Revenue Ruling

Ruling Number:12-91-1
Tax Type:Corporate Income Tax
Brief Description:Attribution of Sales to the Sales Factor of the Apportionment Percentage
Effective Date:01/01/1991

Revenue Ruling 12-91-1
Corporate Income Taxes - Attribution of Sales
to the Sales Factor of the Apportionment Percentage

This revenue ruling is issued to clarify and establish uniform corporate income tax apportionment procedures and to address the concerns raised by Airborne Navigation Corp. v. Arizona Department of Revenue, Feb. 5, 1987, CCH Ariz. Tax Reports 200-744 and by Appeal of Finnigan, Cal. St. Bd. Of Equal., Jan. 24, 1990, Cal. Tax Reports 401-797, overruling Appeal of Joyce, Inc., Cal. St. Bd. Of Equal., Nov. 23, 1966, CCH Cal. Tax Reports 203-523. These cases have developed new principles of law which alter the prior interpretation of 15 U.S.C. Sec. 381 and application of U.D.I.T.P.A. Sec. 16(b)(2) [K.S.A. 79-3286(b)(2)] by the U.D.I.F.P.A. states and multistate taxpayers. Under the prior interpretation and application, tax nexus was based solely on the activities of the selling corporate entity.

Retroactive application of the apportionment procedure in this ruling would cause substantial inequitable results. For the years prior to the effective date of this ruling, inconsistent application would result in sales being double included in the sales factor numerators of both the origination and destination states or result in sales being omitted entirely from the numerators of both states. This would not effectuate U.D.I.T.P.A.'s purpose to make uniform the laws of the states which have enacted it and to the apportion no more or less than 100% of the taxable income. Therefore, this ruling shall be applied prospectively to the taxable years beginning after December 31, 1990. For years beginning prior to January 1, 1991 nexus is determined under the former rule, which based nexus solely on the activities of the corporate entity which made the interstate sale.

Date Composed: 10/06/1997 Date Modified: 10/11/2001