Which affiliated-group sales belonged in the Florida processor sales-factor percentage furnished to growers and grower cooperatives?

Plain-English summary

The sales factor furnished to growers and cooperatives had to be limited to sales connected with the Florida processing business.

The processor's former sales subsidiary had become inactive, and a division of another affiliate took over domestic sales. The affiliated group also conducted business outside the activities traditionally associated with processors.

The Department said the percentage should include the processor's sales, the sales company's sales, and any other affiliated-group sales that could be considered those of the Florida processor. Including unrelated types of sales would exceed the statutory intent.

What this means for you

The ruling looked through the changed corporate organization to the substance of the processing sales. It did not use every sale of the consolidated affiliated group merely because the entities filed together.

Common questions

Q: Did the factor include the processor's own sales?
A: Yes.

Q: Did it include sales handled by the affiliate that replaced the old sales subsidiary?
A: Yes, to the extent they were sales of the Florida processing business.

Q: Did every sale of the broader affiliated group belong in the factor?
A: No. Other business activities outside processing were excluded.

Q: What did the processor give growers?
A: The sales factor as a percentage, not the dollar volume of sales.

Citations and references

• Fla. Stat. § 220.15(5)(b)2. — processor sales factor furnished to growers
• Fla. Admin. Code r. 12C-1.0155(3)(a)3.a. — grower and cooperative sales factor
• Fla. Admin. Code r. 12C-1.051 — Form F-1120 reference
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 95C1-006

Original ruling text

Jun 21, 1995

Re: TAA 95(C)1-006
Corporate Income Tax - Calculation of the Florida Sales
Factor
XXX, hereinafter referred to as "A";
XXX, hereinafter referred to as "B";
XXX, hereinafter referred to as "C";

XXX, hereinafter referred to as "D"

Dear:

Your letter of March 16, 1995, requested a Technical Assistance
Advisement concerning the calculation of the Florida sales

factor to be reported by processors of XXX to growers and grower
cooperatives. This response to your request constitutes a
Technical Assistance Advisement under Chapter 12-11, Florida
Administrative Code, and is issued to you under the authority of
S. 213.22, Florida Statutes.

FACTS

"A," a producer and seller of XXX juices and drinks, is wholly
owned by "B." "B" also wholly owns "C," a worldwide producer

and distributor of alcoholic beverages.

"A" has continuously filed consolidated Florida corporate income
tax returns, prior to 1988, as its own group, and since 1988, as
part of "B's" consolidated group. "A" purchases XXX from
growers and grower cooperatives, processes it, and transfers the
product intended for domestic consumption to the sales company
for sale to outside entities. Previously, "A's" consolidated

group included a sales subsidiary, referred to as "D," which
handled domestic sales of XXX juice processed by "A." Recently
"D" has become inactive and a division of "C" is fulfilling its

function. Export sales are recorded in "A's" books.

In the past a pro forma Florida sales factor was calculated

based on the sales of "A" and its subsidiaries, including "D."

This sales factor was provided to the growers and grower
cooperatives for use in calculating their corporate income tax

liabilities.

QUESTION

Considering the new organizational structure, what is the proper
method of calculating the Florida sales factor under s. 220.15,
F.S., to be reported by the processor of XXX to growers and

grower cooperatives?

DISCUSSION AND ANALYSIS OF LAW

Subparagraph 220.15(5)(b)2., F.S., states:

"2. When citrus is delivered by a cooperative for a
grower-member, by a grower-member to a cooperative, or by a
grower-participant to a Florida processor, the sales factor

for the growers for such citrus delivered to such processor
shall be the same as the sales factor for the most recent
taxable year of that processor. That sales factor,

expressed only as a percentage and not in terms of the

dollar volume of sales, so as to protect the

confidentiality of the sales of the processor, shall be

furnished on the request of such a grower promptly after it

has been determined for that taxable year."

Rule 12C-1.0155(3)(a)3.a., F.A.C., states:

"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 Rule

12C-1.051, F.A.C."

Although some of the business activities conducted by the
affiliated group, of which "A" and the sales company are
members, fall outside those traditionally engaged in by
processors, it appears the intent of the statute was to include
only sales related to processing in the Florida sales factor
reported to, and used by growers and grower cooperatives. The
inclusion of other types of sales appears to exceed statutory
intent. Therefore, the Florida sales factor reported by "A" to
growers and grower cooperatives from whom XXX is purchased,
should include the sales of "A," the sales company, and any
other sales of the affiliated group which could be considered

those of a Florida processor of XXX.

This response constitutes a Technical Assistance Advisement
under s. 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 s. 213.22, F.S. Our response is
based on those facts and the specific situation summarized
above. You are advised that subsequent statutory or
administrative rule changes or judicial interpretations of the
statutes or rules upon which this advice is based may subject
similar future transactions to a different treatment than

expressed in this response.

You are further advised that this response and your request are
public records under Chapter 119, F.S., which are subject to
disclosure to the public under the conditions of s. 213.22, F.S.
Your name, address, and any other details which might lead to
identification of the taxpayer must be deleted by the Department
before disclosure. In an effort to protect the confidentiality

of such information, we request you notify the undersigned in
writing within 15 days of any deletions you wish made to the

request or the response.

Sincerely,

Suzanne C. Paul

Statutory Compliance Section

SCP/kk
Control No.: 20403