North Dakota Administrative Code › Title 81 - Tax Commissioner › Article 81-03 - Income Taxes and Privilege Taxes Based on Income › Chapter 81-03-09 - Division of Income › Section 81-03-09-37 - Special rules - Trucking companies

Current through Supplement No. 393, July, 2024
The following special rules are established with respect to
				  trucking companies:
1.
In
				general.
As used in this section, the term "trucking company" means a
				motor common carrier, a motor contract carrier, or an express carrier which
				primarily transports tangible personal property of others by motor vehicle for
				compensation. Where a trucking company has income from sources both within and
				without this state, the amount of business income from sources within this
				state shall be determined pursuant to this section. In such cases, the first
				step is to determine what portion of the trucking company's income constitutes
				business income and what portion constitutes nonbusiness under North Dakota
				Century Code section
				57-38.1-01 and article IV(1) of
				North Dakota Century Code section
				57-59-01 and section
				81-03-09-03. Nonbusiness income is
				directly allocable to specific states pursuant to the provisions of North
				Dakota Century Code sections
				57-38.1-05 through
				57-38.1-08 and article IV(5)
				through IV(8) of North Dakota Century Code section
				57-59-01. Business income is
				apportioned among the states in which the business is conducted and pursuant to
				the property, payroll, and sales apportionment factors set forth in this
				section. The sum of the items of nonbusiness income directly allocated to this
				state plus the amount of business income attributable to the state constitutes
				the amount of the taxpayer's entire net income which is subject to taxing in
				this state.
2.
Business and
				nonbusiness income.
For definitions, rules, and examples for determining
				business and nonbusiness income, see sections
				81-03-09-03 through
				81-03-09-06.
3.
Apportionment of business
				income.
a. In general. The property
				factor must be determined in accordance with sections
				81-03-09-15 through
				81-03-09-21, the payroll factor in
				accordance with sections
				81-03-09-22 through
				81-03-09-25, and the sales factor
				in accordance with sections
				81-03-09-26 through
				81-03-09-31, except as modified by
				this section.
(1) Property valuation. Owned
				property must be valued at its original cost and property rented from others
				must be valued at eight times the net annual rental rate in accordance with
				North Dakota Century Code section
				57-38.1-11 and article IV(11) of
				North Dakota Century Code section
				57-59-01 and sections
				81-03-09-19 and
				81-03-09-20.
(2) General definitions. The following
				definitions are applicable to the numerator and denominator of the property
				factor, as well as other apportionment factor descriptions:
(a) "Average value" of property means the
				amount determined by averaging the values at the beginning and end of the
				income tax year, but the tax commissioner may require the averaging of monthly
				values during the income year or such averaging as is necessary to reflect
				properly the average value of the trucking company's property, in accordance
				with North Dakota Century Code section
				57-38.1-12 and article IV(12) of
				North Dakota Century Code section
				57-59-01 and section
				81-03-09-21.
(b) "Mobile property" means all motor
				vehicles, including trailers, engaged directly in the movement of tangible
				personal property.
(c) "Mobile
				property mile" is the movement of a unit of mobile property a distance of one
				mile whether loaded or unloaded.
(d) "Original cost" is deemed to be the basis
				of the property for federal income tax purposes prior to any federal income tax
				adjustments, except for subsequent capital additions, improvements thereto, or
				partial dispositions, or, if the property has no such basis, the valuation of
				such property for interstate commerce commission purposes. If the original cost
				of property is ascertainable under the foregoing valuation standards, the
				property is included in the property factor at its fair market value as of the
				date of acquisition by the taxpayer in accordance with section
				81-03-09-19.
(e) "Property used during the course of the
				income year" includes property which is available for use in the taxpayer's
				trade or business during the income year.
(f) "Purchased transportation" means the
				taxpayer's use of a motor vehicle owned and operated by another for the purpose
				of transporting tangible personal property for which a charge, whether based
				upon a per diem, mileage, or other basis is incurred.
(g) The "value" of owned real and tangible
				personal property means its original cost, in accordance with North Dakota
				Century Code section
				57-38.1-11 and article IV(11) of
				North Dakota Century Code section
				57-59-01 and section
				81-03-09-19.
(h) The "value" or rented real and tangible
				personal property means the product of eight times the net annual rental rate,
				in accordance with North Dakota Century Code section
				57-38.1-11 and article IV(11) of
				North Dakota Century Code section
				57-59-01 and section
				81-03-09-20.
(3) The denominator and numerator of the
				property factor. The denominator of the property factor must be the average
				value of all the taxpayer's real and tangible personal property owned or rented
				and used during the income year. The numerator of the property factor must be
				the average value of the taxpayer's real and tangible personal property owned
				or rented and used in this state during the income year. In the determination
				of the numerator of the property factor, all property, except mobile property
				as defined in this section, must be included in the numerator of the property
				factor in accordance with North Dakota Century Code sections
				57-38.1-10 through
				57-38.1-12 and article
				IV(10)(11)(12) of North Dakota Century Code section
				57-59-01 and sections
				81-03-09-15 through
				81-03-09-21.
Mobile property, as defined in this section, which is located
				  within and without this state during the income year must be included in the
				  numerator of the property factor in the ratio which mobile property miles in
				  the state bear to the total mobile property miles. Mobile property located
				  solely within this state during the income year must be included in the
				  numerator of the property factor. A trucking company's property factor may be
				  modified to include a portion of purchased transportation to more fairly
				  represent the company's in-state activities. Absent clear and convincing
				  evidence to show otherwise, forty percent of the purchased transportation
				  contract must be included in the property factor as rental property and
				  capitalized in accordance with section
				  81-03-09-20. In addition, the
				  mileage related to the purchased transportation contract must be included in
				  the mobile property miles.