TITLE 44
Taxation

CHAPTER 44-11
Business Corporation Tax

SECTION 44-11-14


§ 44-11-14 Allocation of income from business partially within state.

(a) In the case of a taxpayer deriving its income from sources both within and outside of this state or engaging in any activities or transactions both within and outside of this state for the purpose of profit or gain, its net income shall be apportioned to this state by means of an allocation fraction to be computed as a simple arithmetical mean of three (3) fractions:

(1) The first of these fractions shall represent that part held or owned within this state of the average net book value of the total tangible property (real estate and tangible personal property) held or owned by the taxpayer during the taxable year, without deduction on account of any encumbrance thereon;

(2) The second fraction shall represent that part of the taxpayer's total receipts from sales or other sources during the taxable year which is attributable to the taxpayer's activities or transactions within this state during the taxable year; meaning and including within that part, as being thus attributable, receipts from:

(i) Gross sales of its tangible personal property (inventory sold in the ordinary course of business) where:

(A) Shipments are made to points within this state; or

(B) Shipments are made from an office, store, warehouse, factory or other place of storage in this state and the taxpayer is not taxable in the state of the purchase.

(ii) Gross income from services performed within the state;

(iii) Gross income from rentals from property situated within the state;

(iv) Net income from the sale of real and personal property, other than inventory sold in the ordinary course of business as described in paragraph (i) of this subdivision, or other capital assets located in the state;

(v) Net income from the sale or other disposition of securities or financial obligations; and

(vi) Gross income from all other receipts within the state;

(3) The third fraction shall represent that part of the total wages, salaries, and other compensation to officers, employees, and agents paid or incurred by the taxpayer during the taxable year which is attributable to services performed in connection with the taxpayer's activities or transactions within this state during the taxable year.

(b) For tax years beginning on or after January 1, 2015, all taxpayers organized under subchapter C of the Internal Revenue Code deriving income from sources both within and outside of this state, or engaging in any activities or transactions both within and outside of this state for the purpose of profit or gain, its net income shall be apportioned to this state by means of an allocation fraction to be computed as a simple arithmetical of the following factors:

(1) The factor shall represent that part of the taxpayer's total receipts from sales or other sources during the taxable year which is attributable to the taxpayer's activities or transactions within this state during the taxable year; meaning and including within that part, as being thus attributable, receipts from:

(i) Gross sales of its tangible personal property (inventory sold in the ordinary course of business) where:

(A) Shipments are made to points within this state; or

(B) Shipments are made from an office, store, warehouse, factory or other place of storage in this state and the taxpayer is not taxable in the state of the purchase.

(ii) Gross income from the performance of services where the recipient of the service receives all of the benefit of the service in this state. If the recipient of the service receives some of the benefit of the service in this state, gross income which shall be included in the numerator of the apportionment factor in proportion to the extent the recipient receives benefit of the service in this state;

(iii) Gross income from rentals from property situated within the state;

(iv) Net income from the sale of real and personal property, other than inventory sold in the ordinary course of business as described in subsection (b)(1)(i) of this section, or other capital assets located in the state;

(v) Net income from the sale or other disposition of securities or financial obligations; and

(vi) Gross income from all other receipts within the state.

(vii) Except as otherwise provided under this section, each unitary business group member shall include all receipts in this state without regard to whether the member has nexus in this state. Receipts between members included in a unitary business group must be eliminated in calculating the receipts factor.

(c) Notwithstanding any of the provisions of this section, revenue and expenses subject to the gross earnings tax pursuant to chapter 13 of this title shall not be included in the calculation described in this section.

History of Section.
(G.L. 1938, ch. 37, § 6; P.L. 1947, ch. 1887, art. 1, § 1; G.L. 1956, § 44-11-14; P.L. 1961, ch. 83, § 1; P.L. 1964, ch. 66, § 3; P.L. 1974, ch. 200, art. 2, § 1; P.L. 1975, ch. 188, art. 1, § 1; P.L. 1982, ch. 291, § 1; P.L. 1997, ch. 357, § 6; P.L. 2007, ch. 73, art. 7, § 4; P.L. 2008, ch. 475, § 15; P.L. 2014, ch. 145, art. 12, § 17.)