Florida Regulations 12C-1.015: Apportionment of Adjusted Federal Income
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(1) For taxable years beginning on or after January 1, 1991, corporations will apportion their adjusted federal income in accordance with Florida Statutes § 220.15, only if they are doing business within and without Florida. A taxpayer will be considered doing business within and without this state if it has income from business activity which is taxable both within and without Florida.
(a) In determining whether or not a taxpayer is doing business within and without Florida, a taxpayer will be considered doing business without this state if the corporation is taxable in another state, provided:
1. That state subjects the business to a net income tax, a franchise tax measured by net income, a franchise tax for the privilege of doing business, or a corporate stock tax, or,
2. That state has jurisdiction to subject the taxpayer to a net income tax regardless of whether, in fact, the state does or does not.
(b)1. States have the jurisdiction to impose an income tax on any corporation that incorporates within their state. This is true regardless of whether the corporation exists or conducts business within their state. Therefore, corporations that have incorporated outside Florida may apportion income in accordance with Florida Statutes § 220.15
2. In general, whether a state has jurisdiction to subject a Florida corporation to a net income tax is dependent on whether the activities within the state fall within or without the limitations prescribed under the due process or commerce clauses.
3. The jurisdiction of a state to impose a net income tax is further limited by P.L. 86-272 (15 U.S.C. ss. 381-384), which is incorporated by reference in Fl. Admin. Code R. 12C-1.0511, P.L. 86-272 precludes a state from taxing income from interstate commerce if a corporation’s only business activity in the state is the solicitation of orders for sales of tangible personal property and the orders are approved and filled from outside the state.
4. The taxation by another state may also be limited by a de minimis exception. If the activity within a state is de minimis, or the activity that goes beyond the mere solicitation of orders for sales of tangible personal property is de minimis, a state is precluded from imposing an income tax. Whether a particular activity is a de minimis deviation from a prescribed standard must be determined with reference to the specific activity and all the facts of a specific case.
5. If no other state may tax a Florida corporation because of jurisdictional limitations due to the due process or commerce clauses, Public Law 86-272, or de minimis exceptions, the corporation will not be considered to be doing business within and without Florida.
6. If another state specifically rules that a Florida corporation is subject to a net income tax, a franchise tax measured by net income, a franchise tax for the privilege of doing business, or a corporate stock tax within that state, such ruling will be prima facie evidence that the state does have jurisdiction to tax.
7. The fact that a corporation has voluntarily filed a return and paid tax in another state will not be conclusive proof that the state had jurisdiction to impose a corporate income tax.
8. For purposes of determining whether a corporation is doing business within and without the state when engaged in foreign commerce, the state will determine taxability in a foreign country as though the jurisdictional standards applicable to a state of the United States applied to that country. Therefore, if a foreign country actually imposes a tax measured by income on a corporation, the criteria of doing business within and without the state will be met. The corporation will also meet the criteria if when applying the standards of due process, the commerce clause, and P.L. 86-272, which is incorporated by reference in Fl. Admin. Code R. 12C-1.0511, the foreign country would have jurisdiction to tax if it were a state of the United States.
(c) Once it is determined that a corporation is subject to tax within another state or country, the corporation may apportion income using the property, payroll, and sales factors as prescribed in Florida Statutes § 220.15 The denominators of the apportionment factors will include the property, payroll, and sales everywhere. The denominators of the factors are not limited to only including the property, payroll, and sales in states which actually tax or have the jurisdiction to tax.
(d) There is no throwback rule in Florida. For a corporation that is doing business within and without Florida, the sales are not considered to be Florida sales solely because the corporation is not subject to tax within another state.
(e) Sales to the United States government are not treated differently from sales to individuals, partnerships, or corporations. If the sale is tangible personal property and the delivery is within Florida, the sale will be considered a Florida sale. If the sale is delivered outside Florida, it will not be considered a Florida sale.
(2) If a taxpayer is not considered to be doing business within and without Florida under subsection (1), all of its adjusted federal income will be subject to Florida corporate income/franchise tax.
(3) General Method.
(a) All corporations doing business within and without Florida, except insurance companies, transportation services, and taxpayers who have been given prior permission to use an alternate method of apportioning income, are required by Florida Statutes § 220.15, to apportion their business income to Florida based upon a three factor formula. Business income is adjusted federal income.
(b) The three factor formula measures Florida’s share of adjusted federal income by ratios of the taxpayer’s property, payroll, and sales in Florida to total property, payroll, and sales located or occurring everywhere. The general method of apportionment is modified for financial organizations; that is, what is included in the sales factor and property factor is modified for financial organizations.
(4) Zero in Numerator. In the event any of the factors has a numerator which is zero, the Florida fraction for such factor shall be zero and the apportionment fraction shall be the sum of the weighted fractions for the other factors.
Example: Corporation W had no property in Florida but the average value of its property everywhere in 1986 was $275,000. We’s payroll in Florida in 1986 amounted to $75,000 and the total payroll everywhere was $125,000. W reported sales in Florida in 1986 of $5,000,000 and sales everywhere of $8,000,000. The apportionment fraction is computed as follows:
Property:
Terms Used In Florida Regulations 12C-1.015
- Corporation: A legal entity owned by the holders of shares of stock that have been issued, and that can own, receive, and transfer property, and carry on business in its own name.
- Dependent: A person dependent for support upon another.
- Evidence: Information presented in testimony or in documents that is used to persuade the fact finder (judge or jury) to decide the case for one side or the other.
- Jurisdiction: (1) The legal authority of a court to hear and decide a case. Concurrent jurisdiction exists when two courts have simultaneous responsibility for the same case. (2) The geographic area over which the court has authority to decide cases.
- Personal property: All property that is not real property.
- Public law: A public bill or joint resolution that has passed both chambers and been enacted into law. Public laws have general applicability nationwide.
1. That state subjects the business to a net income tax, a franchise tax measured by net income, a franchise tax for the privilege of doing business, or a corporate stock tax, or,
2. That state has jurisdiction to subject the taxpayer to a net income tax regardless of whether, in fact, the state does or does not.
(b)1. States have the jurisdiction to impose an income tax on any corporation that incorporates within their state. This is true regardless of whether the corporation exists or conducts business within their state. Therefore, corporations that have incorporated outside Florida may apportion income in accordance with Florida Statutes § 220.15
2. In general, whether a state has jurisdiction to subject a Florida corporation to a net income tax is dependent on whether the activities within the state fall within or without the limitations prescribed under the due process or commerce clauses.
3. The jurisdiction of a state to impose a net income tax is further limited by P.L. 86-272 (15 U.S.C. ss. 381-384), which is incorporated by reference in Fl. Admin. Code R. 12C-1.0511, P.L. 86-272 precludes a state from taxing income from interstate commerce if a corporation’s only business activity in the state is the solicitation of orders for sales of tangible personal property and the orders are approved and filled from outside the state.
4. The taxation by another state may also be limited by a de minimis exception. If the activity within a state is de minimis, or the activity that goes beyond the mere solicitation of orders for sales of tangible personal property is de minimis, a state is precluded from imposing an income tax. Whether a particular activity is a de minimis deviation from a prescribed standard must be determined with reference to the specific activity and all the facts of a specific case.
5. If no other state may tax a Florida corporation because of jurisdictional limitations due to the due process or commerce clauses, Public Law 86-272, or de minimis exceptions, the corporation will not be considered to be doing business within and without Florida.
6. If another state specifically rules that a Florida corporation is subject to a net income tax, a franchise tax measured by net income, a franchise tax for the privilege of doing business, or a corporate stock tax within that state, such ruling will be prima facie evidence that the state does have jurisdiction to tax.
7. The fact that a corporation has voluntarily filed a return and paid tax in another state will not be conclusive proof that the state had jurisdiction to impose a corporate income tax.
8. For purposes of determining whether a corporation is doing business within and without the state when engaged in foreign commerce, the state will determine taxability in a foreign country as though the jurisdictional standards applicable to a state of the United States applied to that country. Therefore, if a foreign country actually imposes a tax measured by income on a corporation, the criteria of doing business within and without the state will be met. The corporation will also meet the criteria if when applying the standards of due process, the commerce clause, and P.L. 86-272, which is incorporated by reference in Fl. Admin. Code R. 12C-1.0511, the foreign country would have jurisdiction to tax if it were a state of the United States.
(c) Once it is determined that a corporation is subject to tax within another state or country, the corporation may apportion income using the property, payroll, and sales factors as prescribed in Florida Statutes § 220.15 The denominators of the apportionment factors will include the property, payroll, and sales everywhere. The denominators of the factors are not limited to only including the property, payroll, and sales in states which actually tax or have the jurisdiction to tax.
(d) There is no throwback rule in Florida. For a corporation that is doing business within and without Florida, the sales are not considered to be Florida sales solely because the corporation is not subject to tax within another state.
(e) Sales to the United States government are not treated differently from sales to individuals, partnerships, or corporations. If the sale is tangible personal property and the delivery is within Florida, the sale will be considered a Florida sale. If the sale is delivered outside Florida, it will not be considered a Florida sale.
(2) If a taxpayer is not considered to be doing business within and without Florida under subsection (1), all of its adjusted federal income will be subject to Florida corporate income/franchise tax.
(3) General Method.
(a) All corporations doing business within and without Florida, except insurance companies, transportation services, and taxpayers who have been given prior permission to use an alternate method of apportioning income, are required by Florida Statutes § 220.15, to apportion their business income to Florida based upon a three factor formula. Business income is adjusted federal income.
(b) The three factor formula measures Florida’s share of adjusted federal income by ratios of the taxpayer’s property, payroll, and sales in Florida to total property, payroll, and sales located or occurring everywhere. The general method of apportionment is modified for financial organizations; that is, what is included in the sales factor and property factor is modified for financial organizations.
(4) Zero in Numerator. In the event any of the factors has a numerator which is zero, the Florida fraction for such factor shall be zero and the apportionment fraction shall be the sum of the weighted fractions for the other factors.
Example: Corporation W had no property in Florida but the average value of its property everywhere in 1986 was $275,000. We’s payroll in Florida in 1986 amounted to $75,000 and the total payroll everywhere was $125,000. W reported sales in Florida in 1986 of $5,000,000 and sales everywhere of $8,000,000. The apportionment fraction is computed as follows:
Property: