Generally, in determining the tax base, the attribution or allocation of receipts among multiple bases of operations, and the apportionment of receipts with interstate characteristics, must fairly reflect the business activity connected to a base of operations in the borough and avoid the possibility of double taxation.
(A) Attribution. Attribution is the process of specifically identifying gross receipts directly or indirectly connected to a particular base of operations of the taxpayer.
(1) For taxpayers with a single base of operations, 100% of intrastate gross receipts will be attributed to that single base of operations. Receipts cannot be attributed to job sites, or customer or subcontractor locations that do not qualify as a base of operations of the taxpayer.
(2) For taxpayers with multiple bases of operations, gross receipts resulting from business activity managed, controlled or directed from a base of operations are attributed to that base of operations. Receipts will be considered attributable to a base of operations in the borough if any significant aspect of the transaction occurs or arises out of that base of operations in the borough. Generally, receipts paid to a particular base of operations will be attributed to that base of operations. A taxpayer with more than one base of operations must maintain accounting records to support attribution of receipts to the various business locations.
(a) Example 1.
1. A plumbing contractor has a single business location in the borough. He or she provides services to customers in numerous surrounding municipalities.
2. One hundred percent of his or her gross receipts are attributed to his or her North York Borough base of operations because all work is managed, directed and controlled from his or her sole business location.
(b) Example 2.
1. An engineering firm has two offices; one in North York Borough and another in Allentown. The firm separately accounts for revenues and expenses for each location.
2. Gross receipts separately identified for the North York Borough location are attributed to North York Borough. Gross receipts attributed to the Allentown base of operations are excluded from the North York Borough tax base, provided no part of the Allentown activity is managed, directed or controlled from the North York Borough office.
(3) Gross receipts must be determined through attribution if possible. If determination of gross receipts through attribution is not possible, gross receipts are determined through allocation. If attribution of receipts under this section does not accurately or fairly reflect a taxpayer’s activity connected to a base of operations in the borough, the Tax Collector may determine gross receipts using the allocation or apportionment formulas.
(B) Allocation. Allocation is the calculation of a share of total gross receipts for a particular base of operations when more than one base of operations exist, and the taxpayer is unable to determine gross receipts through attribution. The allocation formula is based on a single payroll factor.
(1) The allocation of gross receipts for a particular base of operations is calculated by multiplying total gross receipts by a fraction, the numerator of which is payroll for workers connected with a particular base of operations, and the denominator of which is total payroll for all locations.
(2) (a) For the purpose of computing the payroll factor other forms of compensation must be included when relevant. Other forms of compensation may include: self-employment income of a proprietor or a single member of a limited liability company; an active partner’s share of partnership income; an active member’s share of the income of a limited liability company; or an active shareholder’s ordinary income from an “S” corporation.
(b) Example:
1. A law firm is based in North York Borough and has a second office in West Chester. The accounting system does not segregate receipts by location. Gross receipts total $1,225,000 for the year. Total payroll and partners’ compensation is $860,000. Payroll and partners’ compensation for workers based in North York Borough is $570,000.
2. The allocation of gross receipts to the North York Borough office is as follows: Payroll Allocation Factor = $570,000/$860,000 or 66.3%.
Total Gross Receipts | $1,225,000 |
Allocation Factor | X 66.3% |
Borough Receipts | $812,175 |
(3) If a taxpayer has no payroll or payroll cannot be identified by location, the square footage of each base of operations must be used to determine the allocation factor.
(4) (a) Furthermore, the Tax Collector may authorize the use of another objective and measurable basis of allocation when unusual circumstances exist that result in an allocation that does not fairly reflect the activity connected to a base of operations in Springettsbury Township. In such circumstances, the taxpayer must request authorization in writing to use a method of allocation other than payroll or square footage, and such authorization is prospective in nature.
(b) Example:
1. A taxpayer owns and operates two coin-operated laundromats, one in North York Borough and one in a neighboring municipality. Receipts are not tracked separately for each location. There is no payroll.
2. The Tax Collector may authorize the taxpayer to allocate gross receipts using a formula based on the water usage for each location as reflected on the water or sewer invoices.
(C) Apportionment. Apportionment of gross receipts is the calculation of a share of gross receipts to be included in the tax base, resulting from the performance of services in Philadelphia and/or outside the state, by or in conjunction with a base of operations in North York Borough. See § 36.057 regarding interstate commerce for apportionment formula and applicability.
(D) Taxpayers subject to Philadelphia business privilege tax.
(1) Philadelphia imposes its business privilege tax under a different state law than other Pennsylvania municipalities. Philadelphia may impose its business privilege tax on taxpayers that do not have a base of operations in Philadelphia. In order to avoid the possibility of double taxation, taxpayers subject to the Philadelphia business privilege tax may apportion gross receipts subject to tax in Philadelphia.
(2) Apportionment of gross receipts subject to tax in Philadelphia will be made under the following formula:
(Receipts within Pennsylvania x 100%) - (Receipts within Pennsylvania x Philadelphia apportionment factor) = Gross receipts included in tax base |
(3) (a) The Philadelphia apportionment factor shall be the product of averaging the following percentages:
1. Wages, salaries, commissions and other compensation in Philadelphia, as a percentage of total Pennsylvania wages, salaries, commissions and other compensation;
2. Value of the tangible personal property and real property owned or leased and situated within Philadelphia as a percentage of total Pennsylvania tangible personal and real property owned or leased. The value of leased property is eight times the annual rental, for the purpose of this calculation; and
3. Philadelphia gross receipts, as a percentage of total Pennsylvania gross receipts.
(b) Example:
1. A taxpayer based in North York Borough operates a janitorial service and has total Pennsylvania receipts of $1,000,000, and total Pennsylvania payroll of $450,000; the value of owned and leased property in Pennsylvania is $650,000. Gross receipts from services performed in Philadelphia were $220,000, and Philadelphia wages totaled $88,000. Cleaning equipment kept at customer locations in Philadelphia had a value of $7,500. The taxpayer has no Philadelphia base of operations.
2. a. Gross receipts subject to North York Borough’s business privilege tax are as follows: Pennsylvania gross receipts @ 100% = $1,000,000
b. Less: receipts apportioned to Philadelphia by formula:
Philadelphia Wages | $88,000 | = 19.56% |
Pennsylvania Wages | $450,000 | |
Philadelphia Property | $7,500 | = 1.15% |
Pennsylvania Property | $650,000 | |
Philadelphia Receipts | $220,000 | = 22.00% |
Pennsylvania Receipts | $1,000,000 | |
Total All Percentages: | 42.71% | |
Philadelphia apportionment factor = Average of percentages (divide total by 3) = 14.24% | ||
Pennsylvania receipts ($1,000,000) x 14.24% receipts apportioned to Philadelphia | = ($142,400) | |
Borough Gross Receipts: | $857,600 | |
Note: the percentages for wages, property and receipts, used in the apportionment formula must be consistent with those reported by a taxpayer on its Philadelphia business privilege tax return, a copy of which should be attached to the taxpayer’s North York borough’s bp/mercantile tax return. | ||
(Ord. 2015-5, passed 4-28-2015)