(a) Method of determination. Net profits from a business or profession conducted both within and without the boundaries of the city shall be considered as having a taxable situs for purposes of the tax in the same proportion as the average ratio of:
(1) The average original cost 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 the real and tangible personal property owned or used by the taxpayer in the business or profession during the same period, wherever situated. 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 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. Wages, salaries and other compensation shall be included to the extent that they represent qualifying wages; 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.
(b) Basis. In the event that the foregoing allocation formula in division (a) above does not produce an equitable result, another basis may, under uniform regulations, be substituted so as to produce such result. A basis using the “books and records” method, or another method, may be substituted at the discretion of the Administrator.
(c) Sales made in the City of Solon. As used in division (a)(3) hereof, SALES MADE IN THE CITY OF SOLON means:
(1) All sales of taxable personal property which is delivered within the City of Solon regardless of where title passes if shipped or delivered from a stock of goods within the City of Solon;
(2) All sales of tangible personal property which is delivered within the City of Solon regardless of where title passes even though transported from a point outside the City of Solon if the taxpayer is regularly engaged through its own employees in the solicitation or promotion of sales within the City of Solon 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 of Solon to purchasers outside of the City of Solon 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.
(d) Total allocation. The percentages determined in accordance with divisions (c)(1), (c)(2) and (c)(3) hereof, or such of the aforesaid percentages as are applicable to the particular taxpayer, shall be added together and the total so obtained shall be divided by the number of percentages used in deriving said total in order to obtain the business allocation percentage referred to in division (a) hereof. A factor is applicable even though it may be allocable entirely in or outside the city.
(e) Rentals. Rental income received by a taxpayer shall be included in the computation of net profits from business activities under divisions (c) through (g) of § 890.03 only if and to the extent that the rental, ownership, management or operations 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. The net profits will be allocated in accordance with the three-factor formula, unless approval is given by the Administrator to use a substitute method (see division (b) above). Net profits not constituting a business activity remain taxable, and shall be taxed using the books and records method.
(1) Where the gross monthly rental of any and all real properties, regardless of number and value, aggregates in excess of $125 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.
(2) 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 $125 per month.
(3) In the case of farm property, the owner shall be considered engaged in a business activity when he or she 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 said $125 per month. Any person who operates a licensed rooming house shall be considered in business whether or not the gross income exceeds $125 per month.
(f) Operating loss-carry forward.
(1) The portion of a net operating loss sustained in any taxable year subsequent to October 1, 1967, 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 herein 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. 2007-217, passed 10-15-2007)