(a) Application of Method. The business allocation percentage method shall be used if the taxpayer is not granted approval to use the separate accounting method of allocation. The entire net profits of such taxpayer earned as a result of work done, services rendered or other business activity conducted in the City shall be ascertained by determining the total "in-City" percentages of property, payroll and sales. "In-City" percentages of property, payrolls and sales, separately computed, shall be determined in accordance with subsections (b) to (e) hereof.
(b) Percentage of Average Net Book Value; Gross Rental Value of Real Property. First the taxpayer shall ascertain the percentage which the average net book value, of the tangible personal property owned and the real property, including leasehold improvements, owned or used by it in the business and situated within the City during the taxable period, is of the average net book value of all of such property, including leasehold improvements, owned or used by the taxpayer in the business during the same period wherever situated. Real property shall include real property rented or leased by the taxpayer and the value of such property shall be deemed to be eight times the annual gross rental thereon. "Gross rental of real property" means the actual sum of money or other consideration payable, directly or indirectly, by the taxpayer for the use or possession of real property and includes but is not limited to:
(1) An amount payable for the use or possession of real property or any part thereof, whether designated as a fixed sum of money or as a percentage of sales, profits or otherwise.
(2) An amount payable as additional rent or in lieu of rent such as interest, taxes, insurance, repairs or other amount required to be paid by the terms of a lease or other arrangement.
(c) Percentage of Compensation Paid Employees. Second, the taxpayer shall ascertain the percentage which the total compensation paid to employees for work done or for services performed within the City is of the total compensation paid to all the taxpayer's employees within and without the City during the period covered by the return. For allocation purposes, compensation shall be computed on the cash or accrual basis in accordance with the method used in computing the entire net income of the taxpayer.
If an employee performs services within and without the City, the following examples are not all inclusive but may serve as a guide for determining the amount to be treated as compensation for services performed within the City:
(1) In the case of an employee compensated on a time basis, the proportion of the total amount received by him or her which his or her working time within the City is of his or her total working time.
(2) In the case of an employee compensated directly on the volume of business secured by him or her, such as a salesperson on a commission basis, the amount received by him or her for business attributable to his or her efforts in the City.
(3) In the case of an employee compensated on other results achieved, the proportion of the total compensation received which the value of his or her services within the City bears to the value of all his or her services.
(d) Percentage of Gross Revenue. Third, the taxpayer shall ascertain the percentage which the gross revenue of the taxpayer derived from sales made and services rendered in the City is of the total gross revenue from sales and services wherever made or rendered during the period covered by the return.
(1) For the purposes of this section, "sales made in the City" means all sales where the goods, merchandise or property is received in the City by the purchaser, or a person or firm designated by him or her. In the case of delivery of goods in the City to a common or private carrier or by other means of transportation, the place at which the delivery has been completed is considered as the place at which the goods are received by the purchaser.
In determining "sales made in the City" the fact that title may pass to the purchaser on delivery to a common or private carrier or other means of transportation is immaterial. The place at which the goods are ultimately received after all transportation has been completed shall be considered as the place at which the goods are received by the purchaser.
The following examples are not all inclusive but may serve as a guide for determining sales made in the City:
A. Sales to a customer in the City with shipments to a destination within the City from a location in the City or an out-of-City location are considered sales made in the City.
B. Sales to a customer in the City with shipments to a destination within the City directly from the taxpayer's in-City supplier or out-of-City supplier are considered sales made in the City.
C. Sales to a customer in the City with shipments directly to the customer at his or her regularly maintained and established out-of-City location are considered out-of-City sales.
D. Sales to an out-of-City customer with shipments or deliveries to the customer's location within the City are considered sales made in the City.
E. Sales to an out-of-City customer with shipments to an out-of-City destination are considered out-of-City sales.
(2) In the case of public utilities, or businesses furnishing transportation services, "gross revenue", for the purposes of this subsection, may be measured by such means as operating revenues, vehicle miles, revenue miles, passenger miles, ton miles, tonnage or such other method as shall reasonably measure the proportion of gross revenue obtained in the City by such business.
(3) In case the business of the taxpayer involves substantial business activities other than sales of goods and services, such other method or methods of allocation shall be employed as shall reasonably measure the proportion of gross revenue obtained in the City by such business.
(e) Business Allocation Percentage. Fourth, the taxpayer shall add the percentages determined in accordance with subsections (b) to (d) hereof and divide the total by three and the result so obtained is the business allocation percentage. In determining this percentage, a factor shall be excluded from the computation only when the factor does not exist anywhere insofar as the taxpayer's business operation is concerned and, in such case, the total of the percentages shall be divided by the number of factors actually used. The business allocation percentage shall be applied to the entire net profits, wherever derived, of the taxpayer subject to the tax to determine the net profits allocable to the City.
(f) Substitute Methods. An alternative method of accounting shall be used if the taxpayer or the Administrator demonstrates that the net profits of the taxpayer allocable to the City, cannot be justly and equitably determined under the separate accounting method or the business allocation percentage method, or if undue expense to the taxpayer would result from complying therewith because of the taxpayer's manner of operations and methods of accounting. In such cases the Administrator, upon application of the taxpayer or upon his or her own initiative, may approve or specify factors or methods of determination as will effect a just, non-discriminatory and reasonable result. Application to the Administrator to substitute other factors in the formula or to use a different method to allocate net profits shall be made in writing and state the specific grounds on which the substitution of factors or use of a different method is requested and the relief sought. No specific form need be followed in making the application. Once a taxpayer has filed under a substitute method, he or she shall continue so to file until given permission by the Administrator to change.
(Ord. 360. Passed 12-11-93.)