Current through Register Vol. 35, No. 18, September 24, 2024
A. The following special rules are
established in respect to the sales factor of the apportionment formula:
(1) Where substantial amounts of gross
receipts arise from an incidental or occasional sale of a fixed asset used in
the regular course of the taxpayer's trade or business, such gross receipts
shall be excluded from the sales factor. For example, gross receipts from the
sale of a factory or plant will be excluded.
(2) Insubstantial amounts of gross receipts
arising from incidental or occasional transactions or activities may be
excluded from the sales factor unless such exclusion would materially affect
the amount of income apportioned to this state. For example, the taxpayer
ordinarily may include or exclude from the sales factor gross receipts from
such transactions as the sale of office furniture, business automobiles,
etc.
(3) Where the income producing
activity in respect to business income from intangible personal property can be
readily identified, such income is included in the denominator of the sales
factor and, if the income producing activity occurs in this state, in the
numerator of the sales factor as well. For example, usually the income
producing activity can be readily identified in respect to interest income
received on deferred payments on sales of tangible property and income from the
sale, licensing or other use of intangible personal property.
(4) Where the taxpayer realizes gains from
the sale or other disposition of intangible property held as part of the
taxpayer's short term investments of working capital, only the net gain from
such sales reported as taxable income shall be included in the taxpayer's sales
factor.
B. Where
business income from intangible property cannot readily be attributed to any
particular income producing activity of the taxpayer, such income cannot be
assigned to the numerator of the sales factor for any state and shall be
excluded from the denominator of the sales factor. For example, where business
income in the form of dividends received on stock, royalties received on
patents or copyrights, or interest received on bonds, debentures or government
securities results from the mere holding of the intangible personal property by
the taxpayer, such dividends and interest shall be excluded from the
denominator of the sales factor.
