Could this cargo-delivery business use Florida's transportation-company revenue-mile apportionment factor?

Plain-English summary

The Florida Department of Revenue concluded that this taxpayer was a transportation company because its income came primarily from transporting customer cargo from one location to another.

The taxpayer also performed some research and development to fulfill its delivery contracts, but did not conduct that work to produce goods for sale to third parties. The transportation service remained its primary revenue activity.

Florida income was apportioned using revenue miles in Florida divided by revenue miles everywhere. Empty or “dead” miles without freight or passengers were excluded, while revenue miles not attributable to any state were included in the denominator. Several operational details and one additional issue are redacted, so the public ruling does not support a more specific mileage formula for those hidden facts.

What this means for you

Transportation businesses

The special factor depends on income being derived primarily from moving people or goods for consideration. Related design or research work did not displace the primary transportation activity here.

Corporate tax teams

Track freight weight, compensated miles, Florida-boundary miles, empty miles, and miles not attributable to a state separately.

Accountants and tax professionals

Do not reconstruct redacted operational facts. The visible ruling supports the statutory revenue-mile framework, not assumptions about the undisclosed cargo or routes.

Common questions

Q: Did some research and development prevent transportation-company status?
A: No, under these facts.

Q: Were empty miles included?
A: No.

Q: Were revenue miles not attributable to a state included?
A: Yes, in the everywhere denominator.

Citations and references

• Fla. Stat. §§ 213.22 and 220.151(2)(a), (c)
• Fla. Admin. Code r. 12C-1.0151(2)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 16C1-002

Original ruling text

Executive
Director
Leon M. Biegalski

QUESTION: IS TAXPAYER A TRANSPORTATION COMPANY? IF TAXPAYER CAN
UTILIZE THE TRANSPORTATION COMPANY APPORTIONMENT FACTOR PURSUANT
TO S. 220.151(2), F.S., WHAT IS THE PROPER MEASUREMENT OF REVENUE MILES
WITHIN AND WITHOUT FLORIDA?
ANSWER: TAXPAYER IS A TRANSPORTATION COMPANY. REVENUE MILES ARE
AS PROVIDED BY S. 220.151(2)(C), F.S.
October 17, 2016
Re: Technical Assistance Advisement – 16C1-002
Apportionment for Special Industries – Transportation Company
Section 220.151, Florida Statutes (“F.S.”)
Rule 12C-1.0151, Florida Administrative Code (“F.A.C.”)
XXXX (“Taxpayer”)
FEIN: XXXX
Dear XXXX:
This is in response to your request dated February 29, 2016, for a Technical Assistance Advisement
(“TAA”) pursuant to section 213.22, F.S., and Rule Chapter 12-11, F.A.C., on whether Taxpayer
furnishes transportation services and is eligible to apportion its income to Florida utilizing a factor of
revenue miles within Florida divided by revenue miles everywhere pursuant to s. 220.151, F.S.; and if
so, the proper measurement of its revenue miles within and without Florida.
FACTS SUPPLIED BY TAXPAYER
Taxpayer designs, manufactures, and XXXX. It is headquartered in XXXX. Taxpayer contracts with
XXXX customers to transport and deliver goods (XXXX) to specified locations XXXX. XXXX. This
type of contract requires Taxpayer to deliver a specified amount of cargo XXXX. Taxpayer also enters
into XXXX contracts with XXXX customers for delivery of cargo (i.e., XXXX) to a specified XXXX.
XXXX contracts may include some research and development (“R&D”).
Taxpayer engages in some R&D in order to perform the contracted delivery service. XXXX. However,
Taxpayer does not engage in R&D to produce goods for sale to third parties. XXXX. XXXX.
Taxpayer’s revenue is primarily from furnishing XXXX delivery (i.e., transportation) services. XXXX.
XXXX.
Child Support – Ann Coffin, Director  General Tax Administration – Maria Johnson, Director
Property Tax Oversight – Dr. Maurice Gogarty, Director  Information Services – Damu Kuttikrishnan, Director

http://dor.myflorida.com/dor/
Florida Department of Revenue
Tallahassee, Florida 32399-0100

Technical Assistance Advisement
Page 2

Taxpayer’s operations in Florida XXXX.
XXXX.
XXXX1. XXXX.2

1. XXXX
   XXXX
2. XXXX
   XXXX
3. XXXX
   XXXX. XXXX3.
   XXXX. XXXX4.
   Taxpayer states that because it is in the business of furnishing transportation services and delivering
   freight on behalf of its customers, Taxpayer should be considered a provider of transportation services
   for Florida apportionment purposes. To determine revenue miles, Taxpayer proposes using the number
   of Florida XXXX miles5 as the numerator; and for the denominator, Taxpayer would XXXX.
   XXXX
   ISSUES PRESENTED
   1.

Whether Taxpayer is a transportation company?

2. If Taxpayer can utilize the transportation company apportionment factor pursuant to s. 220.151(2),
   F.S., what is the proper measurement of revenue miles within and without Florida?
3. Whether XXXX should be excluded from the apportionment factor?

1

XXXX
XXXX
3
Provided by XXXX, 2016.
4
Provided by XXXX, 2016.
5
Taxpayer’s TAA request states, XXXX.
2

Technical Assistance Advisement
Page 3

LAW
Section 220.151(2), F.S., states in part:
(2) The tax base for a taxpayer furnishing transportation services, for the purpose
of computing a tax on those activities, shall be apportioned to this state by
multiplying such base by a fraction the numerator of which is the revenue miles of
the taxpayer in this state and the denominator of which is the revenue miles of the
taxpayer everywhere.
(a) For transportation other than by pipeline, a revenue mile is the transportation
of one passenger or 1 net ton of freight the distance of 1 mile for a consideration….

(c) For purposes of paragraph (a), in computing the revenue miles of any taxpayer
engaged in furnishing air or sea transportation services, the “revenue miles in this
state” shall include all miles traversed within the area bounded on the west by the
meridian of longitude 87°30′ west from Greenwich, bounded on the north by the
northern land border of this state or the parallel of latitude 31° north from the
equator, bounded on the east by the meridian of longitude 80° west from
Greenwich, and bounded on the south by the parallel of latitude 23°30′ north from
the equator as the case may be. The “revenue miles in this state” shall also include
all miles traversed between points in this state, even though the route of travel is
not wholly over the land mass of the state. The department may prescribe standard
mileage tables for the purpose of determining revenue miles in the state under this
paragraph, rather than requiring taxpayers to compute from their records the actual
number of miles traversed within such boundaries or points from time to time.
(d) For purposes of this subsection, the term “taxpayer furnishing transportation
services” includes taxpayers engaged exclusively in interstate commerce.

Rule 12C-1.0151(2), F.A.C., states in part:
(2) Transportation Companies.
(a)1. Definition of taxpayer providing transportation services. A taxpayer providing
transportation services is a business whose income is derived primarily from
transporting people or goods from one location to another.

4. For tax years beginning on or after January 1, 1989, the term “taxpayer furnishing
   transportation services” in Section 220.151, F.S., includes taxpayers engaged
   exclusively in interstate commerce. Transportation companies that deliver or pick

Technical Assistance Advisement
Page 4

up goods or passengers in this state, as well as corporations that do not have a point
of origin or termination within this state, are subject to the Florida Income Tax
Code whenever they have revenue miles in Florida.
(b) Mileage.

1. Air mail, air express cargo, and passenger excess baggage shall be considered
   freight for the purpose of computing freight revenue miles and gross receipts from
   freight transportation.
2. “Dead miles” for which no revenue is earned are not included in computing the
   apportionment factor. For example, if a common carrier hauls freight from Miami
   to Atlanta and returns to Miami without any freight, the mileage from Atlanta to
   Miami is not included in the apportionment factor. Only the mileage from Miami
   to Atlanta is considered revenue miles.
   (c) Apportionment Factor. The business income of a transportation company
   providing transportation services, partially or wholly in interstate or foreign
   commerce, shall be apportioned to this state by multiplying such income by a
   fraction, the numerator of which is the revenue miles of the taxpayer in this state
   and the denominator of which is the revenue miles of the taxpayer everywhere….

DISCUSSION
1. Transportation Company
Apportionment is a term of art that refers to the method by which the tax base of a business (U.S.
taxable income, Form 1120, as adjusted by the states) is reasonably divided amongst the fifty
states for income tax purposes. One of the underlying concepts of apportionment is the intent to
measure a taxpayer’s business activity within one state, as compared to that taxpayer’s business
activities worldwide, and to allow a state to tax that portion of the business activity within its
jurisdiction. State income taxation is based upon the assumption that the percentage of business
activities within and without a state by a taxpayer is the basis for dividing the tax base. For
example, if five percent of a taxpayer’s business activities are within a state, then in theory that
state should be entitled to impose its income tax scheme on five percent of that taxpayer’s income.
The measurement of business activities within a state has been left to the state legislatures, with
constitutional restrictions. State legislatures adopt a variety of apportionment methods to measure
those business activities, the most common being a three-factor apportionment. Traditional threefactor apportionment uses three different measures of a taxpayer’s business activities (sales,
payroll, and property), with those measures being combined in order to reach an average. Florida
is similar, but weighs the sales factor at fifty percent, and the payroll and property factors at
twenty-five percent each.

Technical Assistance Advisement
Page 5

There are a couple of exceptions to the three-factor apportionment formula. One of the exceptions
applies to taxpayers who furnish transportation services. See Section 220.151(2), F.S. An entity
which qualifies as a transportation service provider uses a single-factor formula for apportionment
based upon revenue miles in this state (the numerator) over revenue miles everywhere (the
denominator). Rule 12C-1.0151(2)(a)(1), F.A.C., provides: “A taxpayer providing transportation
services is a business whose income is derived primarily from transporting people or goods from
one location to another.” Taxpayer’s income is derived primarily from transporting goods (i.e.,
XXXX) to a specific location XXXX.
The facts as presented indicate that Taxpayer is a transportation company starting with tax year
beginning XXXX, as defined under Rule 12C-1.0151(2)(a)(1), F.A.C., since it is a “business
whose income is derived primarily from transporting people or goods from one location to
another.”

2. Revenue Miles
   A revenue mile is defined in Section 220.151(2)(a), F.S., as the “transportation of one passenger
   or 1 net ton of freight the distance of one mile for a consideration.” Taxpayer’s Florida revenue
   miles would include total XXXX miles freight or people are transported XXXX to the boundary
   provided by s. 220.151(2)(c), F.S. Everywhere revenue miles would consist of total XXXX miles
   traversed to transport freight or people XXXX. The single factor apportionment does not include
   “dead miles,” which is when the transporter does not carry any freight or passengers during
   transport. Rule 12C-1.0151(2)(b)(2), F.A.C. However, it does include “no-where miles” in the
   denominator, which are revenue miles not attributable to any state.
   Section 220.151(2)(c), F.S., defines revenue miles as “all miles traversed within the area bounded
   on the west by the meridian of longitude 87°31ʹ west from Greenwich, bounded on the north by
   the northern land border of this state or the parallel of latitude 31° north from the equator, bounded
   on the east by the meridian of longitude 80° west from Greenwich, and bounded on the south by
   the parallel of latitude 23°30ʹ north from the equator as the case may be.”
3. XXXX
   Based on conversations with Taxpayer, Taxpayer has XXXX. In addition, Taxpayer XXXX.6
   XXXX.

6

Based on several conversations with Taxpayer and confirmed in a conference held XXXX, 2016.

Technical Assistance Advisement
Page 6

CONCLUSION
Taxpayer is a transportation company. Taxpayer’s Florida revenue miles would include total
XXXX miles freight or people are transported XXXX to the boundary provided by s.
220.151(2)(c), F.S. Everywhere revenue miles would consist of total XXXX miles traversed to
transport freight or people XXXX. Taxpayer XXXX. However, Taxpayer is reminded that
should the facts provided in its request of February 29, 2016, be determined to be incorrect or
changed, Taxpayer’s method of apportionment could be substantially different from what has
been agreed upon in this TAA.
This response constitutes a Technical Assistance Advisement under section 213.22, F.S., which
is binding on the Department only under the facts and circumstances described in the request for
this advice as specified in section 213.22, F.S. Our response is based on those facts and specific
situation summarized above. You are advised that subsequent statutory or administrative rule
changes or judicial interpretations of the statutes or rules upon this advice is based may subject
future transactions to a different treatment than expressed in this response.
You are further advised that this response, your request and related backup documents are public
records under Chapter 119, F.S., and are subject to disclosure to the public under the conditions
of section 213.22, F.S. Confidential information must be deleted before public disclosure. In an
effort to protect confidentiality, we request you provide the undersigned with an edited copy of
your request for Technical Assistance Advisement, the backup material and this response,
deleting names, addresses and any other details which might lead to identification of the taxpayer.
Your response should be received by the Department within 15 days of the date of this letter.
Sincerely,

Susan R. Coxwell
Tax Law Specialist
Technical Assistance and Dispute Resolution
(850) 717-6478
Record ID 209887