(a) Use of Formula. At the option of a corporate taxpayer or of a nonresident business entity, such taxpayers may, but are not obliged to, use the formula set forth in Section 183.02 to compute the percentage of their entire net profits (derived from activities both within and outside the Village) which is taxable under Chapter 183, and to determine the tax payable to the Village thereunder.
If the taxpayer did not have a place of business outside the Village during the period covered by any declaration and/or return required under Chapter 183, its business allocation percentage is 100 percent; in other words the taxpayer is required to pay a tax of one percent on the entire net profit of the business.
If the taxpayer had a place or places of business outside the Village and was doing business in the Village during such period, the business allocation percentage shall be computed on the basis as set forth in Section 183.02(h).
The business allocation percentage is computed by determining the percentages:
(1) Which Byesville real and tangible personal property bears to all real and tangible personal property (including that situated in Byesville) of taxpayer wheresoever situated;
(2) Which Byesville business sales bear to taxpayer’s entire business sales wheresoever derived (including those derived from Byesville); and
(3) Which payrolls paid by taxpayer within Byesville bear to taxpayer’s entire payroll wheresoever paid (including Byesville payrolls); adding together the three percentages so arrived at, and dividing the total by three.
However, if one of the factors (property, sales or payrolls) is missing, the other two percentages are added and the sum is divided by two, and if two of the factors are missing, the remaining percentage is the business allocation percentage.
EXAMPLE 1:
Corporation having places of business in Byesville, Detroit and Cleveland.
Byesville real and tangible personal property $10,000. All real and personal property (Byesville, Detroit and Cleveland) $100,000. Percentage: 10%.
Byesville sales $15,000. All sales $75,000. Percentage: 20%
Byesville payroll $6,000. All payroll $20,000. Percentage: 30%
Business Allocation Percentage:
10% plus 20% plus 30%
Equals 20%
3
EXAMPLE 2:
Same corporation owning no real or tangible personal property anywhere.
Byesville sales $15,000. All sales $75,000. Percentage: 20%
Byesville payroll $6,000. All payroll $20,000. Percentage: 30%
Business Allocation Percentage:
20% plus 30%
Equals 25%
2
EXAMPLE 3:
Same corporation owning real and tangible personal property in Byesville valued at $10,000 and owning no real or tangible personal property outside Byesville. Other factors same as in Examples 1 and 2.
Business Allocation Percentage:
100% plus 20% plus 30%
Equals 50%
3
After determining such business allocation percentage, the tax shall be determined by applying that percentage to the entire net profits of the taxpayer wherever derived (thus arriving at the taxable net profit), and computing one percent of the resultant taxable net profit.
In case it appears to the Tax Administrator that any income or capital of the taxpayer is improperly or inaccurately reflected, the Tax Administrator may adjust items of income, expense, deductions and capital, and disregard assets in computing any allocation percentage, provided any income directly traceable thereto is also excluded from entire net income, so as equitably to determine the tax.
(b) Explanation of “Property Factor”. The percentage of the taxpayer’s real and tangible personal property within the Village is determined by dividing the net book value (during the period covered by the report) of such property within the Village, without deduction of any encumbrances, by the average net book value similarly computed, of all such property within and without the Village. Only property owned by the taxpayer is considered in determining such percentage.
(c) Explanation of Sales Factor. Receipts from the following are allocable to the Village:
(1) Work done and performed or services rendered in the Village.
(2) Rentals from property situated in the Village where the rental of such property is a usual or normal part of the taxpayer’s business activity.
(3) For the purpose of determining business allocation percentage, no account shall be given to receipts, within or without the Village, of income derived from intangibles (including stocks, bonds, royalties and the like) the income of which is taxable under the statutes of the State.
(4) Compensation and other receipts for work done or services performed within the Village are allocable to the Village and taxable under Chapter 183. All amounts so received, credited or charged by taxpayer in payment for such work or services are so allocable, irrespective of whether done or performed by employees or agents of taxpayer or by any other persons. It is immaterial where such amounts were payable or where they were received.
Commissions or fees received by the taxpayer are allocated to the Village if the services for which the commission were paid where performed in the Village. If the taxpayer’s services for which commissions or fees were paid were performed for the taxpayer by salesmen or other agents or employees attached to or working out of a Byesville place of business of the taxpayer, the taxpayer’s services will be deemed to have been performed in the Village. Where a lump sum is received by the taxpayer in payment for services within and without the Village, the amount attributable to services within the Village is to be determined on the basis of the relative values of, or amounts or time spent in the performance of, such services within and without the Village.
(5) Receipts from sale of capital assets (property not held by the taxpayer for sale to customers in the regular course of business) are not business receipts. Receipts from the sale of real property held by the taxpayer as a dealer for sale to customers in the regular course of business are business receipts and are allocable to the Village if the real property was situated in the Village. Receipts from sale of intangibles included in business capital, held by the taxpayer as a dealer for sale to customers in the regular course of business, are business receipts and are allocable to the Village if the sales were made in the Village through a regular place of business of the taxpayer in the Village.
(d) Payroll Factor. The percentage of the taxpayer’s payroll allocable to the Village is determined by dividing the qualifying wages, salaries and other personal service compensation of the taxpayer’s employees within the Village during the period covered by the report, by the total amount of compensation of all taxpayer’s employees during such period.
Qualifying wages, salaries and other compensation are computed on the cash or accrual basis in accordance with the method of accounting used in the computation of the entire net income of the taxpayer.
Employees within the Village usually includes all employees regularly connected with or working out of a place of business maintained by the taxpayer in the Village.
However, where an employee performed services both within and without the Village, the amount treated as compensation for services performed within the Village shall be deemed to be:
(1) In the case of an employee whose compensation depends directly on the volume of business secured by him, such as a salesman on a commission basis, the amount received by him for the business attributable to his efforts within the Village;
(2) In the case of an employee whose compensation depends on other results achieved, the proportion of the total compensation which the value of all his services within the Village bears to the value of his services; and
(3) In the case of an employee compensated on a time basis, the proportion of the total amount received by him which the working time employed in the Village bears to the total working time.
(e) Adjustment of Formula. Generally, the Business Allocation Percentage Formula will result in a fair apportionment of the taxpayer’s net profits within and without the Village. However, due to the peculiar circumstances of certain businesses, the formula may work a hardship in some cases or result in a tax evasion in others, thus not do justice to the taxpayer or the Village. Accordingly, in such cases, the Tax Administrator may substitute factors calculated to bring about a fair and proper allocation in any case where the taxpayer has adopted the optional use of the Business Allocation Percentage Formula.
(Ord. 2004-07. Passed 9-29-04.)