35 Miss. Admin. Code Pt. III, Subpt. 8, Ch. 06 — Multistate Taxation

100 This regulation is composed of three sections.

# 1.

General topics and definitions.

# 2.

Computation of income.

# 3.

Methods of reporting income.
101 (Reserved)
200 General Topics and Definitions
201 Corporations Required to File
201.01 Every domestic corporation (those chartered in Mississippi) is subject to the income tax
levy and is required to file annual income tax returns unless such corporations is
specifically exempt from tax within the purview of Code Section 27-7-29.
201.02 Every foreign corporation (those chartered outside Mississippi) which has obtained a
certificate of authority from the Secretary of State to do business in Mississippi, or which is
in fact doing business, as defined, in Mississippi, regardless of qualifications, is subject to
the income tax levy and is required to file annual income tax returns unless corporation is
specifically exempt from tax within the purview of Code Section 27-7-29.
201.03 All corporations subject to the filing requirements of the paragraphs above must file an
income tax return for each year including a tax year or years in which the corporation was
inactive, did not earn any net income, or operated a part of the year. An annual return must
be filed until the corporation, foreign or domestic, is legally withdrawn or dissolved.
202 Definitions
202.01 Commercial Domicile. "Commercial domicile" means the principal place from which the
trade or business of the taxpayer is directed or managed.
202.02 Taxpayer. "Taxpayer" means any individual, partnership, corporation, association, trust or
estate, whose income is, in whole or in part, subject to a tax imposed by the Mississippi
Income Tax Law of 1952, as amended, being Section 27 -7-1 et seq., Mississippi Code of
1972, or any such person who is subject to the filing requirements of this Regulation.
202.03 Apportionment. "Apportionment" refers to the division of business income between
states by the use of a formula containing apportionment factors.
202.04 Allocation. "Allocation" refers to the assignment of income to a particular state.
202.05 Business Activity. "Business activity" refers to the transactions and activity occurring in
the regular course of a particular trade or business of a taxpayer.
202.06 Taxable In Another State. The term "taxable in another state", for the purposes of this
Regulation, shall mean that the taxpayer is subject to net income tax or any tax measured
by net income; or the other state has jurisdiction to subject the taxpayer for tax measured by
net income regardless of whether, in fact, that state exercises such jurisdiction. The
definition for "subject to" income tax in another state will be determined by using the
definition for "doing business" defined above and in section 203 below and in the following
paragraph.
1. A taxpayer is "subject to" one of the taxes specified in the paragraph above only if
it carries on business activities in another state. If the taxpayer voluntarily files and
pays one or more of such taxes when not required to do so by the laws of that state
or pays a minimum tax or fee for qualification, organization, or for the privilege of
doing business in that state, but does not actually engage in business activities in
that state, or does actually engage in some activity, not sufficient for nexus, and the
minimum tax or fees bears no relation to the corporation's activities within such
state, the taxpayer is not "subject to" one of the specified taxes and is therefore not
"taxable" in another state.
2. Jurisdiction to tax is not present when the state is prohibited from imposing the tax
by reason of the provisions of Public Law 86-272, 15 U.S.C.A. Sections 381-385.
203 Nexus
203.01 Doing Business. For Mississippi income tax purposes, the term "doing business " means
the operation of any enterprise or activity in Mississippi for financial profit or economic
gain. For the purposes of this regulation, the term s "doing business" and "nexus" have
the same meaning. Doing Business includes, but is not limited to, the following:
1. The regular maintenance of an office or other place of business in Mississippi.
2. The regular maintenance in Mississippi of an inventory of merchandise or material
for sale, distribution or manufacture, regardless of whether kept on the premises of
the taxpayer, in a public or rented warehouse, or otherwise.
3. The selling or distributing of merchandise to customers in Mississippi directly from
a company-owned or operated vehicle when title to the merchandise is transferred
from the seller or distributor to the customer at the time of the sale or distribution.

# 4.

The regular rendering of a service to clients or customers in Mississippi by agents
or employees of a foreign corporation.

# 5.

The owning, renting, or operating of business or income-producing property, real or
personal, in Mississippi.

# 6.

The performing of contracts, prime or sublet work, for the construction, repair or
renovation of real or personal property.
203.02 A corporation doing business in Mississippi is subject to income tax even if its only
operations in this state are a part of its interstate business. A foreign corporation whose
only activity in this state is the solicitation of sales by either resident or nonresident
salesmen is not required to file income tax returns. However, if a corporation maintains an
office or other place of business in Mississippi, or if it owns income-producing property in
this state, or is otherwise qualified to do business, or is otherwise certified to do business in
Mississippi by the Mississippi Insurance commission, or in fact is doing business in
Mississippi with respect to other activities, it is subject to tax and the requirements of filing
returns.
203.03 This regulation intends to adopt a narrow interpretation of the immunity afforded by Public
Law 86-272, which grants a limited immunity to a multistate company from taxation by a
state if the company's activity is limited to the solicitation of orders for the sale of tangible
personal property in interstate commerce.
203.04 Only the sale of tangible personal property is afforded immunity under Public Law 86-272;
therefore, the selling or providing of services, and the selling, leasing, renting, licensing or
other disposition of real estate, personal property intangibles, or any other type of personal
property are not immune from taxation by reasons of P. L. 86-272.
203.05 For the in-state activity to be immune, it must be limited solely to solicitation (except for
that activity conducted by independent contractors in subsection 203.05 paragraph 3
below). If there is any other activity unrelated to solicitation, the immunity shall be lost.
Examples of activities presently treated (unless otherwise stated as an exception or
addition) as either non-immune or immune are as follows:
1. Non-immune Activities: The following in -state activities will cause otherwise
immune sales to lose their immunity:
a. Making repairs or providing maintenance.
b. Collecting delinquent accounts.
c. Investigating credit worthiness.
d. Installation or supervision of installation.
e. Conducting training courses, seminars or lectures.
f. Providing engineering functions.
g. Handling customer complaints.
h. Approving or accepting orders.
i. Repossessing property.
j. Securing deposits on sales.
k. Picking up or replacing damaged or returned property.
l. Hiring, training, or supervising personnel.
m. Providing shipping information and coordinating deliveries.
n. Maintaining sample or display room in excess of two weeks (14 days)
during the tax year.
o. Carrying samples for sale, exchange or distribution in any manner for
consideration or other value.
p. Owning, leasing, maintaining or otherwise using any of the following
facilities or property in-state:
i. Repair shop.
ii. Parts department.
iii. Purchasing office.
iv. Employment office.
v. Warehouse.
vi. Meeting place for directors, officers or employees.
vii. Stock of goods.
viii. Telephone answering service.
ix. Mobile stores, i.e., trucks with driver salesmen.
x. Real property or fixtures of any kind.
q. Consigning tangible personal property to any person, including an
independent contractor.
r. Maintaining, by either an in-state or an out-of-state resident employee, of an
office or place of business (in-home or otherwise).
s. Conducting any activity in addition to those described in paragraph II below
which is not an integral part of the solicitation of orders.
2. Immune Activities: The following in -state activities will not cause the loss of
immunity for otherwise immune sales:
a. Advertising campaigns incidental to missionary activities.
b. Carrying samples only for display or for distribution without charge or other
consideration.
c. Owning or furnishing autos to salesmen.
d. Passing inquiries and complaints on to home office.
e. Incidental and minor advertising, i.e., notice in newspaper that a salesman
will be in town at a certain time.
f. Missionary sales activities.
g. Checking of customers' inventories (for re -order, but not for other
purposes).
h. Maintaining sample or display room for two weeks (14 days) or less during
the tax year.
i. Soliciting of sales by an in -state resident employee of the taxpayer;
provided the employee maintains no in -state sales office or place of
business (in-home or otherwise).
3. Independent Contractors:
a. P.L..86-272 provides immunity to certain activities if conducted by an
independent contractor that would not be afforded if performed by the
taxpayer directly. Independent contractors may engage in the following
limited activities in the state without the taxpayer's loss of immunity:
i. Soliciting sales.
ii. Making sales.
iii. Maintaining a sales office.
b. Sales representatives who represent a single principal are not considered to
be independent contractors and are subject to the same limitations as
employees.
c. Maintenance of a stock of goods in the state by the independent contractor
under consignment or any other type of arrangement with the principal shall
remove the immunity.
4. Miscellaneous Practices:
a. Interstate Commerce: The only activity in the state must be in interstate
commerce. If there is any other activity (except that described subsection
203.05 paragraph 2 or otherwise incidental to solicitation), then the
immunity shall be lost. Requisites are:
i. Approval of the sales must be made outside the state (except for
sales by independent contractors).
ii. Deliveries must be made from a point outside the state.
b. Incorporated: The immunity afforded by P. L. 86-272 does not apply to any
corporation incorporated within the taxing state.
c. Service vs. Service: Sales of services are not immune under P. L. 86-272. If
a sale consists of a mixture of tangible personal property and services, the
immunity shall be lost. Examples of such mixture are:
i. Photographic development.
ii. Fabrication of customer's materials.
iii. Installation of equipment.
iv. Architectural and engineering services.
204 (Reserved)
300 Computation of Income
301 Business and Nonbusiness Income. Business income means income arising from
transactions and activities in the regular course of the taxpayer's trade or business and
includes income from real, tangible and intangible property if the acquisition, management,
and disposition of the property constitute integral parts of the taxpayer's regular trade or
business operations. In essence, all income which arises from the conduct of trade or
business operations of a taxpayer's is business income . The income of the taxpayer is
business unless clearly classifiable as non-business income.
301.01 Non-business income means all income other than business income.
301.02 The classification of income into categories customarily used, such as manufacturing
income, compensation for services, sales income, interest, dividends, rents, royalties, gains,
operating income, non -operating income, etc., does not determine whether income is
business or non-business income.
301.03 Some of any type or class and from any source is business income if it arises from
transactions and activities occurring in the regular course of a trade or business.
301.04 Transactions between affiliated taxpayers, groups, or parties shall be calculated on an
arms-length basis. Transactions determined not to be at fair market value may be
recomputed on review of such transactions or the Commissioner may prescribe an alternate
method of reporting by the taxpayer.
302 Allocation or Apportionment. A taxpayer should use section 400 to determine the method
of reporting income to Mississippi for its major line(s) of business. For the following
items of income, when they are considered to be general or administrative income by the
commissioner, the following rules should be used to determine the way the income is
reported. If the income is determined to be business income it should be apportioned;
those items determined to be non -business income should be allocated. If the taxpayer is
using a formula method of apportionment, then the items below that are classified as
business income would be included in apportionable income. If the taxpayer is not
required to use a formula method of apportionment or if the taxpayer is using divisional
accounting, then the items below that are considered business income shall be
apportioned using a sales ratio.
302.01 The following are general rules for determining whether specific income is business or
non-business income.
1. RENTS FROM REAL AND TANGIBLE PERSONAL PROPERTY. Rental
income from real and tangible property is business income if the income producing
property is used by the taxpayer's trade or business. If rental income is from an
asset which is purely an investment, then it is non-business.
2. GAINS OR LOSSES FROM SALES OF ASSETS. Gain or loss from the sale,
exchange or other disposition of real, tangible, or intangible personal property
constitutes business income if the property while owned by taxpayer was used in
the taxpayer's trade or business, or was used to produce business income, regardless
of whether the asset has actually produced income. However, if such property was
utilized for the production of non-business income, the gain or loss will constitute
non-business income.
3. INTEREST. Interest income is business income where the intangible, with respect
to which the interest was received, arises out of or was created in the regular course
of the taxpayer's trade or business operations or where the purpose for acquiring
and holding the intangible is related to or incidental to such trade or business
operations. Business income shall not, however, include interest income on loans to
subsidiaries or affiliates which are not organized under the laws either of the United
States, or any state, district, territory or possession thereof.
4. FOREIGN SOURCE INTEREST.
a. Interest that is derived from a source outside of the United States, or any
state, district, territory or possession of the United States is non -business
interest.
b. In general, all other interest is business income . A partial listing for
illustrative purposes of interest that is considered to be business income is
interest on accounts receivable, certificates of deposit, money market
accounts, tax refunds, and municipal obligations. Municipal obligations of
the state of Mississippi are exempt.
5. DIVIDENDS.
a. Dividends are business income where the stock, with respect to which the
dividends are received, arises out of or was acquired in the regular course of
the taxpayer's trade or business operations or where the purpose for
acquiring and holding the stock is related to or incidental to such trade or
business operations. Business income shall not, however, include foreign
source dividends realized from stock ownership in a corporation not
organized under the laws either of the United States, or any state, district,
territory or possession thereof.
b. Dividends from domestic, unitary, and controlled subsidiaries are business
income. Dividends from foreign, non -unitary, and/or non -controlled
corporations are non -business income. Dividends from Domestic
International Sales Corporation (DISC's) are business income. For treatment
of dividends from a Foreign Sales Corporation (FSC's) see the regulation on
FSC's. Dividends from a DISC are business income to the extent actually
received, not deemed as is used for federal purposes. Descriptions of
domestic, controlled, and unitary corporations are as follows:
i. DOMESTIC. Means any corporation organized under the laws of
the United States, or any other state, territory or possession thereof.
ii. CONTROLLED. In this context, controlled is defined as being:
• Where one corporation owns more than 50% of another
corporation; or
• If ownership by one corporation of another is 50% or less,
then the question is whether the first corporation has
effective control of the second. If the first corporation does
not have effective control of the second, then dividends paid
by the second corporation to the first is non -business
income. For example, if the first corporation owns 40% of
the second corporation, but the remaining 60% is owned by
one entity unrelated to the first corporation, then the first
corporation does not have effective control. But, if the first
corporation owns 40% of the second corporation, and the
remaining 60% is owned by the thousands of unrelated
shareholders, each with a small percentage, then, in that
circumstance, the first corporation would have effective
control. If a corporation is controlled or effectively
controlled, then the dividends may be business income ,
depending upon whether this corporation is also domestic
and unitary.
iii. UNITARY. In general, unitary depends upon the extent that the
different entities have been integrated into one economic operation.
Some of the items to be considered include autonomy of officers
and directors of the different corporations ; lines of business;
number, size, and type of inter -company transactions, and jointly
used services such as accounting or tax department. The above list is
not all inclusive. It is only for the purpose of illustrating some of the
points to be considered in determining whether the entity paying the
dividends is unitary with the entity receiving the dividend.
6. PATENT AND COPYRIGHT ROYALTIES. Patent and copyright royalties,
including royalties from non -patented items such as "know -how", technical
assistance, and use of product name, are business income where the patent or
copyright arises out of or was created in the regular course of the taxpayer's trade or
business operations, or where the purpose for acquiring and holding the patent or
copyright is related to or incidental to such trade or business operations.

# 7.

MISCELLANEOUS INCOME. In general, miscellaneous income, such as scrap
sales or collections of bad debts written off, is business income.

# 8.

EXCEPTIONS. Royalty income from mineral production must be allocated to the
state where production occurred. Partnership income is allocated directly to the
state where the partnership gross income or loss occurred.
303 Allocation of Non -Business Income . Non-business net rents and royalties from real
property are allocated to the state where the property is located.
303.01 Non-business net rents and royalties from tangible personal property are allocable to this
state: (i) if and to the extent that the property is utilized in this state, or (ii) in their entirety
if the taxpayer's commercial domicile is in this state and the taxpayer is not organized
under the laws of or taxable in the state in which the property is utilized.
303.02 The extent of utilization of tangible personal property in a state is determined by
multiplying the rents and royalties by a fraction, the numerator of which is the number of
days of physical location of the property in this state during the rental or royalty period in
the taxable year and the denominator of which is the number of days of physical location of
the property everywhere during all rental or royalty periods in the taxable year.
303.03 CAPITAL GAINS AND LOSSES. Non-business capital gains and losses from sales of real
property are allocable to the state where the property is located.
303.04 PROPERTY. Capital gains and losses from sales of tangible personal property are allocable
to this state if the property had a situs in this state at the time of sale, or the taxpayer's
commercial domicile is in this state and the taxpayer is not taxable in the state in which the
property had a situs.
303.05 INTANGIBLE PROPERTY. Non-business capital gains and losses from sales of intangible
personal property are allocable to this state, if the taxpayer's commercial domicile is in this
state and the intangible has not acquired a commercial, business or actual situs in another
state, or the taxpayer's commercial domicile is not in this state, but the intangible has
acquired a commercial, business or actual situs in this state.
303.06 INTEREST AND DIVIDENDS. Non-business interest and dividends are allocable of the
state of commercial domicile.
303.07 PATENTS AND COPYRIGHTS.
1. Patent and copyright royalties are allocable to this state if and to the extent that the
patent or copyright is utilized by the payer in this state, or if to the extent that the
patent or copyright is utilized by the taxpayer in a state in which the taxpayer is not
taxable and taxpayer's commercial domicile is in this state.
2. A patent is utilized in a state to the extent that it is employed in production,
fabrication, manufacturing, or other processing in the state or to the extent that a
patented product is produced in the state.
3. A copyright is utilized in a state to the extent that printing or other publication
originates in the state.
304 Consistency and Uniformity in Reporting. In filing returns with this state, if the taxpayer
departs from or modifies the manner in which income has been classified as business
income or non-business income in returns for prior years, the taxpayer shall disclose in the
return for the current year the nature and extent of the modification.
400 Methods of Reporting Income.
401 Basis of Filing
401.01 TOTAL ASSIGNMENT OF INCOME. If the business activity of a taxpayer occurs within
this state, and if by reason of such business activity the taxpayer is not taxable in another
state, the total net income (or loss) of the taxpayer shall be assigned to Mississippi.
401.02 DIRECT OR SEPARATE ACCOUNTING.
1. Any taxpayer, taxable both within and without this state, which maintains or could
maintain books of account detailing allocation of receipts and expenditures
reflecting clearly the business income attributable to property owned or business
done in this state, shall determine Mississippi net business income on the basis of
direct or separate accounting.
2. Non-allocable general administrative expenses, and non -allocable net business
income derived from sales of capital assets, interest, dividends, rents, royalties and
other non -allocable business income shall be apportioned to Mississippi on the
basis of a sales ratio.
3. In the case, however, of contractors , the non -allocable general and administrative
expenses apportioned to this state shall be determined by using the ratio between
Mississippi direct job cost and total direct job cost.
4. If at the discretion of the Commissioner a sales ratio does not fairly apportion the
above items of income and expense, another ratio, such as an asset ratio, may be
required.
5. If a taxpayer feels that a sales ratio does not fairly apportion the above mentioned
income or expense among all business activity, then the taxpayer may make
application in writing to the Commissioner. This application must explain why the
sales ratio does not fairly apportion and specify the ratio that the taxpayer wishes to
use. The taxpayer shall not use this other ratio unless approved in writing by the
Commissioner.
401.03 ALLOCATION OF INCOME. Any taxpayer subject to the taxing jurisdiction of this state
shall allocate non-business income or loss within and without this state in accordance with
the further provisions of this Regulation. All expenses connected with earning non-business
income, such as interest , taxes, general and administrative expenses and such other
expenses relating to the production of non -business income, shall be deducted from gross
non-business income. Non-business interest expense shall be computed by using the ratio
of non-business assets to total assets applied to total interest expense. To the amount of
non-business income allocated to this state, there shall be added the amount of net business
income assigned, directly allocated or apportioned to this state under the other provisions of
this Regulation to establish Mississippi taxable income.
401.04 APPORTIONMENT OF INCOME. If the business activity in respect to any trade or
business of a taxpayer occurs both within and without this state, and if by reason of such
business activity the taxpayer in another state, portion of the net income (or net loss) arising
from such trade or business which is derived from sources within this state shall be
determined by apportionment in accordance with the further provisions of this regulation,
where direct or separate accounting of net income or loss is not feasible.
401.05 DIVISIONAL ACCOUNTING. If the business activity of a taxpayer is conducted on a
divisional basis and a division or divisions of the taxpayer are "doing business" within this
state, the Mississippi taxable income of the taxpayer, where separate accounting is or can
be maintained on each division, shall, at the election of the Commissioner, be determined
on a divisional accounting, nexus is determined on a company-wide basis. Therefore, any
division that has activity in Mississippi must compute its Mississippi taxable income using
the proper method for that division. (Example: If Mississippi has nexus on a corporation
because of one division's activity in the state, and a second division is a manufacturing
division with only destination sales into Mississippi, then the second division shall
apportion a share of its income or loss to Mississippi, even though, if it were a separate
legal entity, it would not be required to do so.) The following shall apply to divisional
accounting:
1. If the total net business income of a division or divisions of the taxpayer is derived
solely from business activities in Mississippi and such division or divisions, when
considered the same as a separate entity, are not taxable in another state, the total
net business income derived from a trade or business activity of such division or
divisions shall be directly assigned to Mississippi. Business income, on a
company-wide basis, derived from sales of capital assets, interest, dividends, rent
and royalties shall be apportioned to Mississippi in the ratio that total sales of the
included division or divisions bears to total company-wide sales everywhere. Non-
business income of the taxpayer shall be allocated to Mississippi in accordance with
the further provisions of this Regulation.
2. If the business income of a division or divisions of the taxpayer is derived from
business activities both within and without the state and by reason of such business
activities such division or divisions, when considered the same as a separate entity,
are taxable in another state, Mississippi taxable income shall be computed and
determined as follows:
a. The total net business income derived from a trade or business activity of
each division doing business in Mississippi shall be determined on a
divisional direct or separate accounting basis. In determining the net
business income for each division, a proportionate part of non -allocable
general and administrative expenses may be deducted by using the ratio that
total sales (gross receipts) of each division bears to total company -wide
sales (gross receipts).
b. Business income, on a company wide basis, derived from the sale of capital
assets, interest, dividends, rents and royalties shall be apportioned to each
division in the ratio that total sales (gross receipts) by the division bears to
total company wide sales (gross receipts).
c. The amounts determined in the above paragraphs, shall be combined of
each division. If more than one division is involved, separate combinations
are required for each division.
d. To the combined amount determined in the previous paragraph, for each
division, there shall be applied the apportionment formula specified in this
Regulation for the trade or business activity of the division. Separate
computations are required for each included division. The amount so
apportioned to Mississippi for each division may be combined to determine
the total apportioned amount of business income of the taxpayer assignable
to Mississippi.
e. The non-business income of the taxpayer shall be allocated to Mississippi in
accordance with the further provisions of this Regulation.
f. The total of the amount apportioned and the total of the amount allocated
for all divisions when combined, shall constitute the Mississippi taxable
income of the taxpayer.
401.06 CONSOLIDATED OR COMBINED RETURNS. See Regulation on Consolidated and
Combined Returns.
402 Computation of Basis of Filing.
402.01 Business Income of Producers of Mineral or Natural Resource Products.
1. Taxpayers engaged in the trade or business of producing oil, gas, other liquid
hydrocarbons, sulphur, coal, sand, gravel and other mineral or natural resource
products, except timber, shall determine Mississippi net business income from such
activity on a direct or separate accounting basis. The Mississippi gross business
income from the production of mineral or natural resources shall include:
a. Sales of natural or mineral resources produced in Mississippi and sold in
this state;
b. The market value, at the time of transfer, of all natural or mineral
resources produced in this state and transferred by the taxpayer to another
state for sale, refining, processing or manufacturing, provided that if the
natural or mineral resources are sold by means of an "arms -length"
transaction prior to refining, processing or manufacturing, the market
value prescribed herein shall not exceed the selling price; and;
c. The market value, at the time of transfer, of all natural or mineral resources
produced by the taxpayer in Mississippi and transferred to a refinery,
processing plant, or manufacturing facility of the taxpayer in Mississippi.
2. A natural resource product shall be deemed to be sold in Mississippi if it is located
in this state at the time title thereto passes to the purchaser. In the absence of
specific proof of value of natural resources at the time of transfer from the state, the
value of natural resources at the time of production shall be determined in
accordance with the methods prescribed for the determination of "gross income
from the property" for purposes of percentage depletion for federal income tax
purposes.
402.02 Business Income of Contractors
1. The net business income of taxpayers engaged in the business of contracting shall
be accounted for and assigned directly to this state for each contract performed
within this state. Taxpayers engaged in the business of contracting both within and
without the state shall determine such job cost which cannot be specifically
allocated to the Mississippi contract by multiplying such non -allocable
business-related expenses in the ratio that Mississippi direct job costs bears to total
direct job costs.
2. Where a contract is performed partly within and partly without the state, the net
business income assignable directly to Mississippi shall be determined by first
deducting from the total contract receipts those job costs directly allocable to said
contract and then deducting a pro -rata part of expenses which cannot be directly
allocable to any contract, said pro -rata part to be determined by using the ratio
between the contract direct job costs and the direct job costs of total contracts. The
net business income from the contract, thus determined, shall then be apportioned
to Mississippi in the ratio that receipts from said contract allocable to Mississippi
for sales tax purposes bears to the total receipts from said contract. In the event that
no allocation has been or can be made of the Mississippi gross receipts from said
contract for Mississippi sales tax purposes, and the Mississippi gross receipts from
said contract cannot otherwise be determined, then the apportionment of the net
business income from the contract to Mississippi shall be made by such reasonable
method as is acceptable to the Commissioner.
3. In the case of a prime contractor, who enters into a contract with a subcontractor for
the performance of all or part of a contract within the State of Mississippi, both
prime contractor and subcontractor are required to report any and all income from
such contracts.
4. The net business income derived by a contractor from gains or losses from sales of
capital assets, interest , dividends, rents and royalties shall be apportioned to
Mississippi by multiplying such net business income by a receipts factor, the
numerator of which is the total receipts located, assignable, allocated, or otherwise
having a situs in this state during the tax year, and the denominator of which is the
total receipts of the taxpayer everywhere during the tax year. In the case of sales of
capital assets (buildings, land, depreciable machinery and equipment, stocks, bonds,
etc.) receipts, for purposes of the receipts factor, shall include only the net gain or
loss resulting from such sales of capital assets.
402.03 Business Income of Airlines. If an airline has any activity other than simply passing over
this state, then it is "doing business" in this state and is required to file a return. The net
business income of an airline company which has not been directly assigned, allocated or
excluded as otherwise provided by this Regulation shall be apportioned to this state as
provided in this section.
1. PASSENGER TRAFFIC INCOME. Business income from passenger traffic shall
be apportioned to this state in the ratio that Mississippi revenue passenger miles
bears to the total revenue passenger miles. The numerator of the ratio shall be
computed by multiplying the number of revenue -producing passengers carried on
flights landing or taking off within this state by the number of miles flown over the
state by such flights. The denominator shall be determined by multiplying the total
number of revenue -producing passengers carried by the total number of miles
flown by flights carrying revenue-producing passengers.
2. CARGO TRAFFIC INCOME. Business income from cargo traffic and other
classes of traffic shall be apportioned to this state in the ratio that Mississippi
revenue ton miles, or other units of cargo transported, multiplied by Mississippi
miles flown bears to the total of such elements of the factor. The numerator of each
of such ratios shall be computed by multiplying the number of revenue -producing
tons, or other units of cargo carried on flights landing or taking off within this state
by the number of miles flown over this state by such flights. The denominator of
each of such ratios shall be determined by multiplying the total number of
revenue-producing tons, or other units of cargo carried, by total number of miles
flown by flights carrying such revenue-producing cargo.
3. ALTERNATIVES BASIS. Business income of an airline company, or business
income from any class of traffic of an airline company, may, as an alternative to the
requirements of the paragraphs above, be apportioned to this state in the ratio that
Mississippi flight miles bears to total flight miles during the tax year. The
numerator of such alternative ratio shall be computed by multiplying the number of
miles flown over this state by such flights. The denominator shall be determined by
multiplying the total number of revenue -producing flights by the total number of
miles flown by such flights.
4. In all of the apportionment formulas above, mileage from states here the taxpayer is
not "doing business" will not be included in the apportionment formula.
402.04 Business Income of Motor Carriers. If a motor carrier picks up, delivers, services
equipment, or has any activity other than simply passing through this state, then it is "doing
business" in this state and is required to file a return. The net business income of motor
carriers which has not been directly assigned, allocated or excluded as provided by this
Regulation shall be apportioned to this state as provided in this section.
1. PASSENGER TRANSPORTATION. Business income from the transportation of
passengers shall be apportioned to this state in the ratio that Mississippi revenue
passenger miles bears to the total revenue passenger miles of the taxpayer during
the tax period.
2. FREIGHT TRANSPORTATION. Business income from the transportation of
freight or cargo shall be apportioned to this state in the ratio that Mississippi
revenue ton miles to the total revenue ton miles of the taxpayer during the tax
period.
3. PASSENGER-FREIGHT TRANSPORTATION. Business income of taxpayers
engaged in the transportation of both passengers and freight shall first make a
breakdown of the business income between passenger traffic and freight traffic by
using the several ratios between gross revenue from each class of traffic and the
total gross operating revenues. Business income from each class or traffic shall then
be apportioned to this state in accordance with the two paragraphs above.
4. ALTERNATIVE BASIS. Business income of a motor carrier, or business income
from any class of traffic of a motor carrier, may as an alternative to the
requirements of the paragraph above, be apportioned to this state (A ) in the ratio
that Mississippi vehicle miles bears to total vehicle miles of the taxpayer during the
tax period, or (B ) in the ratio that gross receipts from trips beginning, ending, or
passing through Mississippi bears to the total gross receipts.
5. In all of the apportionment formulas above, mileage from states where the taxpayer
is not "doing business" will not be included in the apportionment formula.
402.05 Business Income of Certain Utilities. The net business income of taxpayers operating a
railroad, express service, telephone or telegraph business, or other form of public service,
other than public service companies specifically provided for elsewhere in this Regulation,
which has not been directed to this state as provided by this Section.
1. FORMULA. Business income of public utilities shall be apportioned to this state in
the ratio that gross operating revenues within Mississippi during the tax year bears
to total gross operating revenues everywhere by the taxpayer during the tax year.
2. GROSS OPERATING REVENUE WITHIN MISSISSIPPI. The term "gross
operating revenue within Mississippi" means an equal mileage portion of
revenue such as ton miles, passenger miles, message miles, and the like as received
for interstate business from activity in this state whether such business originates,
ends, or passes through Mississippi to this result, there shall be added the
Mississippi portions of all intrastate revenue.
3. ALTERNATIVE. In cases where the amounts of gross operating revenues within
this state cannot be accurately and adequately determined, the Commissioner may
prescribe a method for otherwise apportioning business income in Mississippi.
Only methods provided in this regulation may be used without the prior approval of
the Commissioner.
402.06 Business Income of Retailers, Wholesalers, Service Companies and Lessors. The net
business income of retailers, wholesalers, lessors and other service companies, merchants,
traders, vendors, or dealers buying, selling or renting, other than those specifically provided
for elsewhere in this Regulation, which has not been allocated, directly assigned, or
excluded as otherwise provided, shall be apportioned to Mississippi by multiplying such
net business income by a single sales -factor apportionment formula as defined in
subsection 402.09 paragraph 3 of this Regulation.
402.07 Business Income of Pipelines. The net business income of a pipeline company which has
not been allocated, directly assigned, or excluded as otherwise provided in this Regulation
shall be apportioned to Mississippi by multiplying such net business income by a fraction,
the numerator of which is the property factor plus the payroll factor, as defined in
subsection 402.09, paragraphs 1 and 2 of this Regulation, plus the traffic miles factor, and
the denominator where is three (3).
1. TRAFFIC MILES FACTOR. The term "traffic miles" means the movement or
transportation of one barrel of oil, one gallon of gasoline, or one thousand cubic feet
of natural or casinghead gas for a distance of one mile. In cases where MCF
mileage units cannot be determined, then capacity mileage of the pipeline in
Mississippi to total capacity mileage everywhere shall be used. Capacity mileage
shall be determined by squaring one -half (½) of the diameter of each size of pipe
and multiplying by the mileage of that size of pipe with a total computation for each
in Mississippi as compared to the total of such computations everywhere.
2. PIPELINE COMPANY DEFINED. A pipeline company means any taxpayer
engaged in the trade or business of moving, conveying or transporting through a
system or conduit of pipes any crude oil, natural gas, refined petroleum products,
minerals or any other mineral products to a point of delivery either in, out or
through Mississippi, and irrespective of whether such products of goods belong to
the taxpayer or to others. The term includes transmission lines and connecting field
and storage lines.
402.08 Business Income of Manufacturers
1. MANUFACTURERS SELLING PRINCIPALLY AT WHOLESALE. The net
business income of a taxpayer, engaged in the trade or business of manufacturing
and selling principally at wholesale, which has not been allocated, directly assigned,
or excluded as otherwise provided in this Regulation shall be apportioned to
Mississippi by multiplying such net business income by a fraction, the numerator of
which is the property factor plus the payroll factor plus the sales factor, as defined
subsection 402.09, paragraphs 1 and 2, and (c) of this Regulation, and the
denominator of which is three (3).
2. MANUFACTURERS SELLING PRINCIPALLY AT RETAIL. The net business
income of a taxpayer, engaged in the trade or business of manufacturing and selling
principally at retail, which has not been allocated, directly assigned, or excluded as
otherwise provided in this Regulation shall be apportioned to Mississippi by
multiplying such net business income by a fraction, the numerator of which is the
average of the sum of property and payroll factors plus the sales factor, as defined
in subsection 402.09, paragraphs 1 and 2 of this Regulation, and the denominator of
which is two (2).
402.09 Apportionment Factors
1. Property Factor Defined.
a. Except as otherwise provided, the property factor of the apportionment
formula for each trade or business of the taxpayer shall include all real and
tangible personal property owned or rented by the taxpayer and used during
the tax period in the regular course of such trade or business. The term
"real and tangible personal property" includes land, buildings,
machinery, stock of goods, equipment, and other real and tangible personal
property, but does not include such properties owned or rented and used for
general and administrative functions, transportation equipment
(automobiles, trucks, and trailers, aircraft and other mobile equipment), coin
or currency, or properties used in the production of non-business or exempt
income. The includable property in the property factor shall include the
average net book value of property owned, plus the value of rented property
computed as provided in the "valuation of rental property" portion of this
section of the Regulation.
b. PROPERTY USED IN THE PRODUCTION OF BUSINESS INCOME.
Property shall be included in the property factor if it is actually used or is
available for or capable of being used during the tax period in the regular
course of the trade or business of the taxpayer unless expressly excluded.
Property held as reserves or standby facilities or property held as a reserve
source of materials shall be included in the factor. Property or equipment
under construction during the tax period (except inventoriable goods in
process) shall be excluded from the factor until such property is actually
used in the regular course of the trade or business of the taxpayer. If the
property is partially used in the regular course of the trade or business while
under construction, the value of the property to the extent used shall be
included in the property factor. Property used in the regular course of the
trade or business of the taxpayer shall remain in the property factor until its
permanent withdrawal is established by an identifiable event such as
conversion to the production of non -business income, its sale or its
abandonment.
c. NUMERATOR. The numerator of the property factor shall include rented
by the taxpayer and used in this state during the tax period in the regular
course of the trade or business of the taxpayer. Property in transit between
locations of the taxpayer to which it belongs shall be considered to be at the
destination for purposes of the property factor. Property in transit between a
buyer and seller which is included by a taxpayer in the denominator of his
property factor in accordance with his regular accounting practices shall be
included in the numerator according to the state of destination. The value of
transportation equipment such as automobiles, trucks and trailers, aircraft,
etc. shall be excluded completely from the property factor.
d. DENOMINATOR. The denominator of the property factor is the total of
such property described in the above three paragraphs wherever located
during the tax year.
e. VALUATION OF OWNED PROPERTY.
i. Property owned by the taxpayer shall be valued at net book value.
As a general rule "net book value" is deemed to be the original cost
of the property less the depreciation as reflected on the books of the
taxpayer and includes the net book value of subsequent capital
additions or improvements to the includable property as well as
adjustment or partial disposition thereof, by reason of sale,
exchange, abandonment, etc.
ii. Inventory of stock of goods shall be included in the factor in
accordance with the valuation method acceptable for federal income
tax purposes and used by the taxpayer for book purposes.
iii. Property acquired by gift or inheritance shall be included in the
factor as its net book value as reflected on the books of the taxpayer.
f. VALUATION OF RENTED PROPERTY. Property rented by the taxpayer
is valued at eight times the net annual rental rate. The net annual rental rate
for any item of rented property is the annual rental rate paid by the taxpayer
for such property, less the aggregate annual subrental rates paid by
subtenants of the taxpayer.
g. SUBRENTALS. Subrents are not deducted when subrents constitute
business income because the property which produces the subrents is used
in the regular course of a trade or business of the taxpayer when it is
producing such income.
h. ANNUAL RENTALS. "Annual rental rate" is the amount paid as rental
for property for a 12-month period. Where property is rented for less than a
12-month period, the rent paid for the actual period of rental shall constitute
the "annual rental rate" for the tax period. Where a taxpayer has rented
property for a term of 12 or more months and the current tax period covers a
period of less than twelve months, the rent paid for the short tax period shall
be annualized. If the rental term is for less than 12 months, the rent shall not
be annualized beyond its term. Rent shall not be annualized because of the
uncertain duration when the rental term is on a month to month basis.
Annual rent is the actual sum of money or other consideration payable,
directly or indirectly, by the taxpayer or for its benefit for the used of the
property. Leasehold improvements shall, for the purposes of the property
factor, be treated as property owned by the taxpayer regardless of whether
the taxpayer is entitled to remove the improvements or the improvements
revert to the lessor upon expiration of the lease. Hence, the net book value
of leasehold improvements shall be excluded in the factor.
i. AVERAGING PROPERTY. As a general rule the average value of
property owned by the taxpayer shall be determined by averaging the values
at the beginning and ending of the tax period. However, the Commissioner
may require or allow averaging by monthly values, or other periodic values,
if such method of averaging is required to property reflect the average
values of the taxpayer's property for the tax period. Averaging by monthly
values, or other periodic values, will generally be applied if substantial
fluctuations in the values of the property exist during the tax period or
where property is acquired after the beginning of the tax period or disposed
of before the end of the tax period. Averaging with respect to rented
property is achieved automatically by the method of determining the net
annual rental rate of such property.
2. Payroll Factor Defined . Except as otherwise provided, the payroll factor of the
apportionment formula for each trade or business of the taxpayer shall include the
total amount paid by the taxpayer in the regular course of its trade or business for
compensation during the tax period. There shall be excluded from the payroll factor
amounts paid as compensation for general and administrative functions and
amounts paid for the production of non-business or exempt income.
a. PAID. The total amount "paid" to employees is determined upon the basis
of the taxpayer's accounting method. If the taxpayer has adopted the accrual
method of accounting, all compensation properly accrued shall be deemed
to have been to have been paid. Notwithstanding the taxpayer's method of
accounting, at the election of the taxpayer, compensation paid to employees
may be included in the payroll factor by use of the cash method if the
taxpayer is required to report such compensation under such method for
unemployment compensation purposes.
b. COMPENSATION. The term "compensation" means wages, salaries,
commissions and other form of remuneration paid to employees for
personal services. Amounts considered paid directly include the value of
board, rent, housing, lodging, and other benefits, or services furnished to
employees by the taxpayer in return for personal services, provided that
such amounts constitute income to the recipient under the Federal Internal
Revenue Code. Payments made to an independent contractor or any other
person for personal services rendered for the taxpayer may, with the
approval or requirement of the Commission, be classified as compensation.
c. EMPLOYEES. Except as otherwise provided, the term "employee" means
any officer of a corporation, or any individual who, under the usual
common-law rules applicable in determining the employer -employee
relationship, has the status of an employee. Generally, a person will be
considered to be an employee if he is included by the taxpayer as an
employee for purposes of the payroll taxes imposed by the Federal
Insurance Contributions Act.
d. NUMERATOR. The numerator of the payroll factor is the total amount
paid in this state during the tax period by the taxpayer for compensation.
e. DENOMINATOR. The denominator of the payroll factor is the total
compensation paid everywhere during the tax period.
f. Compensation paid in this state. Compensation is paid in this state if any
one of the following tests, applied consecutively, are met:
i. The employee's service is performed entirely within this state.
ii. The employee's service is performed both within and without the
state, but the service performed without the state is incidental to the
employee' s service within the state. The word "incidental" means
any service which is temporary or transitory in nature, or which is
rendered in connection with an isolated transaction.
g. If the employee's services are performed both within and without this state,
the employee's compensation will be attributed to this state:
i. If the employee's base of operations is in the state; or
ii. If there is no base of operations in any instance in which some part
of the service is performed, but the place from which the service is
directed or controlled is in this state; or
iii. If the base of operations or the place from which the service is
directed or controlled is not in any state in which some part of the
service is performed but the employee's residence is in this state.
h. The term "base of operations" is the place of more or less permanent
nature from which the employee starts his work and to which customarily
returns in order to receive instructions from the taxpayer or communications
from his customers or other persons or to replenish stock or other materials,
repair equipment, or perform any other functions necessary to the exercise
of this trade or profession at some other point or points. The term "place
from which the service is directed or controlled" refers to the place from
which the power to direct or control is exercised by the taxpayer.
3. Sales Factor Defined.
a. For the purpose of the sales factor of the apportionment formula for each
trade or business of the taxpayer, the term "sales" means all gross receipts
derived by the taxpayer from transactions and activity in the regular course
of such trade or business during the tax period which have not been directly
assigned, allocated or excluded as provided in this Regulation. The
following are rules for determining "sales" in various situations:
i. In the case of a taxpayer engaged in manufacturing and selling or
purchasing and reselling goods or products, "sales" includes all
gross receipts from the sales of such goods or products held by the
taxpayer primarily for sale to customers in the ordinary course of its
trade or business. Gross receipts for this purpose means gross sales,
less returns and allowances, and includes interest income, service
charges, carrying charges, or time -priced differential charges
incidental to such sales. Federal and state excise taxes (including
sales taxes) shall be included as part of such receipts if such taxes
are passed on to the buyer or included as part of the selling price of
the product.
ii. In the case of cost plus fixed fee sales or service contracts, "sales"
include the entire reimbursed cost, plus the fee.
iii. In the case of a taxpayer engaged in providing services, "sales"
includes the gross receipts from the performances of such services
including fees, commissions, and similar items.
iv. In the case of a taxpayer engaged in renting real and tangible
property "sales" includes the gross receipts from the rental, lease, or
licensing the use of the property.
v. In the case of a taxpayer engaged in the sale, assignment, or
licensing of intangible personal property such as patents and
copyrights, "sales" include the gross receipts therefrom.
vi. In the case of business income derived from interest and dividends,
such receipts constitute "sales".
vii. In the case of business income derived from the sale of capital assets
(sale of equipment used in business, sales of stocks, bonds, etc.),
such receipts constitute "sales" but only to the extent of the gain
realized from such sales.
b. SALES OF TANGIBLE PERSONAL PROPERTY ARE IN THIS STATE.
Gross receipts from sales of tangible personal property (except sale to the
United States Government) are in this state:
i. If the property is delivered or shipped to a purchase, within this state
regardless of the f. o. b. point or other conditions of sale, or
ii. If the property is shipped 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 purchaser.
iii. Property shall be deemed to be delivered or shipped to a purchaser
within this state if the recipient is located in this state, even though
the property is ordered from outside this state.
iv. Property is delivered or shipped to a purchaser within the state if the
shipment terminates in this state, even though the property is
subsequently transferred by the purchaser to another state.
v. The term "purchaser within this state" shall include the ultimate
recipient of the property if the taxpayer in this state, at the
designation of purchases, delivers to or has the property shipped to
the ultimate recipient within this state.
vi. When the property being shipped by a seller from the state of origin
to a consignee in another state is diverted while en route to a
purchaser in this state, the sales are in this state.
vii. If the taxpayer is not taxable in the state of the purchaser, the sale is
attributed to this state if the property is shipped from an office, store,
warehouse, factory, or other place of storage in this state.
viii. If a taxpayer, whose salesman operates from an office located in this
state, makes a sale to a purchaser in another state in which the
taxpayer is not taxable, and the property shipped directly by a third
party to the purchaser, the following rules apply:
• If the taxpayer is taxable in the state from which the third
party ships the property, then the sale is in such state.
• If the taxpayer is not taxable in the state from which the
property is shipped, then the sale is in this state.
c. SALES OF TANGIBLE PERSONAL PROPERTY TO THE UNITED
STATES GOVERNMENT ARE IN THIS STATE. Gross receipts from the
sales of tangible personal property to the United States Government are in
this state if the property is shipped from an office, store, warehouse, factory,
or other place of storage in this state. For purposes of this Regulation, only
sales for which the United States Government makes direct payment to the
seller pursuant to the terms of a contract constitute sales to the United States
Government. Thus, as a general rule, sales by a subcontractor to the prime
contractor (the prime contractor being party to the contract with the United
States Government) do not constitute sales to the United States
Government.
d. SALES OTHER THAN SALES OF TANGIBLE PERSONAL
PROPERTY ARE IN THIS STATE. SECTION 27-7-23(c)(3) provides for
the inclusion in the numerator of the sales factor, gross receipts from
transactions other than sales of tangible personal property (including
transactions with the United States Government ). Under this section gross
receipts are attributed to this state if the income -producing activity is
performed wholly within this state. Gross receipts, with respect to a
particular item of income, derived from income -producing activity
performed within and without this state shall be attributed to this state to the
extent of such gross receipts which represent services or activities actually
performed within this state.
e. INCOME-PRODUCING ACTIVITY DEFINED. The term
"income-producing activity" applies to each separate item of income and
means the transactions and activity directly engaged in by the taxpayer in
the regular course of its trade or business for the ultimate purpose of
obtaining gains or profits. Accordingly, the income -producing activity
includes but is not limited to the following:
i. The rendering of personal services by employees or the utilization of
tangible and intangible property by the taxpayer in performing a
service.
ii. The performance, execution or subletting of a construction contract
by the taxpayer to whom a construction contract has been awarded.
iii. The sale, rental, leasing, or licensing or other use of real property.
iv. The rental, leasing, licensing or other use of tangible personal
property.
v. The sale, licensing or otherwise of intangible personal property.
f. SPECIFIC APPLICATIONS. The following are special rules for
determining when receipts from income -producing activities described
below are in this state:
i. Gross receipts from the sale, lease, rental or licensing of real
property are in this state if the real property is located in this state.
ii. Gross receipts from the rental, lease or licensing of tangible personal
property are in this state if the property is located in this state. The
rental, lease, licensing or other use of tangible personal property in
this state is a separate income -producing activity from the rental,
lease, licensing or other use of the same property while located in
another state; consequently, if property is within and without this
state during t he rental, lease or licensing period, gross receipts
attributable to this state shall be measured by a ratio of the time the
property was physically present or was used in this state bears to the
total time or use of the property everywhere during such period.
iii. Gross receipts for the performance of personal services are
attributable to this state to the extent such services are performed in
this state. Usually where services are performed partly within and
partly without this state, the services performed in each state will
constitute a separate income -producing activity; in such case the
gross receipts for the performance of services attributable to this
state shall be measured by a ratio of the time spent in performing
such services in this state bears to the total time spent in performing
services everywhere. Time spent in performing services includes
the amount of time expended in the performance of a contract or
other obligation which produced such gross receipts. Personal
service not directly connected with the performance of the contract
or other obligation, as for example, time expended in negotiating the
contract, is excluded from the computation.
iv. In the case of a construction contract performed partly within and
partly without this state, gross receipts attributable to this state shall
be the amount of the construction contract allocable to Mississippi
for Mississippi sales tax purposes.
g. NUMERATOR. The numerator of the sales factor shall include the gross
receipts attributable to this state and derived by the taxpayer from
transactions and activity in the regular course of its trade or business. All
interest income, service charges, carrying charges, or time-price differential
charges incidental to such gross receipts shall be included regardless of the
place where the accounting records are maintained or the location of the
contract or other evidence of indebtedness.
h. DENOMINATOR. The denominator of the sales factor shall include the
total gross receipts derived by the taxpayer from transactions and activity in
the regular course of its trade or business, except receipts directly assigned,
allocated or excluded by the provision of this Regulation.
i. UNIFORMITY. It is the purpose and intent of this Regulation to include in
both the numerator and denominator of the factors described in the above
sections only those properties, payrolls and sales which are comparable.
402.10 Other Provisions. If the allocation and apportionment provisions of this Regulation do not
fairly represent the extent of the taxpayer's business activity in this state, the taxpayer may
petition for, or the Commissioner may require, in respect to all or any part of the taxpayer's
business activity, if reasonable:
1 Separate accounting;
2. The exclusion of any one of the factors;
3. The inclusion of one or more additional factors which will fairly represent the
taxpayer's business activity in this state; or
4. The employment of any other method to effectuate an equitable allocation and
apportionment of the taxpayer's income.
403 (Reserved)
500 (Reserved)
600 (Reserved)