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CAT 2006-08 - Commercial Activity Tax: Situsing Receipts from Periodic Payments for Mobile Property; Issued October, 2006

This is a draft rule to assist taxpayers in situsing receipts from the sale or other exchange of mobile property for purposes of the commercial activity tax (CAT). Prior to adopting a rule to situs mobile property receipts, the Ohio Department of Taxation (ODT) is seeking public comment on the draft of that rule. Public comment on this rule should be made to Sarah Hedman by e-mail at sarah_hedman@tax.state.oh.us or by calling her at (614) 466-3794. Please direct any questions you may have to the CAT Division of ODT at 1-888-722-8829.

Please make any comments directly related to this proposed rule by the end of the business day on October 11, 2006.

Reason for rule. The Tax Commissioner is promulgating this rule to establish guidelines for taxpayers in situsing receipts from the sale or other exchange of mobile property for commercial activity tax purposes.

Draft of Rule 5703-29-20 Situsing receipts from periodic payments for mobile property.

(A)(1) Gross receipts from the sale or other exchange of tangible personal property are sitused based on the location where the purchaser receives the property in accordance with division (E) of section 5751.033 of the Revised Code. When dealing with receipts from mobile property upon which leased payments are made, the location to situs such receipts may be unclear and paragraphs (B) and (C) of this rule shall be used in those situations.

(2) As used in this rule, the term “lease payments” also includes rental payments or other similar periodic payments.

(B) As a general rule, when lease payments are made regarding a piece of mobile property, such receipts shall be sitused based on the following:

(1) In the case of airplanes or other aircraft, receipts from the lease shall be sitused to the location where the aircraft is primarily hangared.

(2)(a) In the case of motor vehicles used in business for the transportation of passengers or property in interstate commerce and railcars, receipts from the lease shall be sitused in accordance with division (G) of section 5751.033 of the Revised Code if that information is known. If such information is not known, receipts shall be sitused in accordance with paragraph (B)(2)(b) of this rule.

(b) In the case of all other motor vehicles, receipts from the first lease payment shall be sitused based on the location where the lessee takes possession of the property. All other receipts shall be sitused based on the location where the property is primarily used and/or stored.

(3) In the case of all other lease payments, including those for construction equipment, receipts from the lease shall be sitused to the location where the construction equipment is primarily used and/or stored during the lease period.

(C)(1) In the event a taxpayer believes that the standards set forth in this rule do not fairly represent the operations of the taxpayer despite the strict application of this rule, receipts may be sitused to this state using any reasonable, consistent, and uniform method of apportionment that is supported by the lessor’s business records as they existed at the time the lease payments were made. In the event the tax commissioner disagrees with a taxpayer’s reasonable, consistent, and uniform method of situsing its gross receipts, the commissioner will not impose a penalty if the situsing was found to be made in good faith. While different methods may be used for different types of leases, the same method must be consistently used for all types of similar leases.

(2) A taxpayer may file in writing with the commissioner a request to use an alternative means of situsing gross receipts from the sale or other exchange of mobile property is reasonable, consistent, and uniform under paragraph (C)(1) of this rule. Such request must be made prior to the end of the reporting period for which the request is to become effective.