(a) Business allocation percentage method.
(1) Net profit from a business or profession conducted both within and without the boundaries of the city shall be considered as having a taxable status in the city for purposes of income taxation in the same proportion as the average ratio of:
A. The average original cost (i.e., the total costs as shown on the federal return less allocable depreciation as shown on the entity's federal return as filed) 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 original cost of all of the real and tangible personal property owned or used by the taxpayer in the business or profession during the same period, wherever situated.
1. As used in division (a)(1)A. of this section, "real property" shall include property rented or leased by the taxpayer and the value of that property shall be determined by multiplying the annual rental thereon by eight.
2. "Gross rents" means the actual sum of money or other consideration payable, directly or indirectly, by the taxpayer for the use or possession of property, including:
a. Any amount paid for the use or possession of real and tangible personal property or any part thereof, whether designated as a fixed sum of money or as a percentage of sales profits or otherwise; and
b. Any amount paid as additional rent or in lieu of rent, such as interest, taxes, insurance, repairs or other amounts required to be paid by the terms of a lease or other arrangement.
B. Salaries, wages, commissions and other compensation paid during the taxable period to persons employed in the business or profession for services performed in the city to salaries, wages, commissions and other compensation paid during the same period to persons employed in the business or profession, wherever their services are performed. Wages, salaries and other compensation shall be included to the extent that they represent qualifying wages.
1. Salaries and reasonable compensation paid to owners or credited to the account of owners or partners during the period covered by the return are considered wages for the purpose of this computation.
2. Salaries, wages, commissions and other compensation shall be computed on the cash or accrual basis in accordance with the method of accounting used in the computation of the entire taxable income or loss of the taxpayer.
3. In the case of an employee who performs services both within and without the city, the amount treated as compensation for services performed within the city shall be deemed to be:
a. In the case of an employee whose compensation depends 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 the business attributable to his or her efforts within the city;
b. In the case of an employee whose compensation depends 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; and
c. In the case of an employee compensated on a time basis, the proportion of the total amount received by him or her, which is working time within the city, is of his or her total working time.
C. 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.
(2) As used in division (a)(l)C. of this section, "sales made in the city" means:
A. 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.
B. 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 the solicitation or promotion.
C. All sales of tangible personal property which is shipped from an office, store, warehouse, factory or place within the city to purchasers outside 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. All solicitation of customers outside of the city by mail, telephone, fax, electronic mail or other electronic media from an office or place of business within the city shall be considered a solicitation of "sales within the city".
D. Charges for work done or services performed incident to a sale, whether or not included in the price of the property, shall be considered gross receipts from the sales.
E. In the application of the foregoing divisions a carrier shall be considered the agent of the seller regardless of the freight on board point or other conditions of the sale; and the place at which orders are accepted or contracts legally consummated shall be immaterial.
(3) Add the percentages determined in accordance with division (a)(1) of this section, or such of the aforesaid percentages as may be applicable to the particular taxpayer's business, and divide the total so obtained by the number of percentages used in ascertaining the total. The result so obtained is the business allocation percentage. In determining the average percentage, a factor shall not be excluded from the computation merely because the factor is found to be allocable entirely outside the city. A factor is excluded only when it does not exist anywhere.
(4) The business allocation percentage determined in division (a)(3) of this section shall be applied to the entire taxable net profits of the taxpayer wherever derived to determine the net profits allocable to the city.
(b) Substitute method.
(1) In the event that the foregoing apportionment formula does not produce an equitable result, another basis may be substituted, under uniform regulations, so as to produce the result.
(2) If the taxpayer makes application to the Finance Director to substitute other factors in the formula, or to use a different method to allocate net profits, the application must be made, in writing, not less than 60 days before the due date of the annual return without regard to extension, and shall state the specific grounds on which the substitution of factors or use of a different method is requested and the relief sought to be obtained. No specific form need be followed in making the application. If, pursuant to a taxpayer's request, a substitute method of allocation is authorized by the Finance Director, a statement must be attached to the annual return for the year of change describing the substitute method of allocation and setting forth the date the substitute method was authorized by the Finance Director.
(3) If the Finance Director approves the use of books and records as a substitute method, the following shall apply:
A. The net profits allocable to the city from business, professional or other activities conducted in the city by corporations or unincorporated entities (whether resident or nonresident) may be determined from the records of the taxpayer only if the taxpayer has bona fide records which disclose with reasonable accuracy what portion of his or her net profits is attributable to that part of his or her activities conducted within the city.
B. If the books and records of the taxpayer are used as the basis for apportioning net profits, a statement must accompany the return explaining the manner in which the apportionment is made in sufficient detail to enable the Administrator to determine whether the net profits attributable to the city are apportioned with reasonable accuracy.
C. In determining the income allocable to the city from the books and records of a taxpayer, an adjustment may be made for the contribution made to the production of the income by headquarters activities of the taxpayer, whether the headquarters is within or without the city.
(Ord. 43-2004, passed 12-20-2004)