Colo. Code Regs. 39-22-303.5-6
Current through Register Vol. 47, No. 20, October 25, 2024
Rule 39-22-303.5-6 - Sales Other Than Sales of Tangible Personal Property in This StateThe provisions of this rule apply to income tax years commencing on or after January 1, 2009, but prior to January 1, 2019.
(1) Gross receipts from services rendered are included in the Colorado sales factor numerator if the service that gave rise to the gross receipt is performed wholly within Colorado. If the service is performed within and without Colorado, and except as otherwise provided by § 39-22-303.7, C.R.S., or applicable special rules for allocation and apportionment of corporate income or other rule, the portion of the gross receipt included in the Colorado numerator is found by multiplying the gross receipt by a fraction, the numerator of which is the direct costs incurred in the performance of that service in Colorado and the denominator of which is the direct costs incurred in the performance of that service everywhere. (a) Direct costs include: (i) wages of employees engaged in the performance of the service;(ii) taxpayer's payments to an agent or independent contractor for the performance of personal services on behalf of the taxpayer which give rise to the particular item of gross receipts;(iii) a reasonable measure of the real and tangible-personal property used in the performance of the service. Such reasonable measure could be a market lease rate, depreciation, or other reasonable method. However, the same method must be used consistently from year to year and from state to state.(iv) Services on Behalf of the Taxpayer. An activity giving rise to gross receipts performed on behalf of a taxpayer by an agent or independent contractor is attributed to this state if such activity giving rise to gross receipts is in this state. In order to be included as a sale of the taxpayer in either the numerator or denominator of the sales factor, the activities described in this subparagraph iv must themselves directly give rise to gross receipts of the taxpayer. By way of illustration and not of limitation, such costs could include, for an accounting firm, amounts paid to an independent contractor accountant whose time or activities directly relate to the accounting of the firm's client and which time or activities directly give rise to a billing item presented to the firm's client. Such costs would not include, for the same firm, amounts paid to an independent contractor accountant whose services consist of accounting services related to the firm's accounting, because these activities do not give rise to gross receipts of the taxpayer.(1) Such activity giving rise to gross receipts is in this state: (A) when the taxpayer can reasonably determine at the time of filing that the activity is actually performed in this state by the agent or independent contractor, but if the activity occurs in more than one state, the location where the activity is actually performed shall be deemed to be not reasonably determinable at the time of filing under this subparagraph (1)(a)(iv)(1)(A);(B) if the taxpayer cannot reasonably determine at the time of filing where the activity is actually performed, when the contract between the taxpayer and the agent or independent contractor indicates it is to be performed in this state and the portion of the taxpayer's payment to the agent or contractor associated with such performance is determinable under the contract;(C) if it cannot be determined where the activity is actually performed and the agent or independent contractor's contract with the taxpayer does not indicate where it is to be performed, when the contract between the taxpayer and the taxpayer's customer indicates it is to be performed in this state and the portion of the taxpayer's payment to the agent or contractor associated with such performance is determinable under the contract; or(D) if it cannot be determined where the activity is actually performed and neither contract indicates where it is to be performed or the portion of the payment associated with such performance, when the domicile of the taxpayer's customer is in this state. If the taxpayer's customer is not an individual, "domicile" means commercial domicile.(2) If the location of the activity giving rise to gross receipts by an agent or independent contractor, or the portion of the payment associated with such performance, cannot be determined under subparagraphs (1)(a)(iv)(1)(A) through (1)(a)(iv)(1)(C), or the taxpayer's customer's domicile cannot be determined under subparagraph (1)(a)(iv)(1)(D), or, although determinable, such activity is in a state in which the taxpayer is not taxable, such income producing activity shall be disregarded. (b) Direct costs do not include: (ii) Management costs, unless such management was directly involved in the performance of the service, and(iii) The costs of property not directly used in the performance of the service.(2) Rents and royalties from real property located in Colorado are included in the Colorado sales factor numerator.(3) Gross proceeds from the sale of real property located in Colorado are included in the Colorado sales factor numerator.(4) Interest and dividend income is included in the Colorado sales factor numerator if the taxpayer's commercial domicile for that trade or business is located in Colorado.(5) Gain from the sale of intangible property is included in the Colorado sales factor numerator if the taxpayer's commercial domicile for that trade or business is located in Colorado.(6) Patent and copyright royalties are included in the Colorado sales factor numerator if: (a) The patent or copyright is utilized by the payer in Colorado, or(b) The patent or copyright is utilized by the payer in a state in which the taxpayer is not taxable and the taxpayer's commercial domicile for that trade or business is located in Colorado.(7) Revenue from the performance of purely personal services is included in the Colorado sales factor numerator if the income producing activity is performed in Colorado. (a) Purely personal services consist of services that are performed by individuals with only incidental contributions either from individuals not directly engaged in the performance of the service or from property.(b) Such services include, but are not limited to: (i) legal, accounting, or other professional services,(ii) entertainment and sporting services.(c) In general, the performance of each individual is a separate income producing activity. Where sales are generated by the performance of services of a number of individuals, such sales must be divided among the several individuals performing the services. Such division must be reasonably related to the generation of the revenue. The contributions of individuals whose services are not the direct object of the contract (such as para-professionals and support and administrative staff) are not considered income producing activities. Their contributions are not considered in performing the calculation described in subparagraph (d) of this paragraph (7). If the contributions of such personnel are more than incidental, then the activity is not a purely personal service and would be apportioned pursuant to § 39-22-303.5(4)(c)(I), C.R.S.(d) Each income producing activity is performed in Colorado to the extent that the individual is in Colorado when performing the service. Thus, an income producing activity for the performance of purely personal services is in Colorado in the ratio of the time spent in Colorado in performing the service to the total time spent in performing the service. Time spent in performing the service includes the amount of time expended in the performance of a contract or other obligation that gives rise to the revenue. Personal service not directly connected with the performance of the contract or other obligation, as for example time expended in negotiating the contract, is excluded from the computation.Colorado Register, Vol 37, No. 14. July 25, 2014, effective 8/14/201437 CR 18, September 25, 2014, effective 10/15/201437 CR 19, October 10,2014, effective 10/30/201437 CR 22, November 25, 2014, effective 12/16/201438 CR 04, February 25, 2015, effective 3/17/201538 CR 07, April 10, 2015, effective 4/30/201538 CR 11, June 10, 2015, effective 6/30/201538 CR 22, November 25, 2015, effective 12/15/201538 CR 24, December 25, 2015, effective 1/14/201638 CR 24, December 25, 2015, effective 1/19/201639 CR 01, January 10, 2016, effective 1/30/201639 CR 16, August 25, 2016, effective 9/14/201640 CR 08, April 25, 2017, effective 5/15/201740 CR 12, June 25, 2017, effective 7/15/201740 CR 16, August 25, 2017, effective 9/14/201740 CR 23, December 10, 2017, effective 1/1/201841 CR 14, July 25, 2018, effective 8/14/201841 CR 20, October 25, 2018, effective 11/14/201842 CR 02, January 25, 2019, effective 12/18/201842 CR 02, January 25, 2019, effective 12/18/2018, expires 4/17/201942 CR 06, March 25, 2019, effective 4/14/201943 CR 04, February 25, 2020, effective 3/16/202043 CR 13, July 10, 2020, effective 6/2/202043 CR 17, September 10, 2020, effective 9/30/202044 CR 03, February 10, 2021, effective 3/2/202144 CR 07, April 10, 2021, effective 4/30/202144 CR 08, April 25, 2021, effective 5/15/202145 CR 01, January 10, 2022, effective 1/30/202245 CR 04, February 25, 2022, effective 3/17/202245 CR 05, March 10, 2022, effective 3/30/202246 CR 11, June 10, 2023, effective 5/2/202346 CR 09, May 10, 2023, effective 5/30/2023