| HB 1408 - Income tax; corporations; gross receipts factor |
First Reader Summary
A BILL to amend Code Section 48-7-31 of the Official Code of
Georgia Annotated, relating to allocation and apportionment of
income with respect to income taxation regarding corporations, so
as to provide for the comprehensive revision of the allocation
and apportionment formulas applicable where net business income
is derived principally from the manufacture, production, or sale
of tangible personal property; and for other purposes.
| House |
Action |
Senate |
| 2/10/00 |
Read 1st Time |
|
| 2/14/00 |
Read 2nd Time |
|
HB 1408 LC 18 0020
A BILL TO BE ENTITLED
AN ACT
1- 1 To amend Code Section 48-7-31 of the Official Code of
1- 2 Georgia Annotated, relating to allocation and apportionment
1- 3 of income with respect to income taxation regarding
1- 4 corporations, so as to provide for the comprehensive
1- 5 revision of the allocation and apportionment formulas
1- 6 applicable where net business income is derived principally
1- 7 from the manufacture, production, or sale of tangible
1- 8 personal property; to provide an effective date; to provide
1- 9 for applicability; to repeal conflicting laws; and for other
1-10 purposes.
1-11 BE IT ENACTED BY THE GENERAL ASSEMBLY OF GEORGIA:
1-12 SECTION 1.
1-13 Code Section 48-7-31 of the Official Code of Georgia
1-14 Annotated, relating to allocation and apportionment of
1-15 income with respect to income taxation regarding
1-16 corporations, is amended by striking paragraphs (2) and (3)
1-17 of subsection (d) and inserting in their place new
1-18 paragraphs (2) and (3) to read as follows:
1-19 "(2) Where the net business income of the corporation is
1-20 derived principally from the manufacture, production, or
1-21 sale of tangible personal property, the portion of the
1-22 net income therefrom attributable to property owned or
1-23 business done within this state shall be taken to be the
1-24 portion arrived at by application of the following
1-25 single factor formula: (A) Property factor. The property factor is a
1-27 fraction, the numerator of which is the average value
1-28 of the taxpayer's real and tangible personal property
1-29 owned or rented and used in this state during the tax
1-30 period and the denominator of which is the average
1-31 value of all the taxpayer's real and tangible personal
1-32 property owned or rented and used during the tax
1-33 period;
-1-
2- 1 (i) Property owned by the taxpayer is valued at its
2- 2 original cost. Property rented by the taxpayer is
2- 3 valued at eight times the net annual rental rate.
2- 4 Net annual rental rate is the annual rental rate
2- 5 paid by the taxpayer less any annual rental rate
2- 6 received by the taxpayer from subrentals;
2- 7 (ii) The average value of property shall be
2- 8 determined by averaging the values at the beginning
2- 9 and end of the tax period, except that the
2-10 commissioner may require the averaging of monthly
2-11 values during the tax period if such averaging is
2-12 reasonably required to reflect properly the average
2-13 value of the taxpayer's property;
2-14 (B) Payroll factor. The payroll factor is a fraction,
2-15 the numerator of which is the total amount paid in
2-16 this state during the tax period by the taxpayer for
2-17 compensation and the denominator of which is the total
2-18 compensation paid everywhere during the tax period.
2-19 The term 'compensation' means wages, salaries,
2-20 commissions, and any other form of remuneration paid
2-21 to employees for personal services. Payments made to
2-22 an independent contractor or any other person not
2-23 properly classified as an employee are excluded.
2-24 Compensation is paid in this state if:
2-25 (i) The employee's service is performed entirely
2-26 within this state;
2-27 (ii) The employee's service is performed both within
2-28 and outside this state and the service performed
2-29 outside this state is incidental to the employee's
2-30 service within this state; or
2-31 (iii) Some of the service is performed in this state
2-32 and either the base of operations or the place from
2-33 which the service is directed or controlled is in
2-34 this state or the base of operations or the place
2-35 from which the service is directed or controlled is
2-36 not in any state in which some part of the service
2-37 is performed but the employee's residence is in this
2-38 state;
2-39 (C)(A) Gross receipts factor. The gross receipts
2-40 factor is a fraction, the numerator of which is the
2-41 total gross receipts from business done within this
2-42 state during the tax period and the denominator of
2-43 which is the total gross receipts from business done
-2-
3- 1 everywhere during the tax period. For the purposes of
3- 2 this subparagraph, receipts shall be deemed to have
3- 3 been derived from business done within this state only
3- 4 if the receipts are received from products shipped to
3- 5 customers in this state or products delivered within
3- 6 this state to customers. In determining the gross
3- 7 receipts within this state, receipts from sales
3- 8 negotiated or effected through offices of the taxpayer
3- 9 outside this state and delivered from storage in this
3-10 state to customers outside this state shall be
3-11 excluded;.
3-12 (D)(B) Apportionment formula. The property factor, the
3-13 payroll factor, and the gross receipts factor shall be
3-14 separately determined and an apportionment fraction
3-15 shall be calculated using the following formula:
3-16 (i) The property factor shall represent 25 percent
3-17 of the fraction;
3-18 (ii) The payroll factor shall represent 25 percent
3-19 of the fraction; and
3-20 (iii) The gross receipts factor shall represent 50
3-21 percent of the fraction.
3-22 The net income of the corporation shall be apportioned
3-23 to this state according to such fraction single gross
3-24 receipts apportionment formula;
3-25 (3) Except as otherwise provided in paragraph (3.1) or
3-26 (3.2) of this subsection, where the net business income
3-27 is derived principally from business other than the
3-28 manufacture, production, or sale of tangible personal
3-29 property, the net business income of the corporation
3-30 shall be arrived at by application of the following
3-31 three single factor formula: (A) Property factor. The property factor is a
3-33 fraction, the numerator of which is the average value
3-34 of the taxpayer's real and tangible personal property
3-35 owned or rented and used in this state during the tax
3-36 period and the denominator of which is the average
3-37 value of all the taxpayer's real and tangible personal
3-38 property owned or rented and used during the tax
3-39 period;
3-40 (i) Property owned by the taxpayer is valued at its
3-41 original cost. Property rented by the taxpayer is
3-42 valued at eight times the net annual rental rate.
-3-
4- 1 Net annual rental rate is the annual rental rate
4- 2 paid by the taxpayer less any annual rental rate
4- 3 received by the taxpayer from subrentals;
4- 4 (ii) The average value of property shall be
4- 5 determined by averaging the values at the beginning
4- 6 and end of the tax period, except that the
4- 7 commissioner may require the averaging of monthly
4- 8 values during the tax period if such averaging is
4- 9 reasonably required to reflect properly the average
4-10 value of the taxpayer's property;
4-11 (B) Payroll factor. The payroll factor is a fraction,
4-12 the numerator of which is the total amount paid in
4-13 this state during the tax period by the taxpayer for
4-14 compensation and the denominator of which is the total
4-15 compensation paid everywhere during the tax period.
4-16 The term 'compensation' means wages, salaries,
4-17 commissions, and any other form of remuneration paid
4-18 to employees for personal services. Payments made to
4-19 an independent contractor or any other person not
4-20 properly classified as an employee are excluded.
4-21 Compensation is paid in this state if:
4-22 (i) The employee's service is performed entirely
4-23 within this state;
4-24 (ii) The employee's service is performed both within
4-25 and outside this state and the service performed
4-26 outside this state is incidental to the employee's
4-27 service within this state; or
4-28 (iii) Some of the service is performed in this state
4-29 and either the base of operations or the place from
4-30 which the service is directed or controlled is in
4-31 this state or the base of operations or the place
4-32 from which the service is directed or controlled is
4-33 not in any state in which some part of the service
4-34 is performed but the employee's residence is in this
4-35 state;
4-36 (C)(A) Gross receipts factor. The gross receipts
4-37 factor is a fraction, the numerator of which is the
4-38 total gross receipts from business done within this
4-39 state during the tax period and the denominator of
4-40 which is the total gross receipts from business done
4-41 everywhere during the tax period. Gross receipts are
4-42 in this state if the receipts are derived from
-4-
5- 1 customers within this state or if the receipts are
5- 2 otherwise attributable to this state's marketplace;. (D) The property factor, payroll factor, and the gross
5- 4 receipts factor shall be separately determined and an
5- 5 apportionment fraction shall be calculated using the
5- 6 following formula:
5- 7 (i) The property factor shall represent 25 percent
5- 8 of the fraction;
5- 9 (ii) The payroll factor shall represent 25 percent
5-10 of the fraction; and
5-11 (iii) The gross receipts factor shall represent 50
5-12 percent of the fraction.
5-13 (B) Apportionment formula. The net income of the
5-14 corporation shall be apportioned to this state
5-15 according to such fraction single factor gross
5-16 receipts formula; (E) If the allocation and apportionment provisions
5-18 provided for in this paragraph do not fairly represent
5-19 the extent of the taxpayer's business activity in this
5-20 state, the taxpayer may petition the commissioner for,
5-21 or the commissioner may by regulation require, with
5-22 respect to all or any part of the taxpayer's business
5-23 activity, if reasonable:
5-24 (i) Separate accounting;
5-25 (ii) The exclusion of any one or more of the
5-26 factors;
5-27 (iii) The inclusion of one or more additional
5-28 factors that will fairly represent the taxpayer's
5-29 business activity within this state; or
5-30 (iv) The employment of any other method to
5-31 effectuate an equitable allocation and apportionment
5-32 of the taxpayer's income.
5-33 The denial of a petition under this paragraph shall be
5-34 appealable pursuant to either Code Section 48-2-59 or
5-35 50-13-12;"
5-36 SECTION 2.
5-37 This Act shall become effective upon its approval by the
5-38 Governor or upon its becoming law without such approval and
-5-
6- 1 shall be applicable to all taxable years beginning on or
6- 2 after January 1, 2000.
6- 3 SECTION 3.
6- 4 All laws and parts of laws in conflict with this Act are
6- 5 repealed.
-6-
Clerk of the House
Robert E. Rivers, Jr., Clerk
Last Updated on 02/17/00
