Iowa Administrative Code › Agency 701 - Revenue Department › Title I - Administration › Chapter 40 - Determination of Net Income › Rule 701-40.16 - Income of Nonresidents

Current through Register Vol. 47, No. 3, July 24, 2024
Except as otherwise provided in this rule all income of
				  nonresidents derived from sources within Iowa is subject to Iowa income
				  tax.
Net income received by a nonresident taxpayer from a
				  business, trade, profession, or occupation in Iowa must be reported.
Income from the sale of property, located in Iowa, including
				  property used in connection with the trade, profession, business or occupation
				  of the nonresident, is taxable to Iowa even though the sale is consummated
				  outside of Iowa, and provided that the property was sold before subsequent use
				  outside of Iowa. Any income from the property prior to its sale is also Iowa
				  taxable income.
Income received from a trust or an estate, where the income
				  is from Iowa sources, is taxable, regardless of the situs of the estate or
				  trust. Dividends received in lieu of, or in partial or full payment of, an
				  amount of wages or salary due for services performed in Iowa by a nonresident
				  shall be considered taxable Iowa income. Annuities, interest on bank deposits
				  and interest-bearing obligations, and dividends are not allocated to Iowa
				  except to the extent to which they are derived from a business, trade,
				  profession, or occupation carried on within the state of Iowa by the
				  nonresident.
Interest received from the sale of property, on an
				  installment contract even though the gain from the sale of the property is
				  subject to Iowa taxation, is not allocable to Iowa if the property is not part
				  of the nonresident's trade, profession, business or occupation. As to
				  residents, see 701-40.14(422).
(1)
Nonresidents exempt from paying tax.
See 701-subrules 39.5(10)
				and 39.5(11) for the net income exemption amounts for nonresidents.
These provisions for reducing tax in 701-subrule 39.5(10),
				  paragraph
"c,"
and 701-subrule 39.5(11), paragraph
"b,
				  "
do not apply to the Iowa minimum tax which must be paid irrespective
				  of the amount of Iowa income that an individual has.
(2)
Compensation for personal
				services of nonresidents.
The Iowa income of a nonresident must
				include compensation for personal services rendered within the state of Iowa.
				The salary or other compensation of an employee or corporate officer who
				performs services related to businesses located in Iowa, or has an office in
				Iowa, are not subject to Iowa tax, if the services are performed while the
				taxpayer is outside of Iowa. However, the salary earned while the nonresident
				employee or officer is located within the state of Iowa would be subject to
				Iowa taxation. The Iowa taxable income of the nonresident shall include that
				portion of the total compensation received from the employer for personal
				services for the tax year which the total number of working days that the
				individual was employed within the state of Iowa bears to the total number of
				working days within and without the state of Iowa.
Compensation paid by an Iowa employer for services performed
				  wholly outside of Iowa by a nonresident is not taxable income to the state of
				  Iowa. However, all services performed within Iowa, either part-time or
				  full-time, would be taxable to the nonresident and must be reported to this
				  state.
Compensation received from the United States Government by a
				  nonresident member of the armed forces is explained in
				  701-405.
				  (422).
Income from commissions earned by a nonresident traveling
				  salesperson, agent or other employee for services performed or sales made and
				  whose compensation depends directly on the volume of business transacted by the
				  nonresident will include that proportion of the compensation received which the
				  volume of business transacted by the employee within the state of Iowa bears to
				  the total volume of business transacted by the employee within and without the
				  state. Allowable deductions will be apportioned on the same basis. However,
				  where separate accounting records are maintained by a nonresident or the
				  employer of the business transacted in Iowa, then the amount of Iowa
				  compensation can be reported based upon separate accounting.
Nonresident actors, singers, performers, entertainers,
				  wrestlers, boxers (and similar performers), must include as Iowa income the
				  gross amount received for performances within this state.
Nonresident attorneys, physicians, engineers, architects (and
				  other similar professions), even though not regularly employed in this state,
				  must include as Iowa income the entire amount of fees or compensation received
				  for services performed in this state.
If nonresidents are employed in this state at intervals
				  throughout the year, as would be the case if employed in operating trains,
				  planes, motor buses, or trucks and similar modes of transportation, between
				  this state and other states and foreign countries, and who are paid on a daily,
				  weekly or monthly basis, the gross income from sources within this state is
				  that portion of the total compensation for personal services which the total
				  number of working days employed within the state bears to the total number of
				  working days both within and without the state. If paid on a mileage basis, the
				  gross income from sources within this state is that portion of the total
				  compensation for services which the number of miles traveled in Iowa bears to
				  the total number of miles traveled both within and without the state. If paid
				  on some other basis, the total compensation for personal services must be
				  apportioned between this state and other states and foreign countries in such a
				  manner as to allocate to Iowa that portion of the total compensation which is
				  reasonably attributable to personal services performed in this state. Any
				  alternative method of allocation is subject to review and change by the
				  director. However, pursuant to federal law, nonresidents who earn compensation
				  in Iowa and one or more other states for a railway company, an airline company,
				  a merchant marine company, or a motor carrier are only subject to the income
				  tax laws of their state of residence, and the compensation would not be
				  considered gross income from sources within Iowa.
(3)
Income from business sources
				within and without the state.
When income is derived from any
				business, trade, profession, or occupation carried on partly within and partly
				without the state only such income as is fairly and equitably attributable to
				that portion of the business, trade, profession, or occupation carried on in
				this state, or to services rendered within the state shall be included in the
				gross income of a nonresident taxpayer. In any event, the entire amount of such
				income both within and without the state is to be shown on the nonresident's
				return.
(4)
Apportionment
				of business income from business carried on both within and without the
				state.
a. If a nonresident, or a
				partnership or trust with a nonresident member, transacts business both within
				and without the state, the net income must be so apportioned as to allocate to
				Iowa a portion of the income on a fair and equitable basis, in accordance with
				approved methods of accounting.
b.
				The amount of net income attributable to the manufacture or sale of tangible
				personal property shall be that portion which the gross sales made within the
				state bears to the total gross sales. The gross sales of tangible personal
				property are in the 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 sale.
c. Income derived from
				business other than the manufacture or sale of tangible personal property shall
				be attributed to Iowa in that portion which the Iowa gross receipts bear to the
				total gross receipts. Gross receipts are attributable to this state in the
				portion which the recipient of the service receives benefit of the service in
				this state.
d. If the taxpayer
				believes that the gross sales or gross receipts methods subjects the taxpayer
				to taxation on a greater portion of net income than is reasonably attributable
				to the business within this state the taxpayer may request the use of separate
				accounting or another alternative method which the taxpayer believes to be
				proper under the circumstances. In any event, the entire income received by the
				taxpayer and the basis for a special method of allocation shall be disclosed in
				the taxpayer's return.
e. On or
				after January 1, 2016, see 701-Chapter 242 for allocation and apportionment of
				net income to Iowa by an out-of-state business or out-of-state employee who
				enters Iowa to perform disaster and emergency-related work during a disaster
				response period as those terms are defined in Iowa Code section
				29C.24.