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18 DEPARTMENT
OF ADMINISTRATIVE AND FINANCIAL SERVICES
125 BUREAU
OF REVENUE SERVICES
Chapter 801: APPORTIONMENT
OF INCOME
Summary: This rule explains the basis for the apportionment of net
income of corporations, pass-through entities, sole proprietorships and other
business types as required by 36 M.R.S.A., Chapter 821, and § 5142(6). For
example, the rule applies to S corporation shareholders, partners, estates and
trusts, and to nonresident individuals who have income from business activity
both within and without
Outline of Contents:
.01 Definitions.
.02 Unitary Business.
.03 Apportionment.
.04 Taxability in Another State.
.05 Consistency.
.06 Sales Factor.
.07 Corporate Partners
.08 Variations
.09 Property Value and Factor.
.10 Payroll Value and Factor
.11 Application Date
.01 Definitions
A. Costs
of Performance. "Costs of performance" means direct costs
determined in a manner consistent with Generally Accepted Accounting Principles
and in accordance with accepted conditions or practices in the trade or
business of the taxpayer. In cases where it is impossible or impracticable to
determine the costs of performance attributable to different states, the gross
receipts from the performance of services attributable to this state are
measured by the ratio that the time spent in performing the services in this
state bears to the total time spent in performing the services everywhere. Time
spent in performing services includes the amount of time expended in the
performance of a contract or other obligation which gives rise to such gross
receipts. Personal service not directly connected with the performance of the
contract or other obligation, such as time expended in negotiating the
contract, is excluded from the computations.
B. Domicile.
"Domicile" means the principal place from which the business
activities of a taxpayer are directed or managed. If it is not possible to
determine the principal place from which the business activities of a taxpayer
are directed or managed, the state of the taxpayer's incorporation is
considered its state of domicile.
C. Income
Producing Activity. "Income-producing activity" means each
separate item of income and the transactions and activity directly engaged in
by the taxpayer for the ultimate purpose of obtaining gain or profit. For
income apportionment purposes, such activity does not include transactions and
activities performed on behalf of a taxpayer, such as those conducted on the
taxpayer’s behalf by an independent contractor. Income-producing activity
includes, but is not limited to:
(1) The rendering of personal services by
employees or the utilization of tangible and intangible property by the
taxpayer in performing a service;
(2) The sale, rental, leasing or licensing
the use of, or other use of real property; and
(3) The rental, leasing, licensing the use
of, or other use of tangible or intangible personal property.
D. Located
in the State. "Located in the State” has the same meaning as in 36
M.R.S.A. §5206-D(11)(A)-(D).
E. Office.
"Office” means a permanent or temporary location where a business entity
makes sales or holds itself out to the public as conducting business. The
office of a business’s sales representative is generally not an
"office" of the business for purposes of this rule unless the
representative is publicly held out as doing business on behalf of the business
at that location, either by publishing the home address as the business’s own
address or through other actions.
F. State.
“State” has the same meaning as in 36 M.R.S.A. §5210(6).
G. Total
time. “Total time” means the total number of days. Any portion of a day is
counted as an entire day.
.02 Unitary Business. “Unitary business”
means a business activity characterized by unity of ownership, functional
integration, centralization of management and economies of scale. The
activities of a corporation or group of affiliated corporations constitute a
unitary business if those activities are integrated with, dependent upon and
contributive to each other and to the operations of the corporation or group as
a whole. The presence of any of the following factors creates a strong presumption
that the activities of the corporation or group constitute a single trade or
business:
A. All activities are in the same general
line or type of business;
B. The activities constitute different
steps in a vertically-structured enterprise; or
C.
The
corporation or group is characterized by strong centralized management,
including but not limited to centralized departments for such functions as
financing, purchasing, advertising and research.
.03 Apportionment. If the business activity
of a taxpayer occurs both within and without Maine, and if by reason of such
activity the taxpayer is taxable in another state, the portion of the net
income (or net loss) derived from sources within Maine is determined by
apportionment in accordance with 36 M.R.S.A. §§ 5210 and 5211 and the
provisions of this rule. A corporation
or affiliated group of corporations may be engaged in more than one unitary
business. In that event, the corporation
must, for each line of business, separately apportion its income using the appropriate
Prorating Deductions. In most cases, an allowable deduction of a
taxpayer will relate to apportionable income. In some cases, an allowable
deduction may relate to both apportionable income and to income that
.04 Taxability in
Another State
A. In
General. A taxpayer’s income from business activity is taxable in another
state if the taxpayer, by reason of such activity, is taxable in that state
within the meaning of 36 M.R.S.A. § 5211(2).
A
taxpayer is taxable in another state if:
(1) By reason of business activity in
another state, the taxpayer is subject to a net income tax, a franchise tax
measured by net income, a franchise tax for the privilege of doing business, or
a corporate stock tax, as described in paragraph B below; or
(2) By reason of such activity, the other
state has jurisdiction to subject the taxpayer to a net income tax, regardless
of whether or not the state actually imposes such a tax on the taxpayer, as
described in paragraph D below.
B. When
a Taxpayer is Subject to a Tax under 36 M.R.S.A. §5211(2). A taxpayer is
subject to one of the taxes specified in 36 M.R.S.A. § 5211(2) in another state
if the taxpayer carries on activities in that state and the state imposes such
a tax on the taxpayer. A taxpayer that asserts that it is subject to one of the
specified taxes in another state must furnish to the State Tax Assessor, upon
the Assessor’s request, evidence to support that assertion. The Assessor may
request that such evidence include proof that the taxpayer has filed the
requisite tax return in the other state and has paid any taxes imposed under
the laws of the other state.
C. Effect
of Voluntary Tax Payment. A taxpayer is not subject to one of the taxes
specified in § 5211(2) in another state if the taxpayer voluntarily files and
pays one or more of the specified taxes when not required to do so by the laws
of that state or pays a minimal fee for qualification, organization or for the
privilege of doing business in that state, but (a) does not actually engage in
business activity in that state, or (b) does actually engage in some business
activity not sufficient for nexus with that state and the minimal fee bears no
relationship to the volume of the taxpayer’s business activity within that
state.
D. When
a State or Foreign Country has Jurisdiction to Subject a Taxpayer to a Net
Income Tax. The second test under § 5211(2) applies if the taxpayer’s
business activity is sufficient to give the state jurisdiction to impose a net
income tax by reason of such activity under the Constitution and statutes of
the United States. Jurisdiction to tax is not present where the state is
prohibited from imposing the tax by reason of the provisions of Public Law
86-272 (15 U.S.C.A. §§ 381-385). The determination of whether a foreign country
or a political subdivision thereof has jurisdiction to subject the taxpayer to
a net income tax is made as though the jurisdictional standards applicable to a
state of the
E. Producing
exempt income. A taxpayer is not “taxable in another state” for purposes of
§ 5211(2) if the only activities the taxpayer conducts in that other state are
activities pertaining to the production of income that the State of Maine is
prohibited from taxing by the laws or Constitution of the United States or by
the Constitution of Maine.
.05 Consistency
A. Year-to-year
consistency. The taxpayer must disclose in its Maine return the nature and
extent of any inconsistency between that return and its Maine returns for prior
years with respect to the composition of its unitary business, the
classification of income, the prorating of deductions to business and
constitutionally exempt income, and the determination of the sales
apportionment factor.
B. State-to-state
consistency. If the returns filed by a taxpayer for all states to which the
taxpayer reports are not uniform in the composition of its unitary business,
the classification of income, the prorating of deductions to business and
constitutionally exempt income, and the determination of the sales
apportionment factor, the taxpayer must disclose in its Maine return the nature
and extent of the variance.
.06 Sales Factor. The sales factor is a
fraction, the numerator of which is the total sales of the taxpayer in this
State during the tax period, and the denominator of which is the total sales of
the taxpayer everywhere during the tax period. 36 M.R.S.A. § 5211(14).
A. Generally.
"Sales" means all gross receipts of the taxpayer. "Sales"
includes federal and state excise taxes (including sales taxes) if those taxes
are passed on to the buyer or included as part of the selling price of the
product. “Sales in this State” means all gross receipts of the taxpayer in the
State of Maine including, but not limited to, receipts derived from the sale of
tangible personal property pursuant to section 5211(15) and receipts derived
from the sale of other than tangible personal property pursuant to section
5211(16-A). Interest income, service
charges, carrying charges or time-price differentials incidental to a sale must
be included as sales in the state to which the sale is attributable, regardless
of the place where the accounting records are maintained or the location of the
contract or other evidence of indebtedness. The following are rules for
determining "sales" in various situations:
(1) In the case of a taxpayer engaged in
manufacturing and selling or purchasing and reselling goods or products,
"sales" includes all gross receipts from the sales of such goods or
products (or other property of a kind which would properly be included in the
inventory of the taxpayer if on hand at the close of the tax period) held by
the taxpayer primarily for sale to customers in the ordinary course of its
trade or business.
(2) In the case of cost-plus-fixed-fee
contracts, such as the operation of a government-owned plant for a fee,
"sales" includes the entire reimbursed cost plus the fee.
(3) In the case of a taxpayer engaged in
providing services, such as the operation of an advertising agency or the
performance of equipment service contracts or research and development
contracts, "sales" includes the gross receipts from the performance
of such services, including fees, commissions, and similar items.
(4) In the case of a taxpayer engaged in
renting real or tangible property, "sales" includes the gross
receipts from the rental, lease, or licensing the use of the property.
(5) In the case of a taxpayer engaged in the
sale, assignment, or licensing of intangible personal property such as patents
and copyrights, "sales" includes the gross receipts therefrom.
(6) If a taxpayer derives receipts from the
sale of equipment used in its business, those receipts constitute sales. For
example, a truck express company owns a fleet of trucks and sells its trucks
under a regular replacement program. The gross receipts from the sales of the
trucks are included in the sales factor.
(7) “Sales” includes income from capitalized
leases to the extent that the income from such leases is included in the
federal gross income of the taxpayer.
B. Gross
Receipts. “Gross receipts” means the gross amounts realized (the sum of
money and the fair market value of other property or services received) on the sale
or exchange of property, the performance of services, or the use of property or
capital (including rents, fees, royalties, interest and dividends) in a
transaction that produces income, in which the income or loss is recognized (or
would be recognized if the transaction were in the United States) under the
Internal Revenue Code. Amounts realized on the sale or exchange of property are
not reduced for the cost of goods sold or the basis of property sold. Gross
receipts do not include, for example, such items as:
(1) Repayment, maturity, or redemption of
the principal of a loan, bond, or mutual fund or certificate of deposit or
similar marketable instrument;
(2) The principal amount received under a
repurchase agreement or other transaction properly characterized as a loan;
(3) Proceeds from issuance of the taxpayer’s
own stock or from sale of treasury stock;
(4) Damages and other amounts received as
the result of litigation;
(5) Property acquired by an agent on behalf
of another;
(6) Tax refunds and other benefit
recoveries;
(7) Pension reversions;
(8) Contributions to capital (except for
sales of securities by securities dealers);
(9) Income from forgiveness of indebtedness;
or
(10) Amounts realized from exchanges of
inventory that are not recognized by the Internal Revenue Code.
C. Sales
of tangible personal property in this State. There are two rules for
determining whether a sale of tangible personal property is in
(1) Destination
sales. Sales are in
(a) Tangible property is delivered or
shipped to a purchaser within
(b) Property is delivered or shipped to a
purchaser in
(c) The term “purchaser within this state”
includes the ultimate recipient of the property if the taxpayer, at the
direction of the purchaser, delivers to or has the property shipped to the
ultimate recipient within
(d) When property being shipped by a seller
from the state of origin to a consignee in another state is diverted to a
purchaser in
(2) Throwback
sales. If tangible personal property is delivered or shipped to a purchaser
outside of
(a) If the property is delivered or shipped
from an office, store, warehouse, factory or other place of storage in
(b) If the property is sold by a salesperson
who operates from an office located in this State and the property is shipped
directly by a third party to the purchaser, the sale is in the state from which
shipment is made, if the taxpayer is taxable in that state. If the taxpayer is
not taxable in the state from which shipment is made, the sale is in
D. Sales
of tangible personal property to the
E. Sales
other than sales of tangible personal property. Receipts from the sales of
other than tangible personal property must be sourced as follows below. Where no other sourcing rule is applicable,
the sales must be sourced so as to fairly represent the extent of the taxpayer’s
business activity in this State.
(1) Receipts
from the performance of services. Generally, receipts from the performance
of services must be sourced to the state where the services are received.
(a) Non-business
customer. When it is unclear where the services were received, the sale is
deemed to have occurred at the home of the customer.
(b) Business
customer. When it is unclear where the services were received, the sale is
deemed to have occurred at the office of the business customer where the
services were ordered in the regular course of the customer’s trade or
business. If the ordering location can not be determined, the sale is deemed to
have occurred at the office to which the services were billed.
(c) Federal
Government or taxpayer not taxable in other state. If the customer is the
federal government or the receipts are attributable to a state in which the
taxpayer is not taxable, the services are deemed to have been received in this
State if the greater proportion of the income-producing activity is performed
in this State than in any other state based on costs of performance.
(2) Gross
receipts from the sale of patents, copyrights, or trademarks. Generally,
gross receipts from the license, sale or other disposition of patents,
copyrights, trademarks or similar items of intangible personal property must be
attributed to this State if the intangible property is used in this State by
the licensee or if the taxpayer’s commercial domicile is in this State and the
taxpayer is not taxable in the state in which the property is used by the
licensee.
(a) Used
in more than one state. Where the intangible personal property is used by
the licensee in more than one state, the income must be apportioned to this
State according to the portion of use in this State.
(b) Federal
Government or taxpayer not taxable in other state. Where the purchaser or
licensee of the intangible personal property is the Federal Government or the
receipts are otherwise attributable to a state in which the taxpayer is not
taxable, the receipts are attributable to this State if the greater proportion
of the income-producing activity is performed in this State than in any other
state based on the costs of performance.
(3) Receipts
from the sale, lease, or rental of real property. Generally, receipts from
the sale, lease, rental, or other use of real property must be sourced to this
State if the real property is located in this State.
(4) Receipts
from the lease or rental of tangible personal property. Generally, receipts
from the lease or rental of tangible personal property must be attributed to
this State if the tangible personal property is located in this State.
(5) Receipts
from the sale of partnership interest. Gain or loss from the sale of a
partnership interest must be sourced in accordance with § 5142(3-A). The gain
or loss from the sale of a partnership interest is sourced to Maine by
multiplying the gain or loss by the ratio of the original cost of the
partnership’s tangible property located in Maine to the original cost of the
partnership’s tangible property everywhere, determined at the time of the sale.
A different ratio must be calculated if more than 50% of the value of the
partnership’s assets consists of intangible property. The foregoing allocation
calculations do not apply to the sale of a limited partner’s interest in an
investment partnership where more than 80% of the value of the partnership’s
total assets consists of intangible personal property held for investment,
except that such property cannot include an interest in a partnership unless
that partnership is itself an investment partnership.
(6) Receipts
from financial services. Receipts from financial services must be sourced
to this State in accordance with § 5206-E(2)(C)-(I), and as follows:
(a). Interest, including fees and penalties in
the nature of interest from loans located in
(b). Net gain attributed to this State from
the sale of loans is determined based on the ratio of interest, fees and
penalties from loans located in this State, determined in accordance with
paragraph (a), to interest, fees and penalties from all loans.
(c). Interest, including fees and penalties in
the nature of interest from credit card receivables and receipts from
fees(including annual fees) charged to credit card holders associated with
credit card holders whose billing address is in this State.
(d). Net gain attributed to this State from
the sale of credit card receivables is determined based on the ratio of credit
card interest, fees and penalties associated with credit card holders whose
billing address is in this State to all credit card interest, fees and
penalties.
(e). Receipts from credit card reimbursement
fees, including related payment processing fees, attributed to this State are determined
based on the ratio of credit card interest, fees and penalties associated with
credit card holders whose billing addresses are in this State to all credit
card interest, fees and penalties.
(f). Receipts from merchant discount,
including related payment processing fees, are in this State if the commercial
domicile of the merchant is in this State. The receipts are computed net of any
credit card holder charge-backs, but are not reduced by any interchange
transaction fees or by any issuer’s reimbursement fees paid to another for
charges made by its credit card holders.
(g). Receipts from loan servicing fees
attributed to this State are determined based on the ratio of interest, fees
and penalties in the nature of interest from loans located in this State,
determined in accordance with paragraph (a), to interest, fees and penalties in
the nature of interest from all loans. Loan servicing fees received for
servicing secured or unsecured loans of another must be included in the
numerator if the borrower is located in this State.
(7). Gross
receipts from the sale of goodwill.
Receipts from the sale of goodwill must be sourced to this State
according to the portion of use in this State based upon the previous taxable
year’s sales factor for all sales.
(8). Gross
receipts from the sale of accounts receivable and the sale of collection
services. Receipts from the sale of accounts receivable and collection
services must be sourced as the underlying sales related to the debt was
sourced.
.07 Corporate
Partners
A. Generally.
A corporation with an interest in a pass-through entity, such as a partnership,
limited partnership, limited liability partnership, limited liability company,
S corporation, or other similar entity, must include its distributive share of
the pass-through entity income, loss, or deduction in calculating its income,
in accordance with the Internal Revenue Code and 36 M.R.S.A. § 5102(8), and
must apportion its income pursuant to paragraph D below. The character of any
item included in the distributive share is determined as if it were realized or
incurred directly by the corporation. The business of the pass-through entity is
treated as the business of the corporation.
B. Taxable
in
C. Taxable
in Another State. A corporation is taxable in another state within the
meaning of Section .04 if the corporation is a partner, shareholder or member in
a pass-through entity with activities in that state that cause either the pass-through
entity or its partner, shareholder or member to be taxable in that state under
the rules described in Section .04.
D. Apportionment
Rules. In general, if a corporate partner, shareholder or member is taxable
in another state, it must apportion its taxable net income using the
apportionment percentage in 36 M.R.S.A. § 5211(8).
(1) Sales
Factor. In determining the denominator of its sales factor, a corporate
partner, shareholder or member must include its pro rata share of the pass-through
entity’s total sales during the pass-through entity’s taxable year. In
determining the numerator of its sales factor, a corporate partner, shareholder
or member must include its pro rata share of such sales in
(a) Sales by the corporation to the pass-through entity in an amount equal to the total of such sales
multiplied by the corporation’s interest in the pass-through
entity; and
(b) Sales by the pass-through entity to the corporation in an amount not to exceed the
total of all sales made by the pass-through entity multiplied by the
corporation’s interest in the pass-through entity.
(2) Pro
Rata Share. For purposes of this section, a corporate partner’s,
shareholder’s or member’s pro rata share of a pass-through entity’s sales shall be its percentage interest in pass-through entity profit or loss for the taxable year, as stated
on the partner’s, shareholder’s or member’s Schedule K-1. However,
if, under the pass-through entity agreement, a partner’s,
shareholder’s or member’s share of gain or loss from the sale of
particular pass-through entity assets is different from
its profit or loss ratio stated on Schedule K-1, gross receipts from sales of
such assets shall be attributed to its sales factor in the same proportion as
the partner’s, shareholder’s or member’s interest in gain or loss
from the sale. In the event of a termination or other change in a partner’s,
shareholder’s or member’s interest during the taxable year, the
partner’s, shareholder’s or member’s pro rata share of sales must be modified to
reflect pass-through entity sales during the actual
period that the partner, shareholder or
member held its interest.
.08 Variations
A. Special
Apportionment Formulas. A taxpayer may petition for, or the assessor may
require, an apportionment variation, if the apportionment provided by statute
and this rule does not fairly represent the extent of the taxpayer’s business
activity in the State. In the case of certain industries such as air
transportation, rail transportation, ship transportation, pipelines, trucking,
television, radio, motion pictures, and various types of professional
athletics, this rule may not set forth all appropriate procedures for
determining the apportionment. Nothing in this rule will preclude the assessor
from establishing appropriate procedures for determining the correct
apportionment, including the use of separate accounting, determination of
appropriate factors, or any other method to effectuate equitable apportionment.
B. Factors
for Corporate Partners. The property and payroll factors of a special
apportionment formula for a corporation with an interest in a pass-through
entity may be determined using the guidance below.
(1) Property
Factor. In determining the denominator of its property factor, a corporate
partner, shareholder or member
must
include its pro rata share of the total value of the pass-through entity’s real and tangible personal property, owned or
rented, used during the pass-through entity’s taxable year. In
determining the numerator of its property factor, a corporate partner,
shareholder or member must include its pro rata share of the
value of such property located in
(a) Where a corporation rents property to
the pass-through entity, the corporation must
include the original cost of the property in its property factor. The pass-through entity must not include any portion of the value of
this property in its property factor.
(b) Where the pass-through
entity rents
property to the corporation, the corporation must include in its property
factor the sum of (i) the original cost of the property multiplied by the
corporation’s percentage interest in the pass-through
entity,
plus (ii) eight times the net annual rental rate of the property multiplied by
the difference between 100% and the corporation’s percentage interest in the pass-through entity.
(2) Payroll
Factor. In determining the denominator of its payroll factor, a corporate
partner, shareholder or member must include its pro rata share of the
total compensation paid by the pass-through entity during the pass-through entity’s taxable year. In determining the numerator of
its payroll factor, a corporate partner, shareholder or member must
include its pro rata share of such compensation paid in
.09 Property
Value and Factor. The Assessor may require taxpayers to provide information
on tax returns on property value and factor. The property factor also may be
used in appropriate circumstances in determining an apportionment variation, as
provided under section 5211(17). 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 in
A. Real
and Tangible Personal Property. The term "real and tangible personal
property" includes land, buildings, machinery, stocks of goods, equipment,
and other real and tangible personal property but does not include coin or
currency.
B. Property
Used During the Taxable Year. Property is included in the property factor
if it is actually used or is available for or capable of being used during the
tax period by the taxpayer. Property held in reserve or standby facilities or
property held as a reserve source of materials must be included in the factor. For
example, a plant temporarily idle or raw material reserves not currently being
processed are includable in the factor. Property or equipment under construction
during the tax period (except inventoriable goods in process) must be excluded
from the factor until such property is actually used by the taxpayer. If the
property is partially used by the taxpayer while under construction, the value
of the property to the extent used must be included in the property factor. Property
used by the taxpayer must remain in the property factor until its permanent
withdrawal is established by an identifiable event such as its sale, or the
lapse of an extended period of time (normally, five years) during which the
property is held for sale.
C. Property
in transit/Mobile property. Property in transit between locations of the
taxpayer to which it belongs is considered to be located at the destination for
purposes of the property factor. Property in transit between a buyer and seller
that is included by a taxpayer in the denominator of its property factor in
accordance with its regular accounting practices must be included in the
numerator according to the state of destination. The value of mobile or movable
property, such as construction equipment, trucks, or leased electronic
equipment that is located both within and without this State during the taxable
year, is determined for purposes of the numerator of the property factor on the
basis of total time within
D. Valuation
(owned property). Property owned by the taxpayer is valued at its original
cost. "Original cost" means the basis of the property for federal
income tax purposes (prior to any federal adjustments) at the time of
acquisition by the taxpayer and adjusted by subsequent capital additions or
improvements thereto and partial disposition thereof, by reason of sale,
exchange, abandonment, etc. However, capitalized intangible drilling and
development costs are included in the factor whether or not they have been expensed
for either federal or state tax purposes. If the original cost cannot be
ascertained, the property must be included in the factor at its fair market
value as of the date of its acquisition by the taxpayer.
Generally, the average
value of property owned by the taxpayer is determined by averaging the values
at the beginning and ending of the tax period. However, the State Tax Assessor
may require or allow averaging of monthly values if substantial fluctuations in
the values of the property exist during the taxable year or if property is
acquired after the beginning of the taxable year or disposed of before the end
of the taxable year.
E. Valuation
(rented property). Property rented by the taxpayer is valued at 8 times the
net annual rental rate. Subrentals are not deducted.
If property is used at
no charge or rented for a rate other than a reasonable market rate, the
property must be included in the property factor on the basis of a reasonable
market rental rate.
The "annual rental
rate" is the amount paid as rent for the property for a twelve-month
period. Where property is rented for less than a twelve-month period, the net
rent paid for the actual period of rental constitutes the "annual rental
rate" for the tax period. However, where a taxpayer has rented property
for a term of 12 or more months and the current tax period covers a period of
less than 12 months, the net rent paid for the short tax period must be
annualized. If the rental term is for less than 12 months, the rent must not be
annualized beyond its term. Rent will not be annualized because of the
uncertain duration when the rental term is on a month-to-month basis.
"Rent" is the
actual sum of money or other consideration payable directly or indirectly, by
the taxpayer or for its benefit for the use of the property and includes:
(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;
(2) Any amount payable as additional rent or
in lieu of rents, such as interest, taxes, insurance, repairs or any other
items required to be paid by the terms of the lease or other arrangement but
does not include amounts paid as service charges, such as utilities, janitor
services, etc. If a payment includes rent and other charges unsegregated, the
amount of rent must be determined by consideration of the relative values of
the rent and the other items.
"Rent" does
not include incidental day-to-day expenses such as hotel or motel
accommodations, daily rental of automobiles, etc. “Rent” does not include
royalties based on extraction of natural resources, whether represented by
delivery or purchase. For this purpose, a royalty includes any consideration
conveyed or credited to a holder of an interest in property which constitutes a
sharing of current or future production of natural resources from such
property, irrespective of the method of payment or how such consideration may
be characterized, whether as a royalty, advance royalty, rental or otherwise.
Leasehold improvements
are treated as property owned by the taxpayer regardless of whether the
taxpayer is entitled to remove the improvements or of whether the improvements
revert to the lessor upon expiration of the lease.
.10 Payroll Value
and Factor.
The Assessor may require taxpayers to provide information on tax returns on
payroll value and factor. The payroll factor also may be used in appropriate
circumstances in determining variations on the apportionment formula as provided
under § 5211(17). The payroll factor is a fraction, the numerator of which is
the total amount paid in this state during the tax period by the taxpayer for
compensation, and the denominator of which is the total compensation paid
everywhere during the tax period.
A. Effect
of Accounting Method. If the taxpayer has adopted the accrual method of
accounting, all compensation properly accrued will be deemed to have been paid.
However, compensation may be included in the payroll factor by use of the cash
method if the taxpayer is required to report such compensation under that
method for unemployment compensation purposes.
B. Base
of Operations. “Base of Operations” means the taxpayer’s place of business
from which an employee customarily begins work or to which the employee
customarily returns at some other time to receive instructions, direction, and
supervision from the taxpayer or communications from customers or other
persons, to replenish stock or other materials, to repair equipment, or to
perform any other function necessary to the exercise of the employee’s trade or
profession.
C. Compensation.
The term "compensation" means wages, salaries, commissions, and any
other form of remuneration paid to employees for personal services. Payments
made to an independent contractor or any other person not properly classifiable
as an employee are excluded. Only amounts paid directly to employees are
included in the payroll factor. Amounts considered paid directly include the
value of board, rent, housing, lodging, and other benefits or services
furnished to an employee by the taxpayer in return for personal services
provided that such amounts constitute income to the recipient under the
Internal Revenue Code. In the case of employees not subject to the Internal Revenue
Code, e.g., those employed in foreign countries, the determination of whether
such benefits or services would constitute income to the employees is made as
though such employees were subject to the Internal Revenue Code. Employer
contributions under a qualified cash or deferred arrangement as defined in
Internal Revenue Code, § 401(k) and employer contributions to nonqualified
deferred compensation plans are generally included in the payroll factor.
D. Employee.
"Employee" means any officer of a corporation, or any individual who
would be considered an employee under the common law rules governing the
employer-employee relationship. Generally, an individual is considered to be an
employee if the individual is included by the taxpayer as an employee for
purposes of the payroll taxes imposed by the Federal Insurance Contributions
Act. This presumption may be overcome by evidence provided by a taxpayer that
an individual who is included as an employee for purposes of the Insurance
Contributions Act would not be an employee of the taxpayer under the usual
common-law rules.
E. Independent
Contractor. "Independent contractor" means any individual who
performs services for a taxpayer but who is not an employee of the taxpayer,
and who is not otherwise subject to the supervision or control of the taxpayer
in the performance of the services.
F. Payroll
in states in which taxpayer is not taxable. Compensation paid to employees
whose services are performed entirely in a state where the taxpayer is immune
from taxation, for example, by P.L. 86-272, is included in the denominator of
the payroll factor.
.11 Application
Date. This
Rule applies to tax years beginning on or after January 1, 2007.
STATUTORY AUTHORITY: 36
M.R.S.A. §112(1)
EFFECTIVE DATE:
September 30, 1976
AMENDED:
December 31, 1979
April 27, 1982
EFFECTIVE DATE
(ELECTRONIC CONVERSION):
May 1, 1996
REPEALED AND REPLACED:
February 17, 2001
AMENDED:
March 12, 2008 – filing 2008-98
February 8, 2009