Ala. Admin. Code r. 810-27-1-.18.03
Current through Register Vol. 43, No. 1, October 31, 2024
Section 810-27-1-.18.03 - Special Rules: Publishing The following special rules are established with respect to the apportionment of income derived from the publishing, sale, licensing or other distribution of books, newspapers, magazines, periodicals, trade journals or other printed material.
(1) In General. Except as specifically modified by this rule, when a person in the business of publishing, selling, licensing or distributing newspapers, magazines, periodicals, trade journals or other printed material has income from sources both within and without Alabama, the amount of business income from sources within Alabama from such business activity shall be determined pursuant to §§ 40-27-1, and 40-27-1.1, Code of Ala. 1975, and the rules promulgated thereunder.(2) Definitions. The following definitions are applicable to the terms contained in this rule, unless the context clearly requires otherwise. (a) "Outer-jurisdictional property" means certain types of tangible personal property, such as orbiting satellites, undersea transmission cables and the like, that are owned or rented by the taxpayer and used in the business of publishing, licensing, selling or otherwise distributing printed material, but which are not physically located in any particular state.(b) "Print or printed material" includes, without limitation, the physical embodiment or printed version of any thought or expression including, without limitation, a play, story, article, column or other literary, commercial, educational, artistic or other written or printed work. The determination of whether an item is or consists of print or printed material shall be made without regard to its content. Printed material may take the form of a book, newspaper, magazine, periodical, trade journal or any other form of printed matter and may be contained on any medium or property.(c) "Purchaser" and "Subscriber" mean the individual, residence, business or other outlet which is the ultimate or final recipient of the print or printed material. Neither of such terms shall mean or include a wholesaler or other distributor of print or printed material.(d) "Terrestrial facility" shall include any telephone line, cable, fiber optic, microwave, earth station, satellite dish, antennae or other relay system or device that is used to receive, transmit, relay or carry any data, voice, image or other information that is transmitted from or by any outer-jurisdictional property to the ultimate recipient thereof.(3) Apportionment of Business Income. (a) All business income shall be apportioned to Alabama in accordance with the calculation provided in § 40-27-1, Code of Ala. 1975, and Rule 810-27-1-.09. 1. For tax periods beginning on or after January 1, 2021, the property factor and the payroll factor are no longer considered in calculating a taxpayer's Alabama apportionment factor.2. The industry specific definitions and guidance provided in this rule for property and payroll are applicable for tax periods on or after January 1, 2021, when:(i) A taxpayer petitions and is granted approval from the department to employ an alternative apportionment method in accordance with § 40-27-1, Code of Ala. 1975.(ii) Measuring against nexus thresholds pursuant to § 40-18-31.2, Code of Ala. 1975. (b) The Property Factor. For tax years prior to January 1, 2021, or if the taxpayer is granted approval from the Commissioner to employ an alternative apportionment method that includes the use of the property factor, the property factor shall include: 1. Property Factor Denominator. All real and tangible personal property, including outer-jurisdictional property, whether owned or rented, which is used in the business shall be included in the denominator of the property factor.2. Property Factor Numerator. (i) All real and tangible personal property owned or rented by the taxpayer and used in Alabama during the tax period shall be included in the numerator of the property factor.(ii) Outer-jurisdictional property owned or rented by the taxpayer and used in Alabama during the tax period shall be included in the numerator of the property factor in the ratio which the value of such property that is attributable to its use by the taxpayer in business activities in Alabama bears to the total value of such property that is attributable to its use in the taxpayer's business activities everywhere. (I) The value of outer-jurisdictional property to be attributed to the numerator of the property factor of Alabama shall be determined by the ratio that the number of uplinks and downlinks (sometimes referred to as "half-circuits") that were used during the tax period to transmit from Alabama and to receive in Alabama any data, voice, image or other information bears to the total number of uplinks and downlinks or half-circuits that the taxpayer used for transmissions everywhere.(II) Should information regarding such uplink and downlink or half-circuit usage not be available or should such measurement of activity not be applicable to the type of outer-jurisdictional property used by the taxpayer, the value of such property to be attributed to the numerator of the property factor of Alabama shall be determined by the ratio that the amount of time (in terms of hours and minutes of use) or such other measurement of use of outer- jurisdictional property that was used during the tax period to transmit from Alabama and to receive in Alabama any data, voice, image or other information bears to the total amount of time or other measurement of use that was used for transmissions everywhere.(III) Outer-jurisdictional property shall be considered to have been used by the taxpayer in its business activities within Alabama when such property, wherever located, has been employed by the taxpayer in any manner in the publishing, sale, licensing or other distribution of books, newspapers, magazines or other printed material and any data, voice, image or other information is transmitted to or from Alabama either through an earth station or terrestrial facility located in Alabama. Example: One example of the use of outer-jurisdictional property is where the taxpayer either owns its own communications satellite or leases the use of uplinks, downlinks or circuits or time on a communications satellite for the purpose of sending messages to its newspaper printing facilities or employees in a state. The state or states in which any printing facility that receives the satellite communications is located and the state from which the communications were sent would, under this rule, apportion the cost of the owned or rented satellite to their respective property factors based upon the ratio of the in-state use of said satellite to its total usage everywhere.
Assume that ABC Newspaper Co. owns a total of $400,000,000 of property everywhere and that, in addition, it owns and operates a communication satellite for the purpose of sending news articles to its printing plant in Alabama, as well as for communicating with its printing plants and facilities or news bureaus, employees and agents located in other states and throughout the world. Also assume that the total value of its real and tangible personal property that was permanently located in Alabama for the entire income year was valued at $3,000,000. Assume also that the total original cost of the satellite is $100,000,000 for the tax period and that of the 10,000 uplinks and downlinks of satellite transmissions used by the taxpayer during the tax period, 200 or 2% are attributable to its satellite communications received in and sent from Alabama. Assume further that the company's mobile property that was used partially within Alabama, consisting of 40 delivery trucks, were determined to have an original cost of $4,000,000 and such mobile property was used in Alabama for 95 days. The total value of property to be attributed to Alabama would be determined as follows:
Value of property permanently in state: | $3,000,000 |
Value of mobile property: 95/365 or (.260274) x $4,000,000: | $1,041,096 |
Value of leased satellite property used in-state: (.02) x 100,000,000: | $2,000,000 |
Total value of property attributable to state: | $6,041,096 |
Total property factor %: $6,041,096/($500,000,000): | 1.2082% |
(c) The Payroll Factor. For tax years prior to January 1, 2021, or if the taxpayer is granted approval from the Commissioner to employ an alternative apportionment method that includes the use of the payroll factor. The payroll factor shall be determined in accordance with rules 810-27-1-.13 and 810-27-1.14.(d) The Sales Factor. 1. Sales Factor Denominator. The denominator of the sales factor shall include the total gross receipts derived by the taxpayer from transactions or activity in the regular course of its trade or business, except receipts that may be excluded under Rules 810-27-1-.15 through 810-27-1-.18.2. Sales Factor Numerator. The numerator of the sales factor shall include all gross receipts of the taxpayer from sources within Alabama, including, but not limited to, the following: (i) Gross receipts derived from the sale of tangible personal property, including printed materials, delivered or shipped to a purchaser or a subscriber in Alabama.(ii) Except as provided in subparagraph (3) (d) 2.(iii), gross receipts derived from advertising and the sale, rental or other use of the taxpayer's customer lists or any portion thereof shall be attributed to Alabama as determined by the taxpayer's "circulation factor" during the tax period. The circulation factor shall be determined for each individual publication by the taxpayer of printed material containing advertising and shall be equal to the ratio that the taxpayer's in-state circulation to purchasers and subscribers of its printed material bears to its total circulation to purchasers and subscribers everywhere. The circulation factor for an individual publication shall be determined by reference to the rating statistics as reflected in such sources as Audit Bureau of Circulations or other comparable sources, provided that the source selected is consistently used from year to year for such purpose. If none of the foregoing sources are available, or, if available, none is in form or content sufficient for such purposes, then the circulation factor shall be determined from the taxpayer's books and records.(iii) When specific items of advertisements can be shown, upon clear and convincing evidence, to have been distributed solely to a limited regional or local geographic area in which Alabama is located, the taxpayer may petition, or the Commissioner may require, that a portion of such receipts be attributed to the sales factor numerator of Alabama on the basis of a regional or local geographic area circulation factor and not upon the basis of the circulation factor provided by subparagraph (3)(d)2.(ii). Such attribution shall be based upon the ratio that the taxpayer's circulation to purchasers and subscribers located in Alabama of the printed material containing such specific items of advertising bears to its total circulation of such printed material to purchasers and subscribers located within such regional or local geographic area. This alternative attribution method shall be permitted only upon the condition that such receipts are not double counted or otherwise included in the numerator of any other state.(iv) In the event that the purchaser or subscriber is the United States Government or that the taxpayer is not taxable in a State, the gross receipts from all sources, including the receipts from the sale of printed material, from advertising, and from the sale, rental or other use of the taxpayer's customer's lists, or any portion thereof that would have been attributed by the circulation factor to the numerator of the sales factor for such State, shall be included in the numerator of the sales factor of Alabama if the printed material or other property is shipped from an office, store, warehouse, factory, or other place of storage or business in Alabama.Ala. Admin. Code r. 810-27-1-.18.03
Amended by Alabama Administrative Monthly Volume XXXV, Issue No. 01, October 30, 2016, eff. 11/20/2016.Amended by Alabama Administrative Monthly Volume XL, Issue No. 06, March 31, 2022, eff. 5/15/2022.Authors: Kathleen Abrams, Holly H. Coon, Christina Hall, CPA, Jennifer Reynolds
Statutory Authority:Code of Ala. 1975, §§ 40-2A-7(a)(5), 40-1831.2, 40-18-57; Rules 810-27-1-.13 through 810-27-1-.18.