Missouri Code of State Regulations › Title 12 - DEPARTMENT OF REVENUE › Division 10 - Director of Revenue › Chapter 2 - Income Tax › Section 12 CSR 10-2.075 - Multistate Allocation and Apportionment

Current through Register Vol. 49, No. 14, July 15, 2024
PURPOSE: This rule represents the methods to be used
				  in allocating and apportioning income to Missouri under that part of Chapter
				  32, RSMo which is commonly known as the Multistate Tax Compact.
PUBLISHER'S NOTE: The secretary of state has
				  determined that the publication of the entire text of the material which is
				  incorporated by reference as a portion of this rule would be unduly cumbersome
				  or expensive. Therefore, the material which is so incorporated is on file with
				  the agency who filed this rule, and with the Office of the Secretary of State.
				  Any interested person may view this material at either agency's headquarters or
				  the same will be made available at the Office of the Secretary of State at a
				  cost not to exceed actual cost of copy reproduction. The entire text of the
				  rule is printed here. This note refers only to the incorporated by reference
				  material.
(1) Authority for
				Rule. This rule is being issued under the general regulatory powers granted to
				the director of revenue in section
				143.961,
				RSMo which became effective January 1, 1973, and in accordance with subsection
				3 of article VII of the Multistate Tax Compact, section
				32.200,
				RSMo.
(2) Applicability and Scope
				of Rule. This rule is intended as an interpretive guideline in the application
				of Article VI of the Multistate Tax Compact, section
				32.200,
				RSMo, implemented by adopting the Multistate Tax Commission's allocation and
				apportionment regulations which were adopted by the commission February 21,
				1973. The apportionment rules set forth in this rule are applicable to any
				taxpayer having business income, regardless of whether or not it has
				nonbusiness income, and the allocation rules set forth in this rule are
				applicable to any taxpayer having nonbusiness income, regardless of whether or
				not it has business income. The numerical references contained in this rule are
				to Article IV of the Multistate Tax Compact, section
				32.200,
				RSMo, and its subsections. The only exceptions to the allocation and
				apportionment rules contained in this rule are those set forth in sections
				(63)-(66) of this rule under the authority of Article IV.18. of the Multistate
				Tax Compact, section
				32.200,
				RSMo. This rule is not intended to modify existing regulations concerning
				jurisdictional standards.
(3) As
				used in this rule, the term director of revenue shall mean the director of
				revenue or his/her duly authorized agent or designee.
(4) Business and Nonbusiness Income. Section
				32.200
				(Article IV.1.), RSMo defines business income as income arising from
				transactions and activity in the regular course of the taxpayer's trade or
				business and includes income from tangible and intangible property if the
				acquisition, management and disposition of the property constitute integral
				parts of the taxpayer's regular trade or business operations. In essence, all
				income which arises from the conduct of trade or business operations of a
				taxpayer is business income. For purposes of administration of section
				32.200
				(Article IV), RSMo, the income of the taxpayer is business income unless
				clearly classifiable as nonbusiness income. Nonbusiness income means all income
				other than business income. The classification of income by the labels
				occasionally used, such as manufacturing income, compensation for services,
				sales income, interest, dividends, rents, royalties, gains, operating income,
				non-operating income, and the like, is of no aid in determining whether income
				is business or nonbusiness income. Income of any type or class and from any
				source is business income if it arises from transactions and activity occurring
				in the regular course of a trade or business. Accordingly, the critical element
				in determining whether income is business income or nonbusiness income is the
				identification of the transactions and activity which are the elements of a
				particular trade or business. In general all transactions and activities of the
				taxpayer which are dependent upon or contribute to the operations of the
				taxpayer's economic enterprise as a whole constitute the taxpayer's trade or
				business and will be transactions and activity arising in the regular course
				of, and will constitute integral parts of, a trade or business.
(5) Business and Nonbusiness Income
				Application of Definitions. The following are rules and examples for
				determining whether particular income is business or nonbusiness income (The
				examples used throughout this rule are illustrative only and do not purport to
				set forth all pertinent facts.):
(A) Rents
				From Real and Tangible Personal Property. Rental income from real and tangible
				property is business income if the property with respect to which the rental
				income was received is used in the taxpayer's trade or business, or incidental
				to the trade or business and therefore is includable in the property factor
				under sections (21)-(24) of this rule.
1.
				Example: The taxpayer operates a multistate car rental business. The income
				from car rentals is business income.
2. Example: The taxpayer is engaged in the
				heavy construction business in which it uses equipment such as cranes, tractors
				and earth-moving vehicles. The taxpayer makes short-term leases of the
				equipment when particular pieces of equipment are not needed on any particular
				project. The rental income is business income.
3. Example: The taxpayer operates a
				multistate chain of men's clothing stores. The taxpayer purchases a five
				(5)-story office building for use in connection with its trade or business. It
				uses the street floor as one (1) of its retail stores and the second and third
				floors for its general corporate headquarters. The remaining two (2) floors are
				leased to others. The rental of the two (2) floors is incidental to the
				operation of the taxpayer's trade or business. The rental income is business
				income.
4. Example: The taxpayer
				operates a multistate chain of grocery stores. It purchases as an investment an
				office building in another state with surplus funds and leases the entire
				building to others. The net rental income is not business income of the grocery
				store trade or business. Therefore, the net rental income is nonbusiness
				income.
5. Example: The taxpayer
				operates a multistate chain of men's clothing stores. The taxpayer invests in a
				twenty (20)-story office building and uses the street floor as one (1) of its
				retail stores and the second floor for its general corporate headquarters. The
				remaining eighteen (18) floors are leased to others. The rental of the eighteen
				(18) floors is not incidental to but rather is separate from the operation of
				the taxpayer's trade or business. The net rental income is not business income
				of the clothing store trade or business. Therefore, the net rental income is
				nonbusiness income.
6. Example: The
				taxpayer constructed a plant for use in its multistate manufacturing business
				and twenty (20) years later the plant was closed and put up for sale. The plant
				was rented for a temporary period from the time it was closed by the taxpayer
				until it was sold eighteen (18) months later. The rental income is business
				income and the gain on the sale of the plant is business income.
7. Example: The taxpayer operates a
				multistate chain of grocery stores. It owned an office building which it
				occupied as its corporate headquarters. Because of inadequate space, taxpayer
				acquired a new and larger building elsewhere for its corporate headquarters.
				The old building was rented to an investment company under a five (5)-year
				lease. Upon expiration of the lease, taxpayer sold the building at a gain (or
				loss). The net rental income received over the lease period is nonbusiness
				income and the gain (or loss) on the sale of the building is nonbusiness
				income;