OAR 150-314-0080: Modified Factors for Carriers of Freight or Passengers: Special Rules — Trucking Companies

(1) In General. As used in this rule, the term “trucking company” means a motor common carrier, a motor contract carrier, or an express carrier that primarily transports tangible personal property of others by motor vehicle for compensation. Where a trucking company has income from sources both within and without this state, the amount of apportionable income from sources within this state must be determined pursuant to ORS 314.610 to 314.665 except as modified by this rule. In such cases, the first step is to determine what portion of the trucking company’s income constitutes apportionable income and what portion constitutes nonapportionable income under ORS 314.610 and the corresponding rules. Nonapportionable income is directly allocable to specific states pursuant to the provisions of ORS 314.625 through 314.645. Apportionable income is apportioned among the states in which the business is conducted pursuant to the property, payroll, and sales factors set forth in this rule. The sum of (a) the items of nonapportionable income directly allocated to this state plus (b) the amount of apportionable income attributable to this state constitutes the amount of the taxpayer’s entire net income which is subject to tax in this state. (2) Apportionable and Nonapportionable Income. For definitions, rules, and examples for determining apportionable and nonapportionable income, see OAR 150-314-0335 through 150-314-0339. (3) Apportionment of Apportionable Income. Apportionable income is apportioned to this state by use of the formula provided in ORS 314.650 as it applies to the tax year involved. For tax years beginning on or after July 1, 2005, ORS 314.650 provides for apportionment using only the sales factor. (a) In General. The property factor is determined in accordance with ORS 314.655, the payroll factor in accordance with ORS 314.660, and the sales factor in accordance with ORS 314.665, except as modified in this rule. (b) The Property Factor. (A) Property Valuation. Owned property is valued at its original cost in accordance with ORS 314.655(2) and OAR 150-314-0398. Property rented from others is valued at eight times the net annual rental rate in accordance with ORS 314.655(2) and OAR 150-314-0400. (B) General Definitions. The following definitions are applicable to the numerator and denominator of the property factor, as well as other apportionment factor descriptions: (i) “Average value” of property means the amount determined by averaging the values at the beginning and end of the tax period, but the department may require the averaging of monthly values during the tax period or such averaging as is necessary to properly reflect the average value of the trucking company’s property (See OAR 150-314-0406). (ii) “Mobile property” means all motor vehicles, including trailers, engaged directly in the movement of tangible personal property, other than support vehicles used predominantly in a local capacity. (iii) A “mobile property mile” is the movement of a unit of mobile property a distance of one mile whether loaded or unloaded. (iv) “Original cost” is deemed to be the basis of the property for federal income tax purposes (prior to any federal income tax adjustments, except for subsequent capital additions, improvements thereto, or partial dispositions); or, if the property has no such basis, the valuation of such property for Interstate Commerce Commission purposes. If the original cost of property cannot be ascertained under the foregoing valuation standards, the property is included in the property factor at its fair market value as of the date of acquisition by the taxpayer. (OAR 150-314-0398) (v) “Property used during the tax period” includes property which is available for use in the taxpayer’s trade or business during the tax period. (C) The Denominator and Numerator of the Property Factor. The denominator of the property factor is the average value of all the taxpayer’s real and tangible personal property owned or rented and used during the tax period. The numerator of the property factor is the average value of the taxpayer’s real and tangible personal property owned or rented and used in this state during the tax period. In the determination of the numerator of the property factor, all property, except mobile property as defined in this rule, is included in the numerator of the property factor in accordance with ORS 314.655 and the corresponding rules. Mobile property as defined in this rule, which is located within and without this state during the tax period is included in the numerator of the property factor in the ratio which mobile property miles in the state bear to the total mobile property miles. (c) The Payroll Factor. The denominator of the payroll factor is the compensation paid everywhere by the taxpayer during the tax period for the production of apportionable income (see ORS 314.660 and the corresponding rules.). The numerator of the payroll factor is the total compensation paid in this state during the tax period by the taxpayer. With respect to all personnel, except those performing services within and without this state, compensation paid to such employees is included in the numerator as provided in ORS 314.660 and the corresponding rules. With respect to personnel performing services within and without this state, compensation paid to such employees is included in the numerator of the payroll factor in the ratio which their services performed in this state bear to their services performed everywhere based on mobile property miles. (d) The Sales Factor. (A) In General. All sales derived from transactions and activities in the regular course of the taxpayer’s trade or business which produce apportionable income are included in the denominator of the sales factor (see ORS 314.665(1) and OAR 150-314-0425). The numerator of the sales factor is the total sales of the taxpayer in this state during the tax period. The total state sales of the taxpayer, other than sales from hauling freight, mail, and express, are attributable to this state in accordance with ORS 314.665 and the corresponding rules. (B) Numerator of the Sales Factor from Freight, Mail, and Express. The total sales of the taxpayer attributable to this state during the tax period from hauling freight, mail, and express is: (i) Intrastate: All sales from any shipment which both originates and terminates within this state; and, (ii) Interstate: That portion of the sales from movements or shipments passing through, into, or out of this state as determined by the ratio which the mobile property miles traveled by such movements or shipments in this state bear to the total mobile property miles traveled by movements or shipments from points of origin to destination. (4) Records. The taxpayer must maintain the records necessary to identify mobile property and to enumerate by state the mobile property miles traveled by such mobile property as those terms are used in this rule. Such records are subject to review by the department or its agents. (5) De Minimis Nexus Standards. Notwithstanding any provision contained herein, this rule does not apply to require the apportionment of income to this state if the trucking company during the course of the tax period neither: (a) Owns nor rents any real or personal property in this state, except mobile property; nor (b) Makes any pick-ups or deliveries within this state; nor (c) Travels more than twenty-five thousand mobile property miles within this state; provided that the total mobile property miles traveled within this state during the tax period does not exceed three percent of the total mobile property miles traveled in all states by the trucking company during that tax period; nor (d) Makes more than twelve trips into this state.