Arizona Administrative Code
Title 15 - REVENUE
Chapter 2 - DEPARTMENT OF REVENUE - INCOME AND WITHHOLDING TAX SECTION
Subchapter C - INDIVIDUALS
Article 6 - NONRESIDENTS
Section R15-2C-601 - Income of a Non-resident
Universal Citation: AZ Admin Code R 15-2C-601
Current through Register Vol. 30, No. 38, September 20, 2024
A. Gross income
1. Non-residents of the state are
required to include in the Arizona gross income only that portion of their
federal adjusted gross income which is relevant in determining the amount of
net income derived from sources within this state.
2. The gross income of a non-resident of the
state who is a member of a partnership, pool, or syndicate includes the
member's distributive share of the net income of the partnership, pool, or
syndicate in addition to any other income from sources within this state to the
extent that the member's distributive share is derived from sources within this
state.
3. A non-resident
beneficiary of an estate or trust must include in gross income, income from the
estate or trust which is deductible by the estate or trust and which is derived
from sources within this state.
B. Income from sources within this state includes:
1. Income from real or tangible
personal property located in this state.
2. Income from a business, trade, or
profession carried on within this state.
3. Income from stocks, bonds, notes, bank
deposits, and other intangible personal property having a business or taxable
situs in this state.
4. Rentals or
royalties for the use of or for the privilege of using in this state patents,
copyrights, secret processes and formulas, good will, trade marks, trade
brands, franchises, and other like property having a taxable or business situs
in this state.
C. Income from real or tangible personal property. Income of a non-resident from sources within this state includes rents from real or tangible personal property in this state, gains realized from the sale or transfer of such property regardless of where the sale or transfer is consummated, and any other type of income derived from the ownership, control, or management of real and tangible personal property located in this state irrespective of whether a trade, business, or profession is carried on within this state.
D. Income from a business, trade, or profession
1. If a non-resident's business,
trade, or profession is carried on entirely without the state, no portion of
the gross income therefrom should be reported. If, on the other hand, the
non-resident's business, trade, or profession is conducted wholly within the
state, the entire gross income therefrom must be reported.
2. If the non-resident's business, trade, or
profession is conducted partly within and partly without the state, and the
part within the state is so separate and distinct from and unconnected with the
part without the state that the net income from the part within the state can
be determined without regard to the part without the state, only the gross
income from the business, trade, or profession within the state should be
reported. Thus, if a non-resident operates hotels both in this state and
elsewhere for example, he should report only the gross income from the hotels
in this state.
3. Unitary business
a. The gross income from the entire business,
trade, or profession must be reported if a business, trade, or profession
carried on within this state is an integral part of a unitary business carried
on both within and without the state, or if the part within the state is so
connected with the part without the state that the net income from the part
within the state cannot be accurately determined independently of the part
without the state. Thus, if a non-resident engaged in the business of
manufacturing and selling goods for example maintains a factory outside this
state and sales offices in this state or vice versa, he must report the gross
income from the entire business.
b.
The net income from sources within this state subject to the tax imposed by the
law should be determined by subtracting from gross income the deductions
allowed by the law and by apportioning the remaining net income to sources
within and without the state in the manner described in subsection
(D)(4).
4. Every
non-resident who conducts a business, trade, or profession within and without
the state of the character described in subsection (D)(3) should accompany his
return with a schedule of statement showing the following:
a. The total value of real and tangible
personal property
i. Within the
state
ii. Within and without the
state
b. The total
wages, salaries, and other compensation paid for personal services performed
i. Within the state
ii. Within and without the state
c. The total gross sales or
charges for personal services performed
i.
Within the state
ii. Within and
without the state
d.
"Total gross sales within the state" shall include all sales relating to
Arizona business even though the sales may be subject to confirmation at an
out-of- state office and even though title may actually pass at some point
outside of this state. Such sales shall include all sales where the product
sold is to be used in Arizona. The value of real and tangible personal property
generally should be determined by taking the average of the value of such
property at the beginning of the taxable year and at the end of the taxable
year. Only property used in the business, trade, or profession should be
included.
e. Generally, the amount
of net income from a business, trade, or profession of the character described
in (D)(3) above which is derived from sources within the state may be
determined by taking that portion of the total net income equal to the average
percentage of subsections (D)(4)(a)(i), (b)(i) and (c)(i) to subsections
(D)(4)(a)(ii), (b)(ii) and (c)(ii) respectively as shown by the schedule or
statement accompanying the return.
f. The use of the foregoing factors shall not
be exclusive, and, if the Department believes that the net income from sources
within this state cannot properly be determined by the above method, it may
require additional factors to be used in making the allocation such as
purchases or expenses of manufacture. If a non-resident taxpayer believes that
the net income from sources within this state cannot properly be determined by
the above method, he may employ another method after 1st receiving the consent
of the Department.
g. Wages,
salaries and other compensation for personal services performed in this state
i. The gross income from commissions earned
by a non-resident traveling salesman, agent, or other employee for services
performed or sales made whose compensation depends directly on the volume of
business transacted by him includes that proportion of the compensation
received which the volume of business transacted by that employee with this
state bears to the total volume of business transacted by him within and
without the state.
ii. Non-resident
actors, singers, performers, entertainers, wrestlers, boxers, etc., must
include in gross income as income from sources within this state the gross
amount received for performances in this state.
iii. Non-resident attorneys, physicians,
account ants, engineers, etc., even though not regularly engaged in carrying on
their professions in this state, must include in gross income as income from
sources within this state the entire amount of fees or compensation for
services performed in this state on behalf of their clients.
iv. If non-resident employees including
officers of corporations but excluding employees mentioned in subsection
(D)(4)(g)(i) above are employed continuously in this state for a definite
portion of any taxable year, the gross income of the employees from sources
within this state includes the total compensation for the period employed in
this state.
v. If non-resident
employees are employed in this state at intervals throughout the year, as would
be the case if employed in operating trains, boats, planes, motor buses, truck,
etc., between this state and other states, and foreign countries, and are paid
on a daily, weekly, or monthly basis; the gross income from sources within this
state includes that portion of the total compensation for personal services
which the total amount of working time within this state bears to the total
amount of working time both within and without the state. If the employees are
paid on a mileage basis, the gross income from sources within this state
includes that portion of the total compensation for personal services which the
number of miles traversed in this state bears to the total number of miles
traversed within and without the state. If the employees are paid on some other
basis, the total compensation for personal services must be apportioned between
this state and other states and foreign countries in such a manner as to
allocate to this state that portion of the total compensation which is
reasonably attributable to personal services performed in this state.
Disclaimer: These regulations may not be the most recent version. Arizona 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.
This site is protected by reCAPTCHA and the Google
Privacy Policy and
Terms of Service apply.
