Taxpayer is a space transportation company that has entered into three launch contracts that result in the recognition of revenue in taxable year 201X. The first contract ("Contract A") is for two launches outside this state where the launch vehicles will each travel 1,000 miles from launch to separation. Taxpayer will recognize $2,000,000 of revenue in taxable year 201X from this contract. The second contract ("Contract B") is for one launch from outside of this state where the launch vehicle will travel 10,000 miles from launch to separation. Taxpayer will recognize $500,000 of revenue in taxable year 201X from this contract. The third contract ("Contract C") is for one launch from within this state where the launch vehicle will travel 1,000 miles from launch to separation. Taxpayer will recognize $1,000,000 of revenue in taxable year 201X from this contract. Taxpayer also has $500,000 of revenue from other than space transportation activities. The taxpayer's sales factor numerator from launch-related revenue in the taxable year shall be determined as follows:
Contract A | Contract B | Contract C | |
Gross receipts recognized in 201X | $2,000,000 | $500,000 | $1,000,000 |
Mileage ratio for each contract | (0+0)/(1,000+1,000)=0 | 0/10,000 = 0 | 62/1,000 = 6.2% |
Contribution to mileage factor numerator from each contract | $2,000,000 x 0 = $0 | $500,000 x 0 = $0 | $1,000,000 x .062 = $62,000 |
Mileage factor numerator | $0 + $0 + $62,000 = $62,000 | ||
Mileage factor denominator (total launch contract revenues recognized in taxable year) | $2,000,000 + $500,000 + $1,000,000 = $3,500,000 | ||
Mileage factor | ($62,000 / $3,500,000) = 1.7714% | ||
Departure factor for all contracts in the taxable year | 1 launch from this state / 4 launches everywhere = 1/4 = 25% | ||
Sales factor: Mileage factor weighted 80% plus departure factor weighted 20% | (1.7714% x 80%) + (25% x 20%) = 6.42% | ||
Gross receipts to be included in sales factor numerator in the taxable year multiplied by taxpayer total gross receipts | .0642 x $4,000,000 = $256,800 |
Cal. Code Regs. Tit. 18, §§ 25137-15
Note: Authority cited: Section 19503, Revenue and Taxation Code. Reference: Sections 25120, 25134, 25135, 25136, 25136.1 and 25137, Revenue and Taxation Code.