West Virginia Code of State Rules › Agency 110 - Tax › Title 110 - LEGISLATIVE RULE STATE TAX DEPARTMENT › Series 110-23 - Business Franchise Tax › Section 110-23-5 - Apportionment Of Tax Base

Current through Register Vol. XLI, No. 28, July 12, 2024
5.1. A
				taxpayer subject to the business franchise tax which is also taxable in another
				state shall apportion its tax base to the State of West Virginia by multiplying
				its tax base by a fraction, the numerator of which is the sum of its property
				factor, plus the payroll factor, plus two times the sales factor, all of which
				shall be determined in accordance with this Section, and the denominator of
				which is four. However, when the denominator of one or more of the factors is
				zero, the denominator of the apportionment formula fraction shall be decreased
				by the number of factors having a denominator of zero. In the case of a sales
				factor which has a denominator of zero the apportionment fraction denominator
				shall be decreased by two.
5.2.
				Property factor. -- The property factor is a fraction, the numerator of which
				is the average value of the taxpayer's real and tangible personal property
				owned or rented and used by it in this State during the taxable year, and the
				denominator of which is the average value of all real and tangible personal
				property owned or rented by the taxpayer and used by it during the taxable
				year, which is reported on Schedule L of "Federal Form 1120," or Schedule L of
				Federal Form 1065 for partnerships, plus the average value of all real and
				tangible personal property leased and used by the taxpayer during the taxable
				year.
5.3. Value of property. --
				Property owned by the taxpayer shall be valued at its original cost, adjusted
				by subsequent capital additions or improvements thereto and partial disposition
				thereof, by reason of sale, exchange, abandonment, etc.: Provided, That where
				records of original cost are unavailable or cannot be obtained without
				unreasonable expense, property shall be valued at original cost as determined
				under Section 5.3.4 of these regulations. Property rented by the taxpayer from
				others shall be valued at eight times the net annual rental rate. Net annual
				rental rate is the annual rental paid, directly or indirectly, by the taxpayer,
				or for its benefit, in money or other consideration for the use of the property
				and includes:
5.3.1. Any amount payable for
				the use of real or tangible personal property, or any part thereof, whether
				designated as a fixed sum of money or as a percentage of sales, profits or
				otherwise;
5.3.2. Any amount
				payable as additional rent or in lieu of rents, such as interest, taxes,
				insurance, repairs or any other items which are required to be paid by the
				terms of the lease or other arrangement, not including amounts paid as service
				charges, such as utilities, janitor services, etc. If a payment includes rent
				and other charges unsegregated, the amount of rent shall be determined by
				consideration of the relative values of the rent and the other items. The term
				"rent" does not include incidental day-to-day expenses such as hotel or motel
				accommodations, daily rental of automobiles, etc.
5.3.2.1. Example 1: A taxpayer, pursuant to
				the terms of a lease, pays the lessor twelve thousand dollars ($12,000) a year
				rent plus taxes in the amount of two thousand dollars ($2,000) and interest on
				a mortgage in the amount of one thousand dollars ($1,000). The amount of rent
				is fifteen thousand dollars ($15,000).
5.3.2.2. Example 2: A taxpayer stores part of
				its inventory in a public warehouse. The total charge for the year was one
				thousand dollars ($1,000), of which seven hundred dollars ($700) was expressly
				for the use of storage space and three hundred dollars ($300) of which was
				expressly for inventory, insurance, handling and shipping charges, and C.O.D.
				collections. The annual rent is seven hundred dollars ($700).
Shipping and handling charges and C.O.D. charges would be for
				  transactions entirely unrelated to the lease of storage space, and would not
				  constitute consideration for use of the leased storage space. The cost of
				  insurance on the lessee's property is not a responsibility of the lessor of the
				  building, and does not relate to the leased storage space. Had the insurance
				  fee been for insurance on the warehouse building paid pursuant to the lease,
				  rather than for the lessee's inventory, it would have then related to the
				  leased property and would have been a payment of an obligation of the lessor
				  pursuant to a lease. It would then constitute consideration paid for use of the
				  storage space, and would qualify as rent under this Section.
5.3.3. Movable property. -- The
				value of movable tangible personal property used both within and without this
				state shall be included in the numerator to the extent of its utilization in
				this state. The extent of such utilization shall be determined by multiplying
				the original cost of such property by a fraction, the numerator of which is the
				number of days of physical location of the property in this state during the
				taxable period, and the denominator of which is the number of days of physical
				location of the property everywhere during the taxable year. The number of days
				of physical location of the property may be determined on a statistical basis
				or by such other reasonable method acceptable to the Tax
				Commissioner.
5.3.4. Where records
				of the original cost of property are not available, property shall be valued at
				original cost. The determination of original cost shall be made by determining
				the fair market value of the property on the date of acquisition.