(a) Method of Determination. In the taxation of income which is subject to the tax levied in Section 890.03
, if the books and records of a taxpayer conducting a business or profession both within and without the boundaries of the City disclose with reasonable accuracy what portion of his net profits is attributable to that part of the business or profession conducted within the boundaries of the City, then only such portion shall be considered as having a taxable situs in the City for the purposes of Municipal income taxation. The portion of the entire net profits of a taxpayer to be allocated as having been derived from within the City, in the absence of actual records thereof, shall be determined by multiplying the entire net profits by a business allocation percentage to be determined by a three-factor formula of property, payroll and sales, each of which shall be given equal weight, as follows:
(1) The average net book value of the real and tangible personal property owned or used by the taxpayer in the business or profession in the City during the taxable period, to the average net book value of all the real and tangible personal property owned or used by the taxpayer in the business or profession during the same period, wherever situated; as used in this paragraph, "real property" includes property rented or leased by the taxpayer and the value of such property shall be determined by multiplying the annual rental thereon by eight.
(2) Wages, salaries and other compensation paid during the taxable period to persons employed in the business or profession for services performed in the City, to wages, salaries and other compensation paid during the same period to persons employed in the business or profession, wherever their services are performed; and
(3) Gross receipts of the business or profession from sales made and services performed during the taxable period in the City, to gross receipts of the business or profession during the same period from sales and services, wherever made or performed.
In the event that the foregoing allocation formula does not produce an equitable result, another basis may, under uniform regulations, be substituted so as to produce such result.
(b) sales Made in the City. As used in paragraph (a)(3) hereof, "sales made in the City" mean:
(1) All sales of tangible personal property which is delivered within the City, regardless of where title passes, if shipped or delivered from a stock of goods within the City;
(2) All sales of tangible personal property which is delivered within the City, regardless of where title passes, even though transported from a point outside the City if the taxpayer is regularly engaged through its own employees in the solicitation or promotion of sales within the City and the sales result from such solicitation or promotion; and
(3) All sales of tangible personal property which is shipped from a place within the City to purchasers outside of the City, regardless of where title passes, if the taxpayer is not, through its own employees, regularly engaged in the solicitation or promotion of sales at the place where delivery is made.
(c) Total Allocation.Add together the percentages determined in accordance with paragraphs (a)(1), (2) and (3) hereof or those of such percentages as are applicable to the particular taxpayer, and divide the total so obtained by the number of percentages used in deriving such total in order to obtain the business allocation percentage referred to in subsection (a) hereof. A factor is applicable even though it may be allocable entirely in or outside the City.
(d) Rentals.
(1) Rental income received by a taxpayer shall be included in the computation of net profits from business activities under Section 890.03(a) (3) through (7) only if and to the extent that the rental ownership, management or operation of the real estate from which such rentals are derived (whether so rented, managed or operated by a taxpayer individually or through agents or other representatives) constitutes a business activity of the taxpayer in whole or in part.
(2) Where the gross monthly rental of any and all real properties, regardless of number and value, aggregates in excess of one hundred twenty-five dollars ($125.00) per month, it shall be prima-facie evidence that the rental, ownership, management or operation of such properties is a business activity of such taxpayer, and the net income of such rental property shall be subject to tax, provided that in the case of commercial property, the owner shall be considered engaged in a business activity when the rental is based on a fixed or fluctuating percentage of gross or net sales, receipts or profits of the lessee, whether or not such rental exceeds one hundred twenty-five dollars ($125.00) per month. In the case of farm property, the owner shall be considered engaged in a business activity when he shares in crops or when the rental is based on a percentage of the gross or net receipts derived from the farm, whether or not the gross income exceeds such one hundred twenty-five dollars ($125.00) per month. The person who operates a licensed rooming house shall be considered in business whether or not the gross income exceeds such one hundred twenty-five dollars ($125.00) per month.
(e) Operating Loss Carry-Forward.
(1) The portion of a net operating loss sustained in any taxable year allocable to the City may be applied against the portion of the profit of succeeding tax years allocable to the City until exhausted, but in no event for more than five taxable years immediately following the year in which the loss occurred. No portion of a net operating loss shall be carried back against net profits of any prior year.
(2) The portion of net operating loss sustained shall be allocated to the City in the same manner as provided in this chapter for allocating net profits to the City.
(3) The Administrator shall provide by rules and regulations the manner in which such net operating loss carry forward shall be determined.
(Ord.68-27. Passed 7-23-68.)