence, to have been distributed solely to a limited regional or local
geographic area in which Alabama is located, the taxpayer may petition, or the
Commissioner may require, that a portion of such receipts be attributed to the
sales factor numerator of Alabama on the basis of a regional or local
geographic area circulation factor and not upon the basis of the circulation
factor provided by subparagraph (3)(d)2.(ii). Such attribution shall be based
upon the ratio that the taxpayer's circulation to purchasers and subscribers
located in Alabama of the printed material containing such specific items of
advertising bears to its total circulation of such printed material to
purchasers and subscribers located within such regional or local geographic
area. This alternative attribution method shall be permitted only upon the
condition that such receipts are not double counted or otherwise included in
the numerator of any other state.
(iv) In the event that the purchaser or
subscriber is the United States Government or that the taxpayer is not taxable
in a State, the gross receipts from all sources, including the receipts from
the sale of printed material, from advertising, and from the sale, rental or
other use of the taxpayer's customer's lists, or any portion thereof that would
have been attributed by the circulation factor to the numerator of the sales
factor for such State, shall be included in the numerator of the sales factor
of Alabama if the printed material or other property is shipped from an office,
store, warehouse, factory, or other place of storage or business in
Alabama.
Authors: Kathleen Abrams, Holly H. Coon,
Christina Hall, CPA, Jennifer Reynolds
Statutory Authority:
Code of Ala.
1975, §§
40-2A-7(a)(5),
40-1831.2, 40-18-57; Rules
810-27-1-.13 through
810-27-1-.18.
