Indiana Administrative Code › Title 45 - DEPARTMENT OF STATE REVENUE › Article 3.1 - ADJUSTED GROSS INCOME TAX › Rule 1 - State Adjusted Gross Income Tax › Section 1-63 - Apportionment in absence of one or more factors

Current through July 10, 2024
Authority: 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:
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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
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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
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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