(1) For the purposes of the sales factor, the term “”sales”” means all gross receipts received by the taxpayer from transactions and activities in the regular course of its trade or business.
    (a) Sales of tangible personal property. 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. Gross receipts for this purpose means gross sales, without regard to returns and allowances, and includes all interest income, service charges, carrying charges, or time-price differential charges incidental to such sales. Any federal or state taxes, such as federal manufacturers’ excise taxes, shall be included as part of such gross receipts if such taxes constitute a part of the selling price. Federal and state excise taxes (including sales taxes) shall not be included in gross receipts when the statutes imposing such taxes require the taxpayer to add these taxes as a separate item to the selling price of the taxable transaction and to collect the tax from the purchaser.
    (b) Sales of business assets. If a taxpayer derives receipts from the sale of equipment used in its business, such receipts constitute a “”sale.”” 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. If amounts of gross receipts arising from an incidental or occasional sale of a fixed asset used in the regular course of the taxpayer’s trade or business would materially distort the sales factor, the taxpayer may petition the Department, or the Department is authorized to require, pursuant to Florida Statutes § 220.152, and Fl. Admin. Code R. 12C-1.0152, an adjustment to the sales factor.
    (c) Installment sales. Installment sales, including interest associated with the sale, are included in the sales factor as gross receipts are received.
    (d) Rentals. Rental income is included in the sales factor if 10 percent or more of the taxpayer’s total income reported on the federal tax return consists of leasing or renting real or tangible personal property. In the case of a taxpayer engaged in renting real or tangible personal property, “”sales”” includes the gross receipts from the rental, lease, or licensing the use of the property.
    (e) Sales for construction contractors. If the percentage-of-completion method is used, the sales factor includes only that portion of the contract price that reflects the percentage of the contract completed. If the completed-contract method is used, the sales factor includes that portion of the gross receipts (progress billings) received or accrued during the year.
    (f) Income from intangible personal property.
    1. Where the income producing activity in respect to business income from intangible personal property can be readily identified, such income is included in the denominator of the sales factor and, if the income producing activity occurs in Florida, in the numerator of the sales factor as well. For example, usually the income producing activity can be readily identified in respect to interest income received on deferred payments on sales of tangible personal property and income from the sale, licensing, or other use of intangible personal property. The sale or licensing of the use of a trade name, trademark, or patent will be attributable to the state in which the trade name, trademark, or patent is used.
    2. Where business income from intangible property cannot readily be attributed to any particular income producing activity of the taxpayer, such income cannot be assigned to the numerator of the sales factor for any state and shall be excluded from the denominator of the sales factor. For example, where business income in the form of dividends received on stock, royalties received on patents or copyrights, or interest received on bonds, debentures or government securities results from the mere holding of the intangible personal property by the taxpayer, such dividends and interest shall be excluded from the denominator of the sales factor.
    3. 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.
    (g) Disposition of partnership interest. The gross receipts from the sale of an interest in a partnership are included in “”sales.””
    (h) Sales of services. In the case of a taxpayer engaged in providing services, such as the operation of an advertising agency, 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.
    (i) Management fees. Generally, management fees charged from a parent corporation to a subsidiary are excluded from the sales factor. If the fees are just a pass-through of corporate overhead expenditures, the fees will not be included in “”sales.”” However, where the parent is not a vendor of tangible personal property or a “”financial organization”” and the preponderance of its gross receipts are management fees, these may be used in construction of the sales factor. In the case of a parent holding company, management fees are clearly in “”its trade or business”” and, therefore, includable in the sales factor.
    (j) Intercompany sales. When a consolidated return is filed, intercompany sales may be included in the sales factor. Indications that the amounts may be included as sales include the following factors:
    1. Amounts called sales on the books;
    2. Amounts invoiced as sold to related party;
    3. Actual payment from related party; or
    4. Amounts included in consolidated federal income tax return as “”gross receipts or sales.””
    (k) Professional sports teams.
    1. Receipts from player contract transactions, franchise fees, etc., are regarded as intangible business income and shall be assigned to the state in which the income-producing activity which is directly related to such receipts occurs. If there is no income-producing activity which directly relates to such receipts, such as the receipt of franchise fees for new league members, such receipts shall ordinarily be excluded from both the numerator and denominator of the sales factor.
    2. Concession income and any other receipts not otherwise specifically covered shall be assigned to the physical location where the activity which gives rise to such receipts occurs.
    (2) Florida sales. The numerator of the sales factor includes gross receipts attributed to Florida which were derived by the taxpayer from transactions and activities in the regular course of its trade or business. All interest income, service charges, carrying charges, or time-price differential charges incident to such gross receipts shall be included, regardless of the place where the account records are maintained or the location of the contract or other evidence of indebtedness.
    (a) Sales of Tangible Personal Property in Florida. Gross receipts from sales of tangible personal property are in Florida if the property is delivered or shipped to a purchaser within Florida regardless of the F.O.B. point, other conditions of the sales, or the ultimate destination of the property. Tangible personal property shipped by common or contract carriers will use a destination test to determine whether the sale is a Florida sale or a sale outside Florida.
    1.a. Property shall be deemed to be delivered or shipped to a purchaser within Florida if the recipient is located in Florida, even though the property is ordered from outside Florida.
    b. Example: The taxpayer, with inventory in State A, sold $100,000 of its products to a purchaser having branch stores in several states including Florida. The order for the purchase was placed by the purchaser’s central purchasing department, located in State B. $25,000 of the purchaser’s order was shipped directly to purchaser’s branch store in Florida. The branch store in Florida is the “”purchaser within Florida”” with respect to $25,000 of the taxpayer’s sales.
    2.a. Property is delivered or shipped to a purchaser within Florida if the shipment terminates in Florida, even though the property is subsequently transferred by the purchaser to another state.
    b. Example: The taxpayer makes a sale to a purchaser who maintains a central warehouse in Florida at which all merchandise purchases are received. The purchaser reships the goods to its branch stores in other states for sale. All of the taxpayer’s products shipped to the purchaser’s warehouse in Florida are property “”delivered or shipped to a purchaser within Florida.””
    3.a. With respect to sales made to a citrus cooperative by a grower-member, the grower-member’s sales factor shall be the same as the sales factor for the most recent taxable year of the citrus cooperative-processor. With respect to sales made to a Florida processor by a grower-participant, the grower participant’s sales factor shall be the same as the sales factor for the most recent taxable year of the Florida processor. A copy of the processor’s sales factor as furnished to the grower-member or grower-participant shall be attached to the grower-member’s or grower-participant’s corporate income tax return, Form F-1120, which is incorporated by reference in Fl. Admin. Code R. 12C-1.051
    b. If there is delivery of citrus fruit in Florida, other than citrus fruit delivered by a cooperative for a grower-member, citrus fruit delivered by a grower-member to a cooperative, or citrus fruit delivered by a grower-participant to a Florida processor, the sale will be a Florida sale. For example, if a citrus grower delivers fruit to a processor or middle-man for cash, the sale is considered to be a Florida sale, regardless of any subsequent shipment of the fruit outside Florida.
    4.a. The term “”purchaser within Florida”” includes the ultimate recipient of the property if the taxpayer in Florida, at the designation of the purchaser, delivers to or has the property shipped to the ultimate recipient within Florida.
    b. Example: A taxpayer in Florida sold merchandise to a purchaser in State A. Taxpayer directed the manufacturer or supplier of the merchandise in State B to ship the merchandise to the purchaser’s customer in Florida pursuant to purchaser’s instructions. The sale by the taxpayer is in Florida.
    5.a. When 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 Florida, the sales are in Florida.
    b. Example: The taxpayer, a produce grower in State A, begins shipment of perishable produce to the purchaser’s place of business in State B. While en route the produce is diverted to the purchaser’s place of business in Florida, where the taxpayer is subject to tax. The sale by the taxpayer is attributed to Florida.
    (b) 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 the rental, lease or licensing period, gross receipts attributable to this state shall be measured by the ratio which 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.
    (c) Real Property. Gross receipts from the sale, lease, rental, or licensing of real property are in Florida if the real property is located in Florida.
    (d)1. The receipts from vessels carrying passengers to international waters where passengers cannot disembark from the vessel at points other than the origination point (cruises to nowhere); fishing boats; or party boats will be measured upon the port-day method. The port-day method measures the ratio of days in port inside the state, including port days to stock and clean the boat, to total port days. This ratio is multiplied by the total receipts to determine the numerator of the sales factor. Only the time that a vessel is moored to a wharf or pier is considered in computing the days spent in port.
    2. Aircraft leasing companies.
    a. Corporations leasing aircraft to airlines that fly the aircraft into Florida must elect to measure receipts in Florida using one of the following methods:
    (I) The lease receipts for the leased aircraft multiplied by a fraction, the numerator of which is the actual revenue miles in Florida for the aircraft leased and the denominator of which is the actual revenue miles everywhere for the aircraft leased; or
    (II) The lease receipts for the leased aircraft multiplied by a fraction, the numerator of which is lessee’s revenue miles in Florida for their fleet of similar aircraft and the denominator of which is the lessee’s revenue miles everywhere for their fleet of similar aircraft.
    b. The phrase “”revenue miles”” is defined by Florida Statutes § 220.151(2), and Fl. Admin. Code R. 12C-1.0151(2)(b)
    c. The method used (the actual revenue miles for the aircraft or the fleet average of the lessee) must be consistent with the method for determining the property factor, as described in Fl. Admin. Code R. 12C-1.0153(4)(d) Once the method is elected, the taxpayer must petition the Department of Revenue to change the method of valuation for subsequent taxable years. The taxpayer must petition the Department for the change by filing, on or before the due date for filing of the return for the taxable year, with extension, either: a written request for a technical assistance advisement under Florida Statutes § 213.22 and rule chapter 12-11, F.A.C.; or, a petition for a declaratory statement under Florida Statutes § 120.565
    (e) Personal Services.
    1. Gross receipts for the performance of personal services are attributable to Florida if such services are performed in Florida.
    2.a. If services relating to a single item of income are performed partly within and partly without Florida, the gross receipts for the performance of such services shall be attributable to Florida only if a greater portion of the services were performed in Florida, based on costs of performance.
    b. The term “”costs of performance”” means direct costs determined in a manner consistent with generally accepted accounting principles and in accordance with accepted conditions or practices in the taxpayer’s trade or business. Where independent contractors are used to complete a contract, the term “”costs of performance”” will include amounts paid to the independent contractors.
    3. Where services are performed partly within and partly without this state, the services performed in each state may constitute a separate income producing activity, even though the client is billed a lump sum amount. In such cases, the gross receipts for the performance of services attributable to this state shall be measured by the ratio which the time spent in performing such services in this state bears to the total time spent in performing such services everywhere. Time spent in performing services includes the amount of time expended in the performance of a contract or other obligation which gives rise to such gross receipts. Personal services not directly connected with the performance of the contract or other obligation, as for example, time expended in negotiating the contract, are excluded from the computations.
    (f) Intangible personal property in Florida.
    1. The rental, leasing, licensing, or other use of a trade name, trademark, or patent to a business entity located in Florida will be considered a Florida sale. The mere holding of intangible personal property is not, of itself, an income producing activity.
    2. Franchises. The franchise fees paid to rent, lease, license, or otherwise use a trade name and system of sales are Florida sales if the franchise location is in the state.
    (g) Telecommunications. For purposes of this rule, gross receipts from telecommunications services include those earned by the offering of telecommunications for a fee directly to the public, or to such classes of users as to be effectively available directly to the public, regardless of the facilities used.
    1. Intrastate charges for telecommunications services are Florida sales.
    2. Interstate communications. Telecommunications charges are Florida sales if the communication originates or terminates in Florida and the bill is charged to a Florida telecommunications number or device, Florida telephone number or telephone, or Florida customer.
    (h) Computer related sales.
    1. Hardware delivered in Florida constitutes Florida sales.
    2. Canned software programs are Florida sales if delivered to a customer in Florida.
    3. Customized software programs are Florida sales when the customization of the programs is done in Florida. That is, when technical advice to customize a program is rendered on site in Florida, the sale will be considered a Florida sale.
    4. Licensing fees for software are Florida sales to the extent the software is used in Florida.
    5. Interactive networks.
    a. Where there are charges to Florida customers for direct access to a data base, these charges are considered Florida sales. These charges include, but are not limited to, fees to access the network, fees based on the number of information requests made, time charges for connection to the data base and lines, and information retrieval from the data base.
    b. Where there are charges by a corporation located in Florida to Florida customers for access to third party data bases, all charges will be considered Florida sales, regardless of where the third-party data bases are located.
    c. Where a foreign (out-of-state) corporation charges Florida customers for access to third party data bases, all charges will be considered Florida sales except for charges directly related to the retrieval of information from the third-party data base.
    d. When a P.C. or mainframe is physically located in Florida, a corporation will have a “”Florida customer”” for purposes of this subparagraph.
    (i) Television and Radio Broadcasting. Gross receipts, including advertising revenues, from broadcasting within and without Florida will be attributed to the numerator of the sales factor on the basis of the ratio of the audience within Florida to the audience everywhere.
    (j) Newspaper and Magazine Revenue. Receipts from the sale of newspapers and magazines, including advertising fees, will be considered Florida sales on the basis of the ratio of circulation within Florida to circulation everywhere.
    (k) Printer Income. When a customer provides paper, the printer will attribute its income to Florida if the place where printing is done is in Florida. When the printer provides paper, the printer will attribute its income to Florida if the delivery destination of the product is Florida.
    (l) Other Sales in Florida. Gross receipts from other sales shall be attributed to Florida if the income producing activity which gave rise to the receipts is performed wholly within Florida. Also, gross receipts shall be attributed to Florida if the income producing activity is performed within and without Florida but the greater proportion of the income producing activity is performed in Florida, based on costs of performance. The term “”income producing activity”” applies to each separate item of income and means the transactions and activity directly engaged in by the taxpayer for the ultimate purpose of obtaining gains or profits. Where independent contractors are used to complete a contract, the term “”income producing activity”” will include amounts paid to the independent contractors.
    (3) Sales factor for financial organizations.
    (a) The sales factor for a financial organization includes gross receipts as described in section 220.15(5)(a), F.S. However, the sales factor is expanded by section 220.15(5)(c), F.S., for a financial organization.
    (b) Regular monthly charges for an account maintained in a Florida branch will be deemed to be Florida sales, regardless where the accounting services for the account are performed.
    (c) Gross profits from trading in stocks, bonds, or other securities are considered sales for a financial organization. The gross profits are considered Florida sales if the stocks, bonds, or securities are managed within Florida. The management is deemed to be within Florida if the customer or client is within Florida.
    (d) Interest on loans is included in the sales factor. Interest received within Florida, other than interest from loans secured by mortgages, deeds of trust, or other liens upon real or tangible personal property located outside Florida, is included in the numerator of the factor.
    (e) Dividends are included in the factor. Dividends received within Florida are included in the numerator.
    (f) Where a loan is secured by multiple liens upon real or tangible personal property, part of which is within Florida and part of which is without Florida, the amount of the interest which is included in the numerator of the factor is based on a fraction, the numerator of which is the value of the secured property in Florida, and the denominator of which is the value of the secured property everywhere. The “”value of the secured property”” will be the fair market value of the property at the time of the loan.
    (4) Sales of a partnership are included in the denominator of a taxpayer’s sales factor to the extent of the taxpayer’s interest in the partnership. The amount of sales in Florida is also included in the numerator of the sales factor to the extent of the taxpayer’s interest in the partnership. Partnership sales should be allocated to each partner based on each partner’s interest in the partnership, or as designated in the partnership agreement, for inclusion in the Florida sales factor.
Rulemaking Authority 213.06(1), 220.51 FS. Law Implemented 220.15, 220.44 FS. History-New 5-17-94, Amended 3-18-96, 10-2-01, 1-8-19.