Determination of Apportionment of Tax Method of Determination

3:01 Business Apportionment Percentage Method

A. The portion of the entire net profits of a taxpayer to be allocated as having been derived from within this municipality shall be determined by multiplying the entire federal adjusted income by a business apportionment percentage to be determined by a three- factor formula of property, payroll and sales.

B. The business apportionment percentage shall be determined as follows:

STEP 1- Ascertain the percentage which the original cost of real and tangible personal property, including leasehold improvements owned or used in the business and situated within the Village of Cadiz, is original cost of all real and tangible personal property, including leasehold improvements owned or used in the business wherever situated, during the period covered by the return.  The percentage of taxpayer's real and tangible personal property within the Village of Cadiz is determined by dividing the original cost of such property within this municipality (without deduction of an encumbrances) by the original cost of all such property within and without this municipality.  In determining such percentage, property rented by the taxpayer, as well as real and tangible personal property owned by the taxpayer, must be considered.

a. The original cost of real and tangible personal property rented by the taxpayer shall be determined by multiplying gross annual rents payable by eight (8).

b. Gross rent means the actual sum of money or other consideration payable, directly or indirectly, by the taxpayer for the use and possession of property and includes:

                   i. any amount payable for the use or possession of real and tangible personal property or any part thereof, whether designated as a fixed sum of money or as a percentage of sales profits or otherwise.

ii. Any amount payable as additional rent or in lieu or rent such as interest, taxes insurance, repairs or other amounts required to be paid by the terms of a lease or other arrangement.

STEP 2- Ascertain the percentage, which the total wages, salaries, commissions and other compensation of all the taxpayer's employees within and without this municipality during the period covered, by the return.

a. Wages, salaries and other compensation may be computed on the cash or accrual basis.  The basis does not have to be in accordance with the method of accounting used in the computation of the entire net income of the taxpayer.

b. In the Case of an employee who performs services both within and without this municipality, the amount treated as compensation for services performed within this municipality shall be deemed to be:

i. In the case of an employee whose compensation depends directly on the volume of business secured by him, such as a salesman on a commission basis, the amount received by him for the business attributable to his efforts within the Village of Cadiz.

ii. In the case of an employee whose compensation depends on other than the volume of business transacted, the proportion of the  total amount received by him, which is his working time within this municipality of his total working time.

c. For the purpose of the computation, wages should include a reasonable amount attributable to the services of owners or partners (Section 3:01 B.2.b hereof) for the amount treated as compensation for service performed within this municipality.

STEP 3- Ascertain the percentage of which the gross receipts of the taxpayer derived from sales made and services rendered in this municipality is of the total gross receipts wherever derived during the period covered by the return.

a. The following shall be considered sales made within this municipality:

i. All sales made through retail stores located within the Village of Cadiz to purchasers within or without this municipality except so much of said sales to purchasers outside this municipality that are directly attributable to regular solicitations made outside this municipality personally by the taxpayer's employees.

ii. All sales of tangible personal property delivered to purchasers within this municipality if shipped or delivered from an office, store, warehouse, factory or place of storage located within this municipality.

iii. all sales of tangible personal property delivered to purchasers within this municipality, even though transported from a point outside this municipality, if the taxpayer is regularly engaged through its own  employees in the solicitation or promotion of sales within this municipality and the sale is directly or indirectly the result of such solicitations.

iv. all sales of tangible personal property shipped from an office, store, warehouse, factory, or place of storage outside this municipality to purchasers outside this municipality if the taxpayer is not,  through its own employees, regularly engaged in the solicitation or promotion of sales at the place of delivery.

v. Charges for work done or services performed incident to a sale, whether or not included in the price of the property, shall be considered gross receipts from such sale.

b. In the application of the foregoing sales determination factors, a carrier shall be considered the agent of the seller regardless of the FOB point or other conditions of the sale and the place at which orders are accepted or contracts legally consummated shall be immaterial.  Solicitations of customers outside of this municipality by mail or telephone from an office or place of business within this municipality shall not be considered a solicitation of sales outside the Village of Cadiz.

STEP 4- Add the percentages determined in accordance with Steps 1,2, and 3, or such of the aforesaid percentages as may be applicable to the particular taxpayer's business, and divide the total so obtained by the number of percentages used in ascertaining said total.  The result factor shall not be excluded from the computation merely because said factor is found to be allocable entirely outside this municipality.  A factor is excluded only when it does not exist anywhere.

STEP 5- The business apportionment percentage determined in Step 4 above shall be applied to the entire taxable net profits of the taxpayer whenever derived to determine the net profits allocable to the Village of Cadiz.

If the apportionment formula does not produce an equitable result, another basis may be substituted, under uniform regulations, as to produce an equitable result.  These methods are as follows:

3:02 Separate Accounting Method

 A. If the books and records of a taxpayer conducting a business or profession both within and without the boundaries of the Village of Cadiz disclose with reasonable accuracy that portion of its adjusted federal taxable income which is attributable to the business or profession conducted within the boundaries of this municipality, then only such portion shall be considered as having a taxable situs in this municipality for the purpose of municipal income taxation.

B. If the separate accounting method is used as a basis for attributing the adjusted federal taxable income rather than the business apportionment formula, a statement must accompany the return explaining the manner is which such apportionment is made in sufficient detail to enable the Administrator to determine whether the adjusted federal taxable income  attributable to the Village of Cadiz are allocable with reasonable accuracy.

C. If the separate accounting method is used, an adjustment shall be made for the contribution made to the production of such income by headquarters activities of the taxpayer, whether such headquarters is within this municipality.

3:03 Substitute Method

A. In the event a just and equitable result cannot be obtained under the formula, the Administrator, upon his own initiative or upon application of the taxpayer, may substitute other factors in the formula or prescribe other methods of allocating net income calculated to effect a fair and proper allocation.

B. Application by the taxpayer to the Administrator to substitute other factors in the formula or to use a different method to allocate net profits must be made, in writing, not less than sixty (60) days before the due date of the annual return without regard to extension and shall state the specific grounds on which the substitution of factors or use a different method is requested and the relief sought to be obtained. No specific form need be followed in making such application. If, pursuant to a taxpayer's request, a substitute method of apportionment is authorized by the Administrator, a statement should be attached to the annual return for the year of change describing such substitute method of apportionment and setting forth the date such substitute method was authorized by the Administrator.

3:04 Change of Method

A. A change in a method of apportionment should be described in a statement attached to the return for the year of change (also see Section 3:03 hereof).

3:05 Rentals from Real Property

A. Rentals received by the taxpayer are to be included in the computation of the adjusted federal taxable income from business activities only if, and to the extent that, the rental, ownership, management or operation of the real estate from which such rentals are derived (whether so rented, managed or operated by the taxpayer individually or through agents or other representatives) constitutes a business activity of the taxpayer in whole or in part.

B. Rental income received by a taxpayer engaged in the business of buying or selling real estate shall always be considered as part of business income

C. In determining the taxable income from rentals, the deductible expenses shall be of the same nature, extent and amount as are allowed by the Internal Revenue Service for federal income tax purposes.

D. Owners of rental property who are non-residents of the Village of Cadiz, whether individuals or business entities, are subject to tax only on the income from real property owned in this municipality.

E. Owners of rental property who are residents of the Village of Cadiz are subject to tax on net income from rentals, regardless of the location of the real property owned, excepting that if any such property is located and subject to a municipal income tax by another taxing municipality, credit shall be claimed in accordance with Section 7:00 hereof. 

 F. Owners of rental property who are not residents of the Village of Cadiz may offset net losses against adjusted federal taxable income only between properties located within this municipality.

G. Corporations owning or managing real estate are taxable only on the portion of income derived from property located within this municipality.

H. Any resident or non-resident receiving rental income from commercial property, farm property or a licensed rooming house, must file a return whether or not there is any tax due.

3:06 Operating Loss Carry-Forward

A. Except where prohibited by the Ordinance, the portion of a net operating loss, based on income taxable under the Ordinance sustained in any taxable year subsequent to the effective date of the Ordinance and allocable to this municipality, may be applied against the portion of the profit of succeeding year's) allocable to this municipality until exhausted, but in no event for more than five (5) taxable years. No portion of a net operating loss shall be carried back against net profits of any prior year.

B. In the event profits are apportioned both within and without this municipality, the portion of a net operating loss sustained shall be apportioned to this municipality in the same manner as provided herein for apportioning net profits to this municipality. The portion of net operating loss to be carried forward shall be determined in the year the net operating loss is sustained on the basis of the apportionment factors applicable to that year.

C. In the case of fiscal years beginning prior to the effective date of the Ordinance, the net operating loss deduction will be that portion of the operating loss that the number of days of the fiscal year after the effective date of the Ordinance bears to the total number of days in such fiscal year, except when actual figures are available.

D. A short taxable year (a fiscal less than twelve (12) months) shall be considered a full taxable year for the purposes of this section.

E. In any return in which a net operating loss deduction is claimed, a schedule should be attached showing:

 1. Year in which net operating loss was sustained.

2. Method of accounting and apportionment used to determine the portion of net operating loss apportioned to this municipality.

3. Amount of net operating loss used as a deduction in prior years.

4. Amount of net operating loss claimed as a deduction in current year.

F. The net operating loss of a business which loses its identity through merger, consolidation, etc., shall be allowed as a carry forward deduction to the surviving business entity to the extent permitted by the Internal Revenue Code.

G. In the case of net operating loss in the filing of a consolidated return, see Section 5:04 hereof.