Iowa Administrative Code › Agency 701 - Revenue Department › Title I - Administration › Chapter 54 - Allocation and Apportionment › Rule 701-54.5 - Where Income Is Derived From the Manufacture or Sale of Tangible Personal Property

Current through Register Vol. 47, No. 3, July 24, 2024
The law specifically provides but one method for apportioning
				  net income derived from the manufacture or sale of tangible personal property.
				  The part of such income attributable to business within the state shall be that
				  proportion which the gross sales made within the state bear to the total gross
				  sales.
In determining the total net taxable income, the
				  apportionable income attributable to this state, as determined by use of the
				  apportionment fraction, shall be added to the nonapportionable income allocable
				  to this state.
When a taxpayer is engaged in manufacturing and selling or
				  purchasing and reselling goods or products "gross sales" includes all gross
				  receipts from the sales of such goods or products (or other property of a kind
				  which would properly be included in the inventory of the taxpayer if on hand at
				  the close of the tax period) held by the taxpayer primarily for sale to
				  customers in the ordinary course of its trade or business. "Gross receipts" for
				  this purpose means gross sales, less returns and allowances. Federal and state
				  excise taxes shall be included as part of such receipts if such taxes are
				  passed on to the buyer or included as part of the selling price of the
				  product.
(1) Sales of tangible
				personal property are in this state if the property is delivered or shipped to
				a purchaser within this state regardless of the f o.b. point or other
				conditions of the sales.
(2)
				Property shall be deemed to be delivered or shipped to a purchaser within this
				state if the recipient is located in this state, even though the property is
				ordered from outside this state.
EXAMPLE: The taxpayer, with inventory in State A, sold
				  $100,000 of its products to a purchaser having branch stores in several states
				  including this state. The order for the purchase was placed by the purchaser's
				  central purchasing department located in State B. Twenty-five thousand dollars
				  of the purchase order was shipped directly to purchaser's branch store in this
				  state. The branch store in this state is the "purchaser within this state" with
				  respect to $25,000 of the taxpayer's sales.
(3) Property is delivered or shipped to a
				purchaser within this state if the shipment terminates in this state, even
				though the property is subsequently transferred by the purchaser to another
				state.
EXAMPLE: The taxpayer makes a sale to a purchaser who
				  maintains a central warehouse in this state at which all merchandise purchases
				  are received. The purchaser reships the goods to its branch stores in other
				  states for sale. All of the taxpayer's products shipped to a purchaser's
				  warehouse in this state are property "delivered or shipped to a purchaser
				  within this state".
(4) The
				term "purchaser within this state" shall include the ultimate recipient of the
				property if the taxpayer in this state, at the designation of the purchaser,
				delivers to or has the property shipped to the ultimate recipient within this
				state.
EXAMPLE: A taxpayer in this state sold merchandise to a
				  purchaser in State A. The taxpayer directed the manufacturer or supplier of the
				  merchandise in State B to ship the merchandise to the purchaser's customer in
				  this state pursuant to purchaser's instructions. The sale by the taxpayer is in
				  this state.
(5) When
				property being shipped by a seller from the state of origin to a consignee in
				another state is diverted while en route to a purchaser in this state, the
				sales are in this state.
EXAMPLE: The taxpayer, a produce grower in State A, begins
				  shipment of perishable produce to the purchaser's place of business in State B.
				  While en route the produce is diverted to the purchaser's place of business in
				  this state. The sale by the taxpayer is attributed to this state.
(6) Deliveries for transportation
				outside the state. The taxpayer sells merchandise to a purchaser outside this
				state, and the purchaser picks up the produce or makes arrangements to have the
				product picked up at the taxpayer's place of business in this state to be taken
				outside the state. The sale by the taxpayer is a sale outside this
				state.
(7) Dock or pickup sales.
				The taxpayer sells merchandise to a purchaser within this state, and the
				purchaser picks up the product at the taxpayer's place of business outside of
				this state. The sale by the taxpayer is a sale in this state.
Pahst
				Brewing Co. v. Wis. Dept. of Revenue,
387 N.W.2d 121 (Wis. App.
				1986);
Strickland v. Patcraft Mills, Inc.,
302 S.E.2d 544 (Ga.
				1983);
Olympia Brewing company v. commissioner of Revenue,
326
				N.W.2d 642 (Minn. 1982);
Department of Revenue v. Parker Banana
				company,
391 So. 2d 762 (Fla. App. 1980);
Department of Revenue
				v. U.S. Sugar Corporation,
388 So. 2d 596 (Fla. App. 1980). This
				subrule is effective for tax years beginning on or after January 1, 1989.
This rule is intended to implement Iowa Code section
				  422.33.