3.26 Ark. Code R. 51-718(d)

Current through Register Vol. 49, No. 10, October, 2024

Rule 3.26-51-718(d) - 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.

In General. Except as specifically modified by this regulation, when a taxpayer in the business of publishing, selling, licensing or distributing newspapers, magazines, periodicals, trade journals or other printed material has income from sources both inside and outside of Arkansas, the amount of business income from sources within Arkansas from such business activity shall be determined pursuant to ACA 26-51-702 to 26-51-718.

Definitions. The following definitions apply to the terms contained in this regulation:

(i) "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.

(ii) "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. 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.

(iii) " Purchaser" and 'Subscriber" means 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 include a wholesaler or other distributor of print or printed material.

(iv) "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.

Apportionment of Business Income

The Property Factor

Property Factor Denominator

All real and tangible personal property, whether owned or rented, which is used in the taxpayer's business shall be included in the denominator of the property factor. However, outer-jurisdictional property shall not be included in the property factor's denominator.

Property Factor Numerator

All real and tangible personal property owned or rented by the taxpayer and used in Arkansas during the tax year shall be included in the numerator of the property factor. However, outer-jurisdictional property owned or rented by the taxpayer and used in Arkansas during the tax year shall be excluded from the numerator of the property factor.

Example: ABC Newspaper Co. owns a total of $400,000,000 of property everywhere and, in addition, it owns and operates a communication satellite for the purpose of sending news articles to its printing plant in Arkansas, as well as for communicating with its printing plants, news bureaus, employees and agents located in other states and throughout the world. The total value of its real and tangible personal property that was permanently located in Arkansas for the entire tax year was valued at $3,000,000. The total original cost of the satellite is $100,000,000 for the tax year. The taxpayer's mobile property that was used partially within Arkansas, consisting of 40 delivery trucks, was determined to have an original cost of $4,000,000. The delivery trucks were used in Arkansas for 95 days.

The total value of property to be attributed to Arkansas would be determined as follows:

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The Payroll Factor

The payroll factor shall be determined according to ACA 26-51-713 and 26-51-714 and the regulations promulgated thereunder.

The Sales Factor

Sales Factor Denominator

The denominator of the sales factor shall include the total gross receipts derived by the taxpayer from transactions and activity in the regular course of the taxpayer's trade or business.

Sales Factor Numerator

The numerator of the sales factor shall include all gross receipts of the taxpayer from sources within Arkansas, including, but not limited to, the following:

1. Gross receipts derived from the sale of tangible personal property, including printed materials, delivered or shipped to a purchaser or a subscriber in Arkansas;

2. Except as provided in paragraph 3 below, 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 Arkansas as determined by the taxpayer's "circulation factor" during the tax year. 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 Arkansas 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 and from state to state 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;

3. 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 Arkansas is located, the taxpayer may petition, or the Department may require, that a portion of such receipts be attributed to the sales factor numerator of Arkansas on the basis of a regional or local geographic area circulation factor and not upon the basis of the circulation factor provided by paragraph 2 above. Such attribution shall be based upon the ratio that the taxpayer's circulation to purchasers and subscribers located in Arkansas 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; or

4. In the event that the purchaser or subscriber is the United States Government or that the taxpayer is not taxable in a certain other 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 lists, or any portion thereof that would have been attributed by the circulation factor to the numerator of the sales factor for such other state, shall be included in the numerator of the sales factor of Arkansas if the printed material or other property is shipped from an office, store, warehouse, factory, or other place of storage or business located in Arkansas.

3.26 Ark. Code R. 51-718(d)