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VILLAGE OF MALTA INCOME TAX RULES AND REGULATIONS (Page 3) |
b. If the books and records of the taxpayer are used as the basis for apportioning net profits rather than the business allocation formula, a statement must accompany the return explaining the manner in which such apportionment is made in sufficient detail to enable the Commissioner to determine whether the net profits attributable to this municipality are apportioned with reasonable accuracy.
c. In determining the income allocable to this municipality from the books and records of a taxpayer an adjustment may be made for the contribution made to the production of such income by headquarters activities of the taxpayer, whether such headquarters is within or without this municipality.
2. Business Allocation Percentage Method.
a. STEP I: Ascertain the percentage which the average net book value of real and tangible personal property,, including leasehold improvements, owned or used in the business and situated within this municipality is of the average net book value of all real and tangible personal property, including leasehold improvements, owned or used in the business wherever situated, during the period covered by the return.
1. The percentage of taxpayer's real and tangible personal property within this municipality is determined by dividing the average net book value of such property within this municipality (without deduction of any encumbrances) by the average net book value of all such property within and without this municipality. In determining such percentage property rented to the taxpayer as well as real and tangible personal property owned by taxpayer must be considered.
.01 The net book value of real and tangible personal property rented by taxpayer shall be determined by multiplying gross annual rents payable by eight (8).
.02 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 and includes:
.001 Any amount payable 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;
.002 Any amount payable 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. STEP 2. Ascertain the percentage which the total wages, salaries, commissions and other compensation of employees within this municipality is of the total wages, salaries, commissions and other compensation of all the taxpayer's employees within and without this municipality during the period covered by the return.
.1 Salaries and reasonable compensation paid 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 Wages, salaries, 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 net income of the taxpayer.
.3 In the case of an employee who performs services both within and without this municipality the amount treated as compensation for services performed within the city shall be deemed to be,.
.01 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 this municipality.
.02 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 services within this municipality bears to the value of all his services; and
.03 In the case of an employee compensated on a time basis, the proportion of the total amount received by him which his working time within this municipality is of his total working time.
c. STEP 3: Ascertain the percentage which the gross receipts of the taxpayer derived from sales made and services rendered in this Municipality is of the total gross receipts wherever derived during the period covered by the return.
.1 The following sales shall be considered this municipality’s sales:
.01 All sales made through retail stores located within this municipality to purchasers within or without this municipality except' such of said sales to purchasers outside this municipality that are directly attributable to regular solicitations made outside this municipality personally by taxpayer's employees.
.02 All sales of tangible personal property delivered to purchasers within this municipality if shipped or delivered from an office, store, warehouse, factory, or place of storage located within this municipality.
.03 All sales of tangible personal property delivered to purchasers within this municipality even though transported from a point outside this municipality if the taxpayer is regularly engaged through its own employees in the solicitation or promotion of sales within this municipality and the sale is directly or indirectly the result of such solicitation.
.04 All sales of tangible personal property shipped from an office, store, warehouse, factory or place of storage within this municipality to purchasers outside this municipality if the taxpayer is not, through its own employees regularly engaged in the solicitation or promotion of sales at the places of delivery.
.05 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 such sale.
.2 In the application of the foregoing subparagraphs a carrier shall be considered the agent of the seller regardless of the FOB point or other conditions of the sale; and the place at which orders are accepted or contracts legally consummated shall be immaterial. Solicitation of customers outside this municipality by mail or phone from an office, or place of business within this municipality shall not be considered a solicitation of sales outside this municipality.
d. STEP 4: Add the percentages determined in accordance with Steps 1. 2, and 3 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 said 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 said factor is found to be allocable entirely outside this municipality. A factor is excluded only when it does not exist anywhere.
e. STEP 5: The business allocation percentage determined in Step 4 above shall be applied to the entire taxable net profits of the taxpayer wherever derived to determine the net profits allocable to this municipality.
3. Substitute Method:
a. In the event a just and equitable result cannot be obtained under the formula, the Board, upon application of the taxpayer or the Commissioner may substitute other factors in the formula or prescribe other methods to allocating net income calculated to effect a fair and proper allocation.
b. Application to the Board to substitute other factors in the formula or to use a different method to allocate net profits must be made in writing before the end of the taxable year 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. A copy therof shall be served at the time of filing upon the taxpayer or Commissioner as the case may be. No specific form need be followed in making such application. Once a taxpayer has filed under a substitute method, he must continue to so file until given permission to change by the Board of Review.
C. Operating Loss Carry Forward.
1. The portion of a net operating loss, based on income taxable under the ordinance, sustained in any taxable year subsequent to (effective date of "first" ordinance permitting loss carry-forwards) allocable to this municipality may be applied against the portion of the profit of succeeding year (s) allocable to this municipality, until exhausted but in no event for more than five (5) taxable years. No portion of a net operating loss shall be carried back against net profits of any prior year.
2. In the event net profits are allocated both within and without this municipality, the portion to a net operating loss sustained shall be allocated to this municipality in the same manner as provided herein for allocating net profits to this municipality. The portion of a net operating loss to be carried forward shall be determined in the year the net operating loss is sustained, on the basis of the allocation factors applicable to that year. The same method of accounting and allocation must be used in the year to which an operating loss is carries as was used in the year in which the operating loss was sustained.
3. In the case of fiscal years beginning prior to the effective date of the ordinance, the net operating loss deduction will be that portion of the operating loss that the number of months of the fiscal year after the effective date of the ordinance bears to the total number of months in such fiscal year.
4.A short fiscal year (a fiscal year of less than twelve (12) months) in cases where there has been a change in accounting period, where a new taxpayer selects a short fiscal year, or where a new taxpayer operates in this municipality for less than his full accounting period, shall be considered as a full taxable fiscal year.
5. In any return in which a net operating loss deduction is claimed, a schedule should be attached showing:
a. Year in which net operating loss was sustained.
b. Method of accounting and allocation used to determine portion of net operating loss allocable to this municipality.
c. Amount of net operating loss used as a deduction in prior years,
d. Amount of net operating loss claimed as a deduction in current year.
6. The net operating loss of a business which loses its identity through merger, consolidation, etc., shall not be allowed as a carry-forward loss deduction to the surviving business entity.
7. In the case of a net operating loss in the filing of consolidated returns see Article III, paragraph D.
D. Consolidated Returns:
1. Consolidated returns may be filed by a group of corporations who are affiliated through stock ownership. For a subsidiary corporation to be included in a consolidated return 80% of its stock must be owned by the other members of the affiliated group. A consolidated return must include all companies which are so affiliated.
2. Once a consolidated return has been filed for any taxable year, the consolidated group must continue to file consolidated returns in subsequent years unless:
a. Permission in writing is granted by the Commissioner to file separate returns.
b. A new corporation other than a corporation created or organized by a member of the group has become a member of the group during the taxable year.
c. A corporation member of the group is sold or exchanged. Liquidating a corporation or merging one of the corporations of the group into another will not qualify the group for filing separate returns.
3. If a corporation becomes a member of the group during the taxable year the consolidated return must include the income for the entire taxable year of the common parent corporation and any subsidiaries which were members of the group for the entire year, plus the income of each subsidiary which becomes a member of the group during the year for the period beginning with the date it became a member of the affiliated group. For the period prior to the time any subsidiary became a member of the group, separate returns must be filed for that subsidiary When a subsidiary ceases to be a member of the affiliated group, the consolidated return must include the income of such subsidiary for the period during which it was a member of the group, but for the period after it ceases to be a member, separate returns must be filed. If a corporation has been a member of the affiliated group for less than one month of the taxable year of the group, it may be considered as not being part of the group. Similarly, a subsidiary may be considered as being a member of the affiliated group during the entire taxable year of the group if the period during which it was not a member of the group does not exceed one month.
If a subsidiary is a member of the consolidated group for only part of a taxable year, the income considered to be earned in such fractional part of the year shall be that portion of the net income for the entire year which the number of days it was a member of the group bears to the total number of days in the taxable year.
4. In determining the allocation fraction where a corporation becomes a member of the group or ceases to be a member of the group during the taxable year, the property fraction (Step I of the formula) shall be determined on the basis of the average net book value of the property during the period such corporation was a member of the group. The rental portion of the fraction, however, shall be computed at 8 times the annual rent. The gross receipts and wages fractions shall be based on the actual figures.
5. All subsidiary corporations must agree in writing to the filing of the consolidated return as they will be liable for the tax as well as will be the parent corporation.
6. The net operating loss carryover of a corporation which filed a separate return in a prior year may be carried over to the consolidated return but will be limited in amount to the amount of that same corporation's net income included in the consolidation. The net operating loss carryover from a separate year shall be deducted first before application ' of the allocation fraction. After application of the allocation fraction the consolidated net operating loss carryover allocated to this municipality shall be allowed.
7. In consolidating the net income, the taxable income tax of each corporation shall be computed in accordance with the provisions governing the taxable income of separate corporations except that there shall be eliminated unrealized profits and losses in transactions between members of the affiliated group.
8. I n determining expenses that are not allowable because they are allocable to non-taxable income, such calculations shall be based on the consolidated net income. As an example, inter-company dividends which are eliminated in the consolidation will not be taken into consideration in determining non-taxable income.
E. Exceptions.
The following shall not be considered taxable.
1.Poor relief, unemployment insurance benefits, old age pensions or similar payments received from local, state or federal governments or charitable or religious organizations.
1A. Income from Patents and Copyrights.
2. Proceeds of insurance, annuities, workman's compensation insurance, social security benefits, pensions, compensation for damages for personal injuries and like reimbursements, not including damages for loss of profits.
3. Compensation for damage to property by way of insurance or otherwise.
4. Interest and dividends from intangible property.
5. Military pay and allowances received as a member of the armed forces of the United States.
6. Any charitable, educational, fraternal or other type of non-profit association or organization enumerated in Section 718.02 of the Revised Code of Ohio which is exempt from payment of real estate taxes is exempt from payment of the tax imposed by this ordinance.
7. Any association or organization falling in the category listed in the preceding paragraph not exempt from the payment of real estate taxes is required to file declarations and final returns and remit the taxes levied under this ordinance on all business activities of a type ordinarily conducted for profit by taxpayers operating for profit.
8. Where such non-profit association or organization conducts income producing business both within and without the corporate limits, it shall calculate its profits allocable to this municipality under the method or methods provided above.