La. Admin. Code tit. 61 § I-1134
Current through Register Vol. 50, No. 8, August 20, 2024
Section I-1134 - Determination of Louisiana Apportionment PercentA. General. R.S. 47:287.95 provides for an apportionment percent that is to be applied to the taxpayer's total net apportionable income in determining the Louisiana net apportionable income. Specific formulas are prescribed for air, pipeline, other transportation businesses, and certain service enterprises. A general formula is prescribed for manufacturing, merchandising and any other business for which a formula is not specifically prescribed. The statute contemplates that only one specific formula be used in determining the apportionment percent, that being the formula prescribed for the taxpayer's primary business. As a general rule, where a taxpayer is engaged in more than one business, the taxpayer's primary business shall be that which is the primary source of the taxpayer's net apportionable income. When the numerator and denominator are zero in any one or more ratios in the apportionment formula, such ratio shall be dropped from the apportionment formula and the arithmetical average determined from the total remaining ratios.B. Property Ratio 1. The value of immovable and corporeal movable property owned by the taxpayer and used in the production of net apportionable income is included in each formula except those provided for certain service businesses and those using the single sales ratio under the general formula. Where only a part of the property is used in the production of apportionable income, only the value of that portion so used shall be included in the property ratio. However, where the entire property is used in the production of both allocable and apportionable income the value of the entire property shall be included in the property ratio. Idle property and property under construction, during such construction and prior to being placed in service, shall not be included in the property ratio. Property held as reserve or standby facilities, or property held as a reserve source of materials shall be considered used. For example, a taxpayer who purchases a lignite deposit that is held as a reserve source of fuel should include the value of such deposits in the property ratio. Non-productive mineral leases are considered to be held for such use and should be included in the property ratio. The value of inventories of merchandise in transit shall be allocated to the state in which their delivery destination is located in the absence of conclusive evidence to the contrary. R.S. 47:287.95(A)(1) provides that aircraft owned by a taxpayer whose net apportionable income is derived primarily from air transportation should not be included in the property ratio.2. Proration of Rolling Stock and Other Mobile Equipment. The average value of rolling stock and other mobile equipment owned by the taxpayer shall be prorated within and without Louisiana as set forth below. a. The value of diesel locomotives shall be allocated to Louisiana on the basis of the ratio of diesel locomotive miles in Louisiana to total diesel locomotive miles.b. The value of other locomotives shall be allocated to Louisiana on the basis of the ratio of other locomotive miles in Louisiana to total other locomotive miles.c. The value of freight train cars shall be allocated to Louisiana on the basis of the ratio of freight car miles in Louisiana to total freight car miles.d. The value of passenger cars shall be allocated to Louisiana on the basis of the ratio of passenger car miles in Louisiana to total passenger car miles.e. The value of passenger buses shall be allocated to Louisiana on the basis of the ratio of bus miles in Louisiana to total bus miles.f. The value of diesel trucks shall be allocated to Louisiana on the basis of the ratio of diesel truck miles in Louisiana to total diesel truck miles.g. The value of other trucks shall be allocated to Louisiana on the basis of the ratio of other truck miles in Louisiana to total other truck miles.h. The value of trailers shall be allocated to Louisiana on the basis of the ratio of trailer miles in Louisiana to total trailer miles.i. The value of towboats shall be allocated to Louisiana on the basis of the ratio of towboat miles in Louisiana to total towboat miles. In the determination of Louisiana towboat miles, one half of the mileage of all navigable rivers or streams bordering on both Louisiana and another state shall be considered Louisiana miles.j. The value of tugs shall be allocated to Louisiana on the basis of the ratio of tug miles in Louisiana to total tug miles. In the determination of Louisiana tug miles, one half of the mileage of all navigable rivers or streams bordering on both Louisiana and another state shall be considered Louisiana miles.k. The value of barges shall be allocated to Louisiana on the basis of the ratio of barge miles in Louisiana to total barge miles. In the determination of Louisiana barge miles, one half of the mileage of all navigable rivers or streams bordering on both Louisiana and another state shall be considered Louisiana miles.l. The value of work and miscellaneous equipment shall be allocated to Louisiana on the basis of the ratio of track miles in Louisiana to total track miles in the case of a railroad, on the basis of the ratio of bank miles operated in Louisiana to total bank miles operated in the case of inland waterway transportation and on the basis of the ratio of route miles operated in Louisiana to total route miles operated in the case of truck and bus transportation. In the determination of bank miles, one half of the bank mileage of navigable rivers or streams bordering on both Louisiana and another state shall be considered Louisiana bank miles.m. The value of other floating equipment shall be allocated to Louisiana on the basis of the ratio of operating equipment miles within Louisiana to the total operating equipment miles, for the particular equipment to be allocated. In the determination of Louisiana operating equipment miles, one half of the mileage of all navigable rivers or streams bordering on both Louisiana and another state shall be considered Louisiana operating equipment miles.3. Insufficient Records. In any case where the information necessary to determine the ratios listed above is not readily available from the taxpayer's records, the secretary, in his discretion, may permit or require the allocation of such equipment by any method deemed reasonable by him.C. Wage Ratio. Salaries, wages and other compensation for personal services as used in R.S. 47:287.95 includes only compensation paid to employees or to a deferred plan for the benefit of employees of the taxpayer for services rendered in connection with the production of net apportionable income.D. Revenue Ratio. This ratio is generally composed of sales, charges for service, and other gross apportionable income. Neither allocable income nor income excluded from gross income, such as interest and dividends, is included in the ratio. For all formulas except that provided by R.S. 47:287.95(F), the revenue ratio consists of the ratio of the gross apportionable income of the taxpayer from Louisiana sources to the total gross apportionable income of the taxpayer. For the formula provided by R.S. 47:287.95(F), the revenue ratio consists of the ratio of net sales made in the regular course of business and other gross apportionable income attributable to this state to the total net sales made in the regular course of business and other gross apportionable income of the taxpayer. Sales not made in the regular course of business are not included in the formula provided by R.S. 47:287.95(F). 1. Revenue from Transportation other than Air Travel. Gross apportionable income attributable to Louisiana from transportation other than air includes all such revenue derived entirely from sources within Louisiana plus a portion of revenue from transportation performed partly within and partly without Louisiana, based upon the ratio of the number of units of transportation service performed in Louisiana to the total of such units. Revenue from transportation exclusively without Louisiana shall not be included in gross apportionable income attributed to Louisiana. Gross apportionable income attributable to Louisiana shall be computed separately for each of the four classes enumerated below. a. A unit of transportation shall consist of the following: i. in the case of the transportation of passengers, the transportation of one passenger a distance of 1 mile;ii. in the case of the transportation of liquid commodities, including petroleum or related products, the transportation of one barrel of the commodities a distance of 1 mile;iii. in the case of the transportation of property other than liquids, the transportation of 1 ton of the property a distance of 1 mile;iv. in the case of the transportation of natural gas, the transportation of one MCF or one MBTU a distance of 1 mile.b. In any case where another method would more clearly reflect the gross apportionable income attributable to Louisiana, or where the above information is not readily available from the taxpayer's records, the secretary, in his discretion, may permit or require the use of any method deemed reasonable by him.c. Example: ABC Corporation is in the business of transporting natural gas as a common carrier. During the year 2005, ABC entered into five transactions. In the first transaction 1 million MMCF was transported from Texas, through Louisiana, to Mississippi. The total distance transported was 500 miles, of which 200 miles was in Louisiana. The charge for the transportation was $250,000. In the second transaction 1 million MMCF was transported from one point in Louisiana to another point in Louisiana, a distance of 150 miles, for a charge of $150,000. In the third transaction 1 million MMCF was transported from one point in Texas to another point in Texas, a distance of 500 miles, for a charge of $250,000. In the fourth transaction 1 million MMCF was transported from a point in Louisiana to a point in another state for a charge of $500,000. The total distance transported was 1,000 miles, of which 100 miles were in Louisiana. In the fifth transaction 1 million MMCF was transported from a point in Louisiana to a point in another state for a charge of $250,000. The distance transported was 500 miles, of which 100 was in Louisiana. The portion of the gross apportionable income attributed to Louisiana would be computed as follows. | Louisiana Amount |
First Transaction - 200/500 x $250,000 = | $100,000 |
Second Transaction - entirely from Louisiana = | 150,000 |
Third Transaction - neither entirely nor partially in Louisiana | -0- |
Fourth Transaction - 100/1,000 x $500,000 = | 50,000 |
Fifth Transaction - 100/500 x $250,000 = | 50,000 |
Louisiana Income From Transportation of Natural Gas | $350,000 |
2. Revenue from Telephone, Telecommunications, and Other Similar Services a. Gross apportionable income attributable to Louisiana from providing telephone, telecommunications, and similar services shall include, but is not limited to: i. revenue derived from charges for providing telephone "access" from a location in this state. "Access" means that a call can be made or received from a point within this state. An example of this type of receipt is a monthly subscriber fee billed with reference to a service address located in the state and without regard to actual usage;ii. revenue derived from charges for unlimited calling privileges, if the charges are billed by reference to a service address located in this state;iii. revenue from intrastate telephone calls or other telecommunications, except for mobile telecommunication services, beginning and ending in Louisiana;iv. revenue from interstate or international telephone calls or other telecommunications, except for mobile telecommunication services, either beginning or ending in Louisiana if the service address charged for the call or telecommunication is located in Louisiana, regardless of where the charges are billed or paid;v. revenue from mobile telecommunications service: (a). revenue from mobile telecommunications services shall be attributed to the place of primary use, which is the residential or primary business street address of the customer;(b). if a customer receives multiple services, such as multiple telephone numbers, the place of primary use of each separate service shall determine where the revenue from that service is attributed;(c). revenue from mobile telecommunications services shall be attributed to Louisiana if the place of primary use of the service is Louisiana.b. Definitions. For the purposes of this paragraph, the following terms have the following meanings unless the context clearly indicates otherwise. i.Call-a specific telecommunications transmission.ii.Customer-any person or entity that contracts with a home service provider or the end user of the mobile telecommunications service if the end user is not the person or entity that contracts with the home service provider for mobile telecommunications service.iii.Home Service Provider-the facilities-based carrier or reseller with which the customer contracts for the provision of mobile telecommunications services.iv.Place of Primary Use ofMobile Telecommunications Service-the street address representative of where the customer's use of mobile telecommunications service primarily occurs. This address must be within the licensed service area of the home service provider and must be either the residential or the primary business street address of the customer. The home service provider shall be responsible for obtaining and maintaining the customer's place of primary use as prescribed by R.S. 47:301(14)(i)(ii)(bb)(XI).v.Service Address- the address where the telephone equipment is located and to which the telephone number is assigned.vi.Telecommunications-the electronic transmission, conveyance or routing of voice, data, audio, video, or any other information or signals to a point, or between or among points, by or through the use of any medium such as wires, cables, satellite, microwave, electromagnetic wires, light waves or any combination of those or similar media now in existence or that might be devised, but telecommunications does not include the information content of any such transmission.vii.Telecommunications Service-providing telecommunications, including service provided by telecommunication service resellers, for a charge and includes telephone service, telegraph service, paging service, personal communication services and mobile or cellular telephone service, but does not include electronic information service or Internet access service.3. Attribution of Sales Made in the Regular Course of Business a. Sales made in the regular course of business attributable to Louisiana under R.S. 47:287.95 are those sales where the goods, merchandise or property are received in Louisiana by the purchaser. Similarly, where the goods, merchandise or property are received in some other state, the sale is attributable to that state. Sales made in the regular course of business include all sales of goods, merchandise or product of the business or businesses of the taxpayer. They do not include the sale of property acquired for use in the production of income. Where a taxpayer under a contract performs essentially a management or supervision function and receives a reimbursement of his costs plus a stipulated amount, the amounts received as reimbursed costs are not sales although the contract so designates them. The stipulated amount constitutes other gross apportionable income and shall be attributed to the state where the contract was performed. Where goods are delivered into Louisiana by a public carrier, or by other means of transportation, including transportation by the purchaser, the place at which the goods are ultimately received after all transportation has been completed shall be considered as the place at which the goods are received by the purchaser. The transportation in question is the initial transportation relating to the sale by the taxpayer, and not the transportation relating to a sale or subsequent use by the purchaser.b. Where the goods are delivered by the seller in his own equipment, it is presumed that such transportation relates to the sale. Where the goods are delivered by a common or contract carrier, whether shipped F.O.B. shipping point, and whether the carrier be a pipeline, trucking line, railroad, airline or some other type of carrier, the place where the goods are ultimately received by the purchaser after the transportation by the carrier has ended is deemed to be the place where the goods are received by the purchaser.c. Where the transportation involved is transportation by the purchaser, in determining whether or not the transportation relates to the sale by the taxpayer, consideration must be given to the following principles. i. To be related to the initial sale, the transportation should be commenced immediately. However, before a lapse of time is conclusive, consideration must be given to the nature and character of the goods purchased, the availability of transportation, and other pertinent circumstances.ii. The intent of the parties to the sale must also be considered. The intent and purpose of the purchaser may be determined directly, or by an evaluation of the nature and scope of his operation, customs of the trade, customary activities of the purchaser, and all pertinent actions and words of the purchaser at the time of the sale.iii. In order for the transportation by the purchaser to be related to the initial sale by the taxpayer to the purchaser, such transportation must be generally the same in nature and scope as that performed by the taxpayer or by the carrier. There is no difference between a case where a taxpayer in Houston ships F.O.B., Houston, to a purchaser in Baton Rouge, by common carrier, and a case where all facts are the same except that the purchaser goes to Houston in his own vehicle and returns with the goods to Baton Rouge.d. Generally, transportation by public carrier pipelines is accorded the same treatment as transportation by any other type of public carrier. However, because of the nature and character of the property, the type of carrier, and customs of the trade, the natural resources in the pipeline may become intermixed with other natural resources in the pipeline and lose their particular identity. Where delivery is made to a purchaser in more than one state, or to different purchasers in different states, peculiar problems of attribution arise. In solving such problems consideration must be given to the following principles. i. Where it can be shown that a taxpayer in one state sold a quantity of crude oil to a purchaser in another state, and the oil was transported to the purchaser by pipeline carrier, the sale will be attributed to the state where the crude oil is received by the purchaser, even though the crude oil delivered might not be the identical oil sold because of commingling in the pipeline. Custom of the trade indicates the purchaser buys a quantity of oil of certain quality rather than any specific oil.ii. In situations involving several deliveries in several different states to one or more purchasers, the general rules should be applied with logic and common sense.e. In determining the place of receipt by the purchaser after the initial transportation has ended, peculiar problems may be created by the storage of the property purchased immediately upon purchase at a place other than the place of intended use. The primary problem created by such storage is in determining whether or not the transportation after storage relates to the sale by the taxpayer. Generally, the rules and principles set forth above will control where the storage is of temporary nature, such as that necessitated by lack of transportation, by change from one means of transportation to another, or by natural conditions. In cases where the storage is permanent or semi-permanent, delivery to the place of storage concludes the initial transportation, and the sale is attributed to the place of storage.4. Attribution of Gains from Sales Not Made in the Regular Course of Business a. The net profit from sales not made in the regular course of business shall be included in the ratios provided by R.S. 47:287.95(C) and (D).b. The net profit from the sale of a mineral lease, royalty interest, oil payment, or other mineral interest shall be attributed to the state or states in which the property subject to such mineral interest is located.c. The net profit from the sale of other intangibles shall be attributed to the state or states in which the intangible has acquired a business situs if the intangible has been so used in connection with a business as to acquire a business situs, or, in the absence of such a business situs, shall be at the commercial domicile of the taxpayer.d. The net profit from the sale of the tangibles shall be attributed to the state or states in which the tangible is located at the time of sale.5. Exchanges. In transactions in which raw materials, products, or merchandise are transferred to another party at one location in exchange for raw materials, products, or merchandise at another location in agreements requiring the subsequent replacement with similar property on a routine, continuing, or repeated basis, all such transactions shall be carefully analyzed in order to determine whether they constitute sales that should be included in the sales ratio or whether they constitute exchanges which are not sales and should be excluded from the sales ratio.6. Recoveries and Reductions of Expense. Transactions that are actually recoveries of expenses or transactions that are part of a sequence of transactions for the purpose of managing risk, preventing loss, securing product, securing market or protecting profit shall not be considered gross apportionable income for purposes of determining the Louisiana apportionment percent. Examples of such transactions include, but are not limited to:a. Corporation A rents retail space in a shopping mall. The glass in the front door of the shop has broken and Corporation A is unable to immediately contact the building owner. Corporation A has the glass replaced and is later reimbursed by the building owner. The reimbursement is not gross apportionable income for purposes of determining the Louisiana apportionment percent;b. Corporation B buys and sells wheat. As part of securing a supply of wheat at the best possible price Corporation B will, when it believes prices will be rising in the future, purchase options to buy a fixed quantity of wheat at a fixed price on a fixed date in the future. At times market conditions will change subsequent to the purchase of an option and, believing that prices will fall and the wheat can be bought even cheaper than the option price in the future, the option will be sold. The amount received from the sale of the option is not gross apportionable income for purposes of determining the Louisiana apportionment percent. The amount received relates to the ultimate cost of goods sold;c. Corporation C grows and sells wheat. It knows that at harvest it will have at least a certain amount of wheat that must be sold. To ensure a market for its wheat at harvest Corporation B buys options to sell fixed quantities of wheat at fixed prices at harvest time. At times market conditions will change subsequent to the purchase of an option and, believing that there will be sufficient buyers willing to pay a sufficient price at harvest time, the option will be sold. The amount received from the sale of the option is not gross apportionable income for purposes of determining the Louisiana apportionment percent. The amount received relates to marketing expenses;d. Corporation D grows, buys and sells wheat. To manage market risk in its business Corporation D engages in complex, sophisticated transactions involving options, futures contracts and various derivative contracts. Any amounts received in the course of these risk management transactions are not gross apportionable income for the purposes of determining the Louisiana apportionment percent. The amounts received relate to insurance expenses.La. Admin. Code tit. 61, § I-1134
Promulgated by the Department of Revenue and Taxation, Income Tax Section, LR 14:105 (February 1988), repromulgated by the Department of Revenue, Policy Services Division, LR 30:482 (March 2004), amended LR 31:694 (March 2005), LR 32:421 (March 2005).AUTHORITY NOTE: Promulgated in accordance with R.S. 47:287.95, R.S. 47:287.785, and R.S. 47:1511.