Code of Massachusetts Regulations › 830 CMR - DEPARTMENT OF REVENUE › Title 830 CMR 63.00 - Taxation of corporations › Section 63.38.4 - Apportionment of Income of Courier and Package Delivery Services

Current through Register 1525, July 5, 2024
(1)
General
. If a
			 courier or package delivery service has income derived from business carried on
			 both within and outside Massachusetts, the Commissioner shall determine the
			 amount of its income derived from business carried on within Massachusetts
			 pursuant to M.G.L. c. 63, § 38, and applicable regulations, in particular
			 830 CMR
			 63.38.1, except to the extent
			 830 CMR
			 63.38.1 and the applicable regulations are
			 modified pursuant to 830 CMR 63.38.4. 830 CMR 63.38.4, has been issued pursuant
			 to the commissioner's authority under M.G.L. c. 63, § 38(j).
830 CMR 63.38.4 states rules for determining the property
				factor and the payroll factor of the apportionment formula that applies to
				courier and package delivery services, because the apportionment provisions of
				M.G.L. c. 63, § 38 are not reasonably adapted under the Apportionment of
				Income regulation,
				830 CMR
				63.38.1, to approximate the net income
				derived from business carried on within Massachusetts by a courier or package
				delivery service with respect to the property and payroll factors. The rules
				for determining the sales factor for a courier or package delivery services
				under the Apportionment of Income regulation,
				830 CMR
				63.38.1(9), particularly at
				830 CMR
				63.38.1(9)(d)4.b.iii.,
				however, are reasonably adapted to approximate such net income with respect to
				the sales factor, and thus are not restated in 830 CMR 63.38.4.
See
also,
				830 CMR
				63.38.1(9)(d)1.h.,
				"Industry-specific Alternative Apportionment Rules."
Once the property and payroll factors of the apportionment
				formula for a courier or package delivery service are determined under the
				provisions of 830 CMR 63.38.4, a taxpayer will use those factors in calculating
				its apportionment percentage under M.G.L. c. 63, § 38, and the applicable
				regulations.
A taxpayer may have characteristics of a courier and package
				delivery service, an airline, as defined in
				830 CMR
				63.38.2, and/or a motor carrier, as defined
				in
				830 CMR
				63.38.3, as in the example of a taxpayer that
				accepts and delivers packages using both air and ground transportation. In such
				cases this regulation, Apportionment of Income of Courier and Package Delivery
				Services regulation, 830 CMR 63.38.4, applies.
(2)
Definitions
.
Aircraft Ready for Flight
, aircraft in
				possession of the company that are available for service on its routes.
Courier or Package Delivery Service
,
				any company that transmits packages or written communications primarily to
				residences and business addresses. A company that receives written
				communications, and transmits facsimiles to recipients by electronic or other
				means, shall also be a courier or package delivery service for purposes of 830
				CMR 63.38.4. A vendor that transports goods that it has sold to its customers'
				residences or business addresses is not on that account alone, a courier or
				package delivery service.
Flight Personnel
, the air crew aboard
				an aircraft assisting in the operations of the aircraft.
Nonflight Mobile Personnel
, personnel
				who operate or travel in nonflight mobile property as the predominant activity
				of their employment.
Nonflight Mobile Property
, all motor
				vehicles, including trailers, engaged directly in the movement of property,
				other than aircraft and other than vehicles eighty percent or more of whose
				mileage is traveled in one state. Mobile property may be owned, rented, or
				leased by the courier or package delivery service.
(3)
Determining Property and
			 Payroll Factors for Courier or Package Delivery Services
.
(a)
Property Factor
.
			 A courier or package delivery service's property factor is a fraction, the
			 numerator and denominator of which are determined according to 830 CMR
			 63.38.4(3)(a)1. through 6.
1. The denominator
			 of the property factor is the average value of all of the company's real and
			 tangible personal property owned or rented and used during the taxable year.
			 All property values are determined according to the rules of M.G.L. c. 63,
			 § 38, and
			 830 CMR
			 63.38.1.
2. The numerator of the property factor shall
			 be the sum of the following three amounts:
a.
			 the average value of the real and tangible personal property used by the
			 company, other than aircraft ready for flight and nonflight mobile property,
			 situated in Massachusetts;
b. the
			 average value of the aircraft ready for flight owned or rented and used by the
			 company in Massachusetts; and
c.
			 the average value of the nonflight mobile property owned or rented and used by
			 the company in Massachusetts.
3. The average value of the aircraft ready
			 for flight owned or rented and used by the company in Massachusetts shall be
			 computed separately for each type of aircraft operated by the company. For each
			 type of aircraft, the average value shall consist of the total average value of
			 that type of aircraft ready for flight owned by the company, multiplied by the
			 percentage of departures of the company, of that aircraft type, taking place
			 within Massachusetts. For further guidance on this method of valuation,
see
"Apportionment of Income of Airlines",
			 830 CMR
			 63.38.2(3)(a).
4. The average value of the nonflight mobile
			 property owned or rented and used by the company in Massachusetts shall be the
			 total value of the company's nonflight mobile property, multiplied by the
			 percentage of miles traveled by the company's nonflight mobile property in
			 Massachusetts.
5. Property in the
			 possession of the company under the terms of a lease, which is treated as a
			 lease for federal income tax purposes by operation of provisions contained or
			 previously contained in 26 U.S. Code § 168 (the Internal Revenue Code)
			 shall be treated as owned, not rented, by the company.
6.
Example
. Taxpayer
			 is a corporation that operates a package delivery service. Taxpayer transmits
			 packages using aircraft and trucks. Taxpayer owns property, as follows: real
			 and tangible personal property other that aircraft ready for flight and other
			 than nonflight mobile property, with an average value of $10,000,000. The
			 average value of this property situated in Massachusetts is $6,000,000.
			 Taxpayer also owns and/or rents aircraft ready for flight with an average value
			 of $30,000,000. The value of the aircraft ready for flight is multiplied by the
			 percentage of departures of the company taking place in Massachusetts, in this
			 case 15%, with the result of $4,500,000 attributable to Massachusetts. Taxpayer
			 also owns or rents nonflight mobile property, namely delivery trucks, with an
			 average value of 8,000,000. The percentage of miles traveled by the company's
			 trucks in Massachusetts is 20%, with the result of $1,600,000 attributable to
			 Massachusetts. Taxpayer's property factor is calculated as follows:
($6,000,000 + $4,500,000 + $1,600,000) =
				12,100,000/($10,000,000 + $30,000,000 + $8,000,000) = 48,000,000
= .252 property factor