Section 125-801-06 - Sales factorA.Formula. The sales factor is a fraction in which the numerator is the total sales of the taxpayer in this State during the tax period and the denominator is the total sales of the taxpayer everywhere during the tax period, except that: (1) For tax years beginning on or after January 1, 2009, the formula must exclude from both the numerator and the denominator sales of tangible personal property delivered or shipped by the taxpayer, regardless of F.O.B. point or other conditions of the sale, to a purchaser within a state in which the taxpayer is not taxable within the meaning of 36 M.R.S. §5211(2) and section .04 above. See 36 M.R.S. §5211(14). To avoid duplication, intercompany sales between corporations in a unitary business must be eliminated from both the numerator and the denominator of the sales factor.(2) For tax years beginning on or after January 1, 2010, "total sales of the taxpayer" includes sales of the taxpayer and of any member of an affiliated group with which the taxpayer conducts a unitary business. The formula must exclude from both the numerator and the denominator sales of tangible personal property delivered or shipped by the taxpayer, regardless of F.O.B. point or other conditions of the sale, to a purchaser within a state in which the taxpayer is not taxable within the meaning of 36 M.R.S. §5211(2) and section .04 above, unless any member of an affiliated group with which the taxpayer conducts a unitary business is taxable in that state in the same manner as a taxpayer is taxable under 36 M.R.S. §5211(2) and section .04 above. 36 M.R.S. §5211(14). To avoid duplication, intercompany sales between corporations in a unitary business must be eliminated from both the numerator and the denominator of the sales factor. For discussion of return reporting requirements for unitary business returns, see MRS Rule 810 (18-125 C.M.R., ch. 810).(3) For tax years beginning on or after January 1, 2013, the numerator of the sales factor does not include sales of a person whose only business activity in the State during the taxable year is the performance of services during a disaster period that are solely and directly related to a declared state disaster or emergency that were requested by the State, a county, city, town, or political subdivision of the State or a registered business. 36 M.R.S. §5211(16-B).B.Generally. "Sales" means all gross receipts of the taxpayer. "Sales" includes federal and state excise taxes (including sales taxes) if those taxes are passed on to the buyer or included as part of the selling price of the product. "Sales in this State" means all gross receipts of the taxpayer in the State of Maine including, but not limited to, receipts derived from the sale of tangible personal property pursuant to 36 M.R.S. §5211(15) and receipts derived from the sale of other than tangible personal property pursuant to 36 M.R.S. §5211(16-A). Interest income, service charges, carrying charges or time-price differentials incidental to a sale must be included as sales in the state to which the sale is attributable, regardless of the place where the accounting records are maintained or the contract or other evidence of indebtedness is located. The following are rules for determining "sales" in various situations. (1) 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 (or other property of a kind that would properly be included in the inventory of the taxpayer if on hand at the close of the tax period) held by the taxpayer primarily for sale to customers in the ordinary course of its trade or business.(2) In the case of cost-plus-fixed-fee contracts, such as the operation of a government-owned plant for a fee, "sales" includes the entire reimbursed cost plus the fee.(3) In the case of a taxpayer engaged in providing services, such as the operation of an advertising agency or the performance of equipment service contracts or research and development contracts, "sales" includes the gross receipts from the performance of such services, including fees, commissions, and similar items.(4) In the case of a taxpayer engaged in renting real or tangible property, "sales" includes the gross receipts from the rental, lease, or licensing the use of the property.(5) In the case of a taxpayer engaged in the sale, assignment, or licensing of intangible personal property such as patents and copyrights, "sales" includes the gross receipts therefrom.(6) If a taxpayer derives receipts from the sale of equipment used in its business, those receipts constitute sales. For example, a truck express company owns a fleet of trucks and sells its trucks under a regular replacement program. The gross receipts from the sales of the trucks are included in the sales factor.(7) "Sales" includes income from capitalized leases to the extent that the income from such leases is included in the federal gross income of the taxpayer.C.Gross receipts. "Gross receipts" means the gross amounts realized (the sum of money and the fair market value of other property or services received, less any returns and allowances) on the sale or exchange of property, the performance of services, or the use of property or capital (including rents, fees, royalties, interest and dividends) in a transaction that produces income, in which the income or loss is recognized (or would be recognized if the transaction were in the United States) under the Internal Revenue Code. Amounts realized on the sale or exchange of property are not reduced for the cost of goods sold or the basis of property sold. Gross receipts do not include, for example, such items as:(1) Repayment, maturity, or redemption of the principal of a loan, bond, or mutual fund or certificate of deposit or similar marketable instrument;(2) The principal amount received under a repurchase agreement or other transaction properly characterized as a loan;(3) Proceeds from issuance of the taxpayer's own stock or from sale of treasury stock;(4) Damages and other amounts received as the result of litigation;(5) Property acquired by an agent on behalf of another;(6) Tax refunds and other benefit recoveries;(8) Contributions to capital (except for sales of securities by securities dealers);(9) Income from forgiveness of indebtedness; or(10) Amounts realized from exchanges of inventory that are not recognized by the Internal Revenue Code.D.Sales of tangible personal property in this State. A sale of tangible personal property is in Maine if the property is delivered or shipped to a purchaser (other than the United States Government, see subsection E below) who takes possession within Maine regardless of F.O.B point or other conditions of sale. Tangible property is delivered or shipped to a purchaser within Maine if:
(1) the recipient is located in Maine, even though the property is ordered from outside Maine, and (2) the property is delivered or shipped to a purchaser within Maine if the shipment terminates in Maine, even if the purchaser subsequently transfers the property to another state. The term "purchaser within Maine" includes the ultimate recipient of the property if the taxpayer, at the direction of the purchaser, delivers to or has the property shipped to the ultimate recipient within Maine.
When property being shipped by a seller from the state of origin to a consignee in another state is diverted to a purchaser in Maine, the sales are in Maine.
E.Sales of tangible personal property to the United States Government. 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. Generally, sales by a subcontractor to a prime contractor who is the party to the contract with the United States Government do not constitute sales to the United States Government.F.Sales other than sales of tangible personal property. Receipts from the sales of other than tangible personal property must be sourced as follows below. When no other sourcing rule is applicable, the sales must be sourced so as to fairly represent the extent of the taxpayer's business activity in this State.(1)Receipts from the performance of services. Generally, receipts from the performance of services must be sourced to the state where the services are received. (a)Non-business customer. When it is not readily determinable where the services were received, the sale is deemed to have occurred at the home of the customer.(b)Business customer. When it is not readily determinable where the services were received, the sale is deemed to have occurred at the office of the business customer where the services were ordered in the regular course of the customer's trade or business. If the ordering location cannot be determined, the sale is deemed to have occurred at the office to which the services were billed.(c)Federal government. If the customer is the federal government, the services are deemed to have been received in this State if the greater proportion of the income-producing activity is performed in this State than in any other state based on costs of performance.(2)Gross receipts from the sale of patents, copyrights, or trademarks. Generally, gross receipts from the license, sale or other disposition of patents, copyrights, trademarks or similar items of intangible personal property must be attributed to this State if the intangible property is used in this State by the licensee. (a)Used in more than one state. When the intangible personal property is used by the licensee in more than one state, the income must be apportioned to this State according to the portion of use in this State.(b)Federal government. When the purchaser or licensee of the intangible personal property is the Federal Government, the receipts are attributable to this State if the greater proportion of the income-producing activity is performed in this State than in any other state based on the costs of performance.(3)Receipts from the sale, lease, or rental of real property. Generally, receipts from the sale, lease, rental or other use of real property must be sourced to this State if the real property is located in this State.(4)Receipts from the lease or rental of tangible personal property. Generally, receipts from the lease or rental of tangible personal property must be attributed to this State if the tangible personal property is located in this State.(5)Receipts from the sale of partnership interest. Gain or loss from the sale of a partnership interest must be sourced in accordance with 36 M.R.S. §5142(3-A). The gain or loss from the sale of a partnership interest is sourced to Maine by multiplying the gain or loss by the ratio of the original cost of the partnership's tangible property located in Maine to the original cost of the partnership's tangible property everywhere, determined at the time of the sale. A different ratio must be calculated if more than 50% of the value of the partnership's assets consists of intangible property. The foregoing allocation calculations do not apply to the sale of a limited partner's interest in an investment partnership when more than 80% of the value of the partnership's total assets consists of intangible personal property held for investment, except that such property cannot include an interest in a partnership unless that partnership is itself an investment partnership.(6)Receipts from financial services. Receipts from financial services must be sourced to this State in accordance with 36 M.R.S. §5206-E(2)(C)(I) and as follows: (a) Interest, including fees and penalties in the nature of interest from loans located in Maine, is determined at the time the original agreement was made;(b) Net gain attributed to this State from the sale of loans is determined based on the ratio of interest, fees and penalties from loans located in this State, determined in accordance with subparagraph (a), to interest, fees and penalties from all loans;(c) Interest, including fees and penalties in the nature of interest from credit card receivables, and receipts from fees (including annual fees) charged to credit card holders whose billing address is in this State;(d) Net gain attributed to this State from the sale of credit card receivables is determined based on the ratio of credit card interest, fees and penalties associated with credit card holders whose billing address is in this State to all credit card interest, fees and penalties;(e) Receipts from credit card reimbursement fees, including related payment processing fees, attributed to this State are determined based on the ratio of credit card interest, fees and penalties associated with credit card holders whose billing address is in this State to all credit card interest, fees and penalties;(f) Receipts from merchant discount, including related payment processing fees, are in this State if the commercial domicile of the merchant is in this State. The receipts are computed net of any credit card holder charge-backs, but are not reduced by any interchange transaction fees or by any issuer's reimbursement fees paid to another for charges made by its credit card holders; and(g) Receipts from loan servicing fees attributed to this State are determined based on the ratio of interest, fees and penalties in the nature of interest from loans located in this State, determined in accordance with subparagraph (a), to interest, fees and penalties in the nature of interest from all loans. Loan servicing fees received for servicing secured or unsecured loans of another must be included in the numerator if the borrower is located in this State.(7)Gross receipts from the sale of goodwill. Receipts from the sale of goodwill must be sourced to this State according to the portion of use in this State based upon the previous taxable year's sales factor for all sales.(8)Gross receipts from the sale of accounts receivable and the sale of collection services. Receipts from the sale of accounts receivable and collection services must be sourced as the underlying sales related to the debt were sourced.18-125 C.M.R. ch. 801, § 06