12C-1.0154. Payroll Factor for Apportionment

(1) The total amount “paid” to employees is determined upon the basis of the taxpayer’s accounting method. If the taxpayer has adopted the accrual method of accounting, all compensation properly accrued shall be deemed to have been paid.

(a) Notwithstanding the taxpayer’s method of accounting, at the election of the taxpayer, compensation paid to employees may be included in the payroll factor by use of the cash method if the taxpayer is required to report such compensation under such method for unemployment compensation purposes.

(b)1. The amount of wages paid is included in the payroll factor, regardless of whether the wages are treated as a capital expenditure by the taxpayer.

2. Example: The taxpayer uses some of its employees in the construction of a storage building which, upon completion is used in the regular course of taxpayer’s trade or business. The wages paid to those employees are treated as a capital expenditure by the taxpayer. The amount of such wages is included in the payroll factor, even though those wages are also included in the property factor upon completion of the building.

(2)(a) The term “compensation” means wages, salaries, commissions, and any other form of remuneration paid to employees for personal services.

(b) Amounts considered compensation include deferred compensation, value of board, rent, housing, lodging, and other benefits or services furnished to employees by the taxpayer in return for personal services provided that such amounts constitute income to the recipient under the Federal Internal Revenue Code.

(c) In the case of employees not subject to the Internal Revenue Code, e.g., those employees in foreign countries, the determination of whether such benefits or services would constitute income to the employees shall be made as though such employees were subject to the Federal Internal Revenue Code.

(3) Only amounts paid directly to employees are included in the payroll factor.

(a) The term “employee” means any officer of a corporation, or any individual who, under the usual common-law rules applicable in determining the employer-employee relationship, has the status of an employee. Generally, a person will be considered to be an employee if he is included by the taxpayer as an employee for purposes of the payroll taxes imposed by the Federal Insurance Contributions Act; except that, since certain individuals are included within the term “employees” in the Federal Insurance Contributions Act who would not be employees under the usual common-law rules, it may be established that a person who is included as an employee for purposes of the Federal Insurance Contributions Act is not an employee for purposes of this rule. Payments made to an independent contractor or any other person not properly classifiable as an employee are excluded.

(b)1. The business which is considered to be the common-law employer must include an employee’s salary in the payroll factor, even though a common paymaster is used. The common paymaster may not include the salary of an individual for whom it is not the common-law employer.

2. Salary reimbursement payments to an affiliated corporation for employees loaned to a corporation may not be included in the payroll factor. This provision is not intended to exclude payments to an affiliated corporation acting as a common paymaster from being included in the payroll factor if the reimbursements are for common-law employees.

(c) The wages paid to an individual who is employed directly by an employment agency, such as a temporary agency or a leasing company, are not included in the payroll factor. The employment agency would include the wages paid to that individual.

(4) Compensation paid in Florida.

(a) If compensation paid to employees is included in the payroll factor by use of the cash method of accounting or if the taxpayer is required to report such compensation under such method for unemployment compensation purposes, it shall be presumed that the total wages reported by the taxpayer to Florida for unemployment compensation purposes constitutes compensation paid in Florida except for compensation excluded by these rules. The presumption may be overcome by satisfactory evidence that an employee’s compensation is not properly reportable to Florida for unemployment compensation purposes.

(b) If the employee’s services are performed both within and without this state, the employee’s compensation will be attributed to this state:

1. If the employee’s base of operations is in this state;

2. If there is no base of operations in any state in which some part of the service is performed, but the place from which the service is directed or controlled is in this state; or

3. If the base of operations or the place from which the service is directed or controlled is not in any state in which some part of the service is performed, but the employee’s residence is in this state.

a. The term “base of operations” is the place of more or less permanent nature from which the employee starts his work and to which he customarily returns in order to receive instructions from the taxpayer or communications from his customers or other persons or to replenish stock or other materials, repair equipment or perform any other functions necessary to the exercise of his trade or profession at some other point or points.

b. The term “place from which the service is directed or controlled” refers to the place from which the power to direct or control is exercised by the taxpayer.

(5)(a) Any amount of payroll which is directly related to an amount of gross receipts or income which is deducted, subtracted, or otherwise excluded in determining adjusted federal income is excluded from both the numerator and denominator of the payroll factor.

(b) Example: The taxpayer owns various securities as an investment separate and apart from its trade or business. The income from the securities is determined to be non-business income. The management of the taxpayer’s investment portfolio is the only duty of Mr. X, an employee. The salary paid to Mr. X is excluded from the payroll factor.

(6) Compensation paid to employees of a partnership is included in the denominator of the taxpayer’s payroll factor to the extent of the taxpayer’s interest in the partnership. The amount paid to employees in Florida is also included in the numerator of the payroll factor to the extent of the taxpayer’s interest in the partnership. Partnership payroll 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 payroll factor.

Rulemaking Authority 213.06(1), 220.51 FS. Law Implemented 220.13, 220.15, 220.44 FS. History–New 5-17-94, Amended 3-18-96, 3-13-00.