Section 45 IAC 3.1-1-63 - Apportionment in absence of one or more factorsAuthority: IC 6-8.1-3-3
Affected: IC 6-3-2-2
Sec. 63.
Property, Payroll and Sales Factors-Special Circumstances. In the case of a taxpayer that lacks one or more of the factors in the 3-factor formula, the taxpayer's business income will generally be apportioned by use of the remaining factor or factors. Examples:
(1) The taxpayer, a wholly-owned subsidiary of a manufacturing corporation, has no employees of its own in Indiana or any other state. The taxpayer will apportion its business income by a formula the numerator of which is the property and sales factors, and the denominator of which is two.(2) The taxpayer, a sales subsidiary for a multistate manufacturer, has no property or payroll of its own in Indiana, but does in other states. The taxpayer's business income will be apportioned by a formula the numerator of which is the sales factor and the denominator of which is three. Where in the computation of the property, payroll or sales factors, the taxpayer has not assigned part of its property, payroll, or sales to any state, the Department may require the exclusion of the unassigned property, payroll or sales from the denominator of the appropriate factor in order to prevent distortion of the apportionment.
Transportation Companies. IC 6-3-2-2(b) requires that interstate carriers and all other multistate taxpayers use the three-factor formula in apportioning their business income. This method will assure consistency in the application of the Adjusted Gross Income Tax Act to multistate carriers. Business income for transportation companies is apportioned to Indiana by the use of the following formula:
Click here to view Image
Definition of Factors
(A) Tangible Property. Fixed properties such as buildings and land used in business, shop and terminal equipment and trucks or cars used locally or any other tangible property connected with the transportation business, will be assigned to the state in which such properties are located. The value of all movable equipment used in interstate transportation will be assigned to this State on the basis of total miles traveled in this State, as compared to total miles traveled everywhere. Fixed and movable property will then be combined to arrive at the total property factor, Indiana property over property everywhere.
Property owned by the transportation company is valued at original cost. Property rented is valued at eight (8) times the annual rental rate less any annual subrental.
(B) Payroll. Wages and salaries of employees assigned to fixed locations within this State shall be included in the payroll factor of this State. Wages of personnel operating interstate transportation equipment will be assigned to this State on the basis of total miles traveled in Indiana, as compared to total miles traveled everywhere. The payroll of permanent and transient personnel will then be combined to arrive at the total payroll factor, Indiana payroll over payroll everywhere.(C) Revenue from Transportation. The total revenue dollars from transportation (both intra-state and inter-state) are to be assigned to the states traversed on the basis of class or category mileage in each state in which or through which the freight or passengers move. Pipelines may substitute revenue miles with barrel miles, cubic foot miles, or other appropriate measures of product movement. In order to determine the percentage of revenue from transportation services in Indiana, the fraction of revenue miles in Indiana over revenue miles everywhere must be applied to total revenue from transportation. Example:
Computation of Three-Factor Apportionment Formula
| A. Tangible Property Factor |
| Fixed property in Indiana .............. | 40,000 |
| Fixed property everywhere ............. | 1,000,000 |
| Milage [sic.] Factor 2% ............... | (see C below) |
| Movable property everywhere .......... | 24,000,000 |
1. Indiana value of movable property 2% × 24,000,000 = 480,000
2. Fixed and movable property is combined to arrive at the total property factor Click here to view Image
| B. Payroll Factor |
| Payroll at fixed Indiana location ......... | 20,000 |
| Payroll at fixed location everywhere ..... | 1,000,000 |
| Mileage Factor 2% ................... | (see C below) |
| Payroll of employees operating interstate transportation everywhere ........ | 2,000,000 |
1. Indiana value of transient payroll 2% × 2,000,000 = 40,000 2. Fixed and transient payroll is combined to arrive at the total payroll factor Click here to view Image
| C. Revenue From Transportation Factor |
| Road miles over Indiana ............... | 90,000 |
| Road miles everywhere ............... | 4,500,000 |
| Total gross receipts from transportation . . . | 6,000,000 |
1. Mileage Factor 90,000 ÷ 4,500,000 = 2% Mileage factor is combined with total gross receipts to arrive at the revenue from transportation factor 2% × 6,000,000 = 120,000 120,000 ÷ 6,000,000 = 2% revenue from transportation factor | D. Total Apportionment |
| Percentage Property .................. | 2.08 |
| Payroll ............................ | 2.00 |
| Revenue ........................... | 2.00 |
6.08 ÷ 3 = 2.03% apportionment percentage
Department of State Revenue; Reg 6-3-2-2 l (020); filed Oct 15, 1979, 11:15 am: 2 IR 1532; errata, 2 IR 1743