830 CMR: DEPARTMENT OF REVENUE
830 CMR 63.00: TAXATION OF CORPORATIONS
830 CMR 63.00 is amended by adding the following section:
830 CMR 63.38.4: Apportionment of Income of Courier and Package Delivery Services

(1) General. If a courier or package delivery service has income derived from business carried on both within and outside Massachusetts, the Commissioner shall determine the amount of its income derived from business carried on within Massachusetts pursuant to the general rules of M.G.L. c. 63, § 38, and applicable regulations, except to the extent that the rules of that section are modified pursuant to this regulation. This regulation, 830 CMR 63.38.4, has been issued pursuant to the commissioner's authority under M.G.L. c. 63, § 38(j).

(2) Definitions.

(a) Property factor.

1. The denominator of the property factor shall be the average value of all of the company's real and tangible personal property owned or rented and used during the taxable year. (All property values are determined according to the normal rules of M.G.L. c. 63, § 38.)

2. The numerator of the property factor shall be the sum of the following three amounts:

a. the average value of the real and tangible personal property used by the company, other than aircraft ready for flight and nonflight mobile property, situated in Massachusetts;

b. the average value of the aircraft ready for flight owned or rented and used by the company in Massachusetts; and

c. the average value of the nonflight mobile property owned or rented and used by the company in Massachusetts.

3. The average value of the aircraft ready for flight owned or rented and used by the company in Massachusetts shall be computed separately for each type of aircraft operated by the company. For each type of aircraft, the value shall consist of the total average value of that type of aircraft ready for flight owned by the company, multiplied by the percentage of departures of the company, of that aircraft type, taking place within Massachusetts.

4. The value of the nonflight mobile property owned or rented and used by the company in Massachusetts shall be the total value of the company's nonflight mobile property, multiplied by the percentage of miles traveled by the company's nonflight mobile property in Massachusetts.

5. Property in the possession of the company under the terms of a lease, which is treated as a lease for federal income tax purposes by operation of provisions contained or previously contained in section 168 of the Internal Revenue Code, shall be treated as owned, not rented, by the company.

(b) Payroll factor.

1. The denominator of the company's payroll factor shall be the total compensation paid by the company during the taxable year.

2. The numerator of the payroll factor shall be the sum of the following three amounts:

a. the compensation paid in Massachusetts to personnel other than flight personnel and nonflight mobile personnel during the taxable year;

b. the compensation paid in Massachusetts to flight personnel during the taxable year; and

c. the compensation paid in Massachusetts to nonflight mobile personnel during the taxable year.

3. The compensation paid in Massachusetts to flight personnel shall be computed by multiplying the company's total payroll for flight personnel by the percentage of the company's total payroll for flight personnel by the percentage of the company's departures occurring in Massachusetts weighted, in a manner similar to that described in paragraph (a) of this subsection, by the values of the aircraft types operated by the company.

4. The compensation paid in Massachusetts to nonflight mobile personnel shall be computed by multiplying the company's total compensation for nonflight mobile personnel by the percentage of miles traveled by the company's nonflight mobile property in Massachusetts.

(c) Sales factor. The sales factor of a courier or package delivery service shall be a fraction, the denominator of which is the service's total sales revenue during the taxable year. The numerator of the sales factor shall be the sum of two amounts: (i) the service's revenues from business carried on within Massachusetts, if any, from sources other than courier and package delivery services; and (ii) the service's revenues from courier and package delivery services derived from business carried on within Massachusetts. The service's revenues from courier and package delivery services derived from business carried on within Massachusetts shall be computed by multiplying the service's total revenues from courier and package delivery services by the percentage of the service's total pickups and deliveries taking place in Massachusetts.

The following example illustrates the provisions of 830 CMR 63.38.4(2)(c):

Example 1. During the taxable year, Stork Deliveries had $3,000,000 in revenue from sources other than courier and package delivery services, of which $1,000,000 was derived from business carried on within Massachusetts. Stork had $10,000,000 in revenue from courier and package delivery services. During the taxable year, Stork received 625,000 shipments to be delivered, 125,000 of which Stork received in Massachusetts. Stork also delivered 625,000 shipments during the taxable year, 80,000 of which Stork delivered in Massachusetts. Thus, Stork had a total of 1,250,000 pickups and deliveries, of which 205,000 took place in Massachusetts. Stork's sales factor is--

$1,000,000 + $10,000,000 * (205,000/1,250,000),
$3,000,000 + $10,000,000

or .2031.

(d) Pickup. A pickup shall be the receipt by a courier or package delivery service of a single shipment to be delivered to a single address. A receipt shall constitute a "pickup" whether the courier or package delivery service receives the shipment at the customer's location or at a central reception point.

(e) Delivery. A delivery shall be the transmission by a courier or package delivery service to the recipient of a single shipment originated by a single shipper. A transmission to the recipient shall constitute a "delivery" whether the courier or package service delivers the shipment at the recipient's location or at a central distribution point. However, the electronic transmission of a facsimile by a courier or package delivery service to a recipient shall not be a delivery unless the courier or package delivery service is subject to tax in the state in which the recipient is located.

(f) Courier or package delivery service. A courier or package delivery service shall mean any company that transmits packages or written communications primarily to residences and business addresses. A company that receives written communications, and transmits facsimiles to recipients by electronic or other means, shall also be a courier or package delivery service for purposes of this regulation. A vendor that transports goods that it has sold to its customers' residences or business addresses is not, on that account alone, a courier or package delivery service.

(g) Aircraft ready for flight. Aircraft ready for flight means aircraft in possession of the company that are available for service on its routes.

(h) Flight personnel. Flight personnel means the air crew aboard an aircraft assisting in the operations of the aircraft.

(i) Nonflight mobile property. Nonflight mobile property means all motor vehicles, including trailers, engaged directly in the movement of property, other than aircraft and other than vehicles eighty percent or more of whose mileage is traveled in one state.

(j) Nonflight mobile personnel. Nonflight mobile personnel means personnel who operate or travel in nonflight mobile property as the predominant activity of their employment.

(3) Effective date. This regulation, 830 CMR 63.38.4, applies to taxable years commencing on or its effective date.

REGULATORY HISTORY
Date of Promulgation: 9/15/89