(A) (1) At the option of a corporate taxpayer or of a non-resident business entity, such taxpayers may, but are not obliged to, use the formula set forth herein to compute the percentage of their entire net profits (derived from activities both within and outside the Village of Smithville) which is taxable under the Ordinance and to determine the tax payable to the Village of Smithville thereunder.
(2) If the taxpayer did not have a place of business outside Smithville during the period covered by any declaration and/or return required hereunder, its business allocation percentage is 100%; in other words the taxpayer is required to pay a tax of 1.5% on the entire net profits of the business.
(3) If the taxpayer had a place of business outside Smithville, and was doing business in Smithville during such period, the business allocation percentage shall be computed on the following basis:
(a) In the taxation of income which is subject to municipal income taxes, if the books and records of a taxpayer conducting a business or profession both within and without the boundaries of a municipal corporation shall disclose with reasonable accuracy what portion of its net profit is attributable to that part of the business or profession conducted within the boundaries of the municipal corporation, then only such portion shall be considered as having a taxable situs in such municipal corporation for purposes of municipal income taxation. In the absence of such records, net profit from a business or profession conducted both within and without the boundaries of a municipal corporation shall be considered as having a taxable situs in such municipal corporation for purposes of municipal income taxation in the same proportion as the average ratio of:
1. The average net book value of the real and tangible personal property owned or used by the taxpayer in the business of profession in such municipal corporation during the taxable period to the average net book value of all of the real and tangible personal property owned or used by the tax-payer in the business or profession during the same period, wherever situated. As used in the preceding paragraph, real property shall include 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 such municipal corporation to wages, salaries, and other compensation paid during the same period to persons employed in the business or profession, wherever their services are performed;
3. Gross receipts of the business or profession from sales made and services performed during the taxable period in such municipal corporation to gross receipts of the business of 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) As used in division (A) of this section SALES MADE IN A MUNICIPAL CORPORATION means:
1. All sales of tangible personal property which is delivered within such municipal corporation regardless of where title passes if shipped or delivered from a stock of goods within such municipal corporation;
2. All sales of tangible personal property which is delivered within such municipal corporation regardless of where title passes even though transported from a point outside such municipal corporation if the taxpayer is regularly engaged through its own employees in the solicitation or promotion of sales within such municipal corporation and the sales result from such solicitation or promotion;
3. All sales of tangible personal property which is shipped from a place within such municipal corporation to purchasers outside such municipal corporation 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. The business allocation percentage is computed by determining the percentage (a) which Smithville real and tangible personal property bears to all real and tangible personal property (including that situated in Smithville; of taxpayer wheresoever situated; (b) which Smithville business sales bear to taxpayer's entire business sales wheresoever derived(including those derived from Smithville); and (c) which payrolls paid by taxpayer within Smithville bear to taxpayer's entire payroll wheresoever paid (including Smithville 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 Smithville, Detroit and Cleveland. Smithville real and tangible personal property $10,000.00. All real and personal property (Smithville, Detroit and Cleveland) $100,000.00. Percentage: 10%. Smithville sales $15,000.00. All sales $75,000.00. Percentage 20%. Smithville payroll $6,000.00. All payroll $20,000.00. Percentage 30, Business Allocation Percentage: 10% plus 20% plus 30% divided by 3 equals 20%.
EXAMPLE 2:
Same corporation owning no real or tangible personal property anywhere. Smithville sales $15,000.00. All sales $75,000.00. Percentage 20%. Smithville payroll $6,000.00. All payroll $20,000.00. Percentage 30". Business Allocation Percentage: 20% plus 30% divided by 2 equals 25%.
EXAMPLE 3:
Same corporation owning real and tangible personal property in Smithville valued at $10,000.00 and owning no real or tangible personal property outside Smithville. Other factors same as in Examples 1 and 2. Business Allocation Percentage: 100% plus 20% plus 30% divided by 3 equals 50%.
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 1.5% of the resultant taxable net profit.
In case it shall appear to the Village Clerk that any income or capital of the taxpayer is improperly in inaccurately reflected, the Village Clerk 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 equitable to determine the tax.
2. EXPLANATION OF “PROPERTY FACTOR”. The percentage of the tax-payer's real and tangible personal property within Smithville is determined by dividing the net book value (during the period covered by the report) of such property within Smithville, without deduction of any encumbrances, by the average net book value similarly computed, of all such property within and without Smithville. Only property owned by the taxpayer is considered in determining such percentage.
3. EXPLANATION OF SALES FACTOR. Receipts from the following are allocable to Smithville:
(a) Work done and performed or services rendered in Smithville.
(b) Rentals from property situated in Smithville, where the rental of such property is a usual or normal part of the taxpayer's business activity.
(c) For the purpose of determining business allocation percentage no account shall be given to receipts, within or without Smithville, of income derived from intangibles (including stocks, bonds, royalties and the like) the income of which is taxable under the statutes of the State of Ohio.
(d) Compensation and other receipts for work done or services performed within Smithville are allocable to Smithville and taxable under the Ordinance. 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 person. It is immaterial where such amounts were payable or where they were received. Commissions or fees received by the taxpayer are allocated to Smithville if the services for which the commissions were paid were performed in Smithville. 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 Smithville place of business of the taxpayer the taxpayer's services will be deemed to have been performed in Smithville. Where a lump sum is received by the taxpayer in payment for services within and without Smithville, the amount attributable to services within Smithville is to be determined on the basis of the relative values of, or amounts of time spent in the performance of, such services within and without Smithville.
(e) 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 Smithville if the real property was situated in Smithville.
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 Smithville if the sales were made in Smithville or through a regular place of business of the taxpayer in Smithville.
5. PAYROLL FACTOR. The percentage of the taxpayer's payroll allocable to Smithville is determined by dividing the wages, salaries and other personal service compensation of the taxpayer's employees within Smithville during the period covered by the report, by the total amount of compensation of all taxpayer's employees during such period.
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 Smithville usually includes all employees regularly connected with or working out of a place of business maintained by the taxpayer in Smithville; however, where an employee performed services both within and without Smithville, the amount treated as compensation for services per-formed within Smithville, shall be deemed to be (a) 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 Smithville; (b) in the case of an employee whose compensation depends on other results achieved, the proportion of the total compensation which the value of his services within Smithville bears to the value of all his services; and (c) 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 Smithville bears to the total working time.
6. ADJUSTMENT OF BUSINESS ALLOCATION PERCENTAGE FORMULA. Generally, the Business Allocation Percentage Formula will result in a fair apportionment of the taxpayer's net profits within and without Smithville; however, due to the peculiar circumstances of certain businesses, the formula may work a hard-ship 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 Village Clerk 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.
(Res. 1976-55, passed 12-13-1976)