Appendix — Smoot Sand & Gravel Corp. v. District of Columbia

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. UNITED STATES COURT OF a ‘g

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: FOR THE DISTRICT OF COLUMBIA UIT \

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- Nos, 14,280, 14,291, 14,292, 14,298, 14,294

Pur Smoot Sanp aNnD GRAVEL Corporation, PETITIONER

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District or CoLUMBIA, RESPONDENT

On Petition for Review of Decisions of the

District of Columbia Tax Court

| Decided November 26, 1958

Mr. David R. Shelton for petitioner.

. Mr. Henry E. Wizon, Assistant Corporation Counsel for

the District of Columbia,.with whom Messrs. Chester H.

Gray, Corporation Counsel, and. Milton D. Korman,

Principal Assistant Corporation ‘Counsel, were on the /

. . brief for respondent.

Before Epcerton, ‘Bazeton and Wasiixeton, Circuit

Judges.

| Wasninoton, Circift iitens The Smoot Sand and

, Gravel Corporation petitions for review of decisions of

the District of Columbia Tax Court determining that de-

ficiencies in franchise taxes assessed against the petitioner

and paid to the Distriet for the years 1948 to 1954, in-

clusive, were correctly assessed. The appeal questions the

validity of regulations promulgated by the. Commissioners

to govern the apportionment te the District for franchise

tax purposes of a part of the net income of petitioner’s

business, which was earried on partly within and partly

3 a if ae 2a i: z gant

without the District. The suatedline statute is the District

‘of. Columbia Income and Franchise Tax Act, D.@.Copr

§§ 47-1571, 47: 1ht1a, 47-1580, and.47-1580a (1951).

The petitioner is a Delaware corporation having’ its

principle offite in the District of Columbia. It removes

v4

“. ° washes, and grades sand and gravel along the shores rd

the Petomac River and its tributaries. in Maryland and

Virginia and transports the processed material in scows .

4 by tugboat to three ‘‘plants’”’ inthe District of Columbia

where the’ prodtcts are stored and seld., During the tax- |

“able years in question approximately 95% of the sand

and gravel was disposed of in ‘the District of Columbia

“through sales effected at the, three District plants, and

the remaihing 5% was sold in Ajexandria, Virginia. The

: Assessor for the District assessed and collected taxés on

" papproximately 95% of petitioner's net income for each

_" of the taxable years, pursuant to’ regulations issued by

the Commissioners requiring, in the case of a business con-

sisting: of the manufacture and sale of tangible personal

property. carried on partly within and partly without the

‘District, that the ‘portion of the net income to be appor-

Se. tioned to the District for franchise tax purposes shall -’

be the percentage that sales made in the. District during.

the taxable year bear to total sales: everywhere during .

ef:

that year.’ ‘The Tax Court affirmed the assessments, - ,

' The. pertinent parts of the Regulations Pertaining to Income

. & Franchise Taxes, promulgated or August 31, 1948, read:

; ‘“See, 10-2. The measure of the franchise tax shall he that .

portion of the nét. income of a corporation or unincorporated

,business as is fairly attributable to any trade or business car- |

ried on or engaged in within the District, as defined in the |

Act, and. suck other net income as is derived from sources

within the District. The pottion of such net income which is... -

‘fairly attributable’ to any trade-or business or such other net

income as is derived from sources within the District shall be

determined by allocation and ‘apportionment thereof as pre-

L seribed in Sections 10-2(b), 10-2(¢), 10-2(d), mace,

5 : 7 e ‘e

| “i. 10-2(b). ; If the gross income is derived from

engaging i in a — or r business inti within and partly with-

wean oe. eee

3a

taking the view .that this court had upheld thie validity.

of this regulation i in Lever Bros. Co. v. District of Colum. :

«bia, 92 U. S.App.D.C. 147, °153,. 204 ‘F.2d 39, 45 ,(1953), -

and District of Columbia v. Radio Corporation. of Amer-

ica, supra, note 1. Seé also Eastman Kodak Co..v. Dis-

‘trict of Columbia, 76 U.S.App.D.C. 339, 131 F.2d 347

(1942), and Pamtz v. District of rr 74 App. D.C.

284, 122 F.2d 61 a

¥ nw

: the District or - from sources both. within and without the ~

District, such gross income shall be allocated and apportioned

> in accordance with the specific provisions | or formulae pre-

seribed in these regulations.

- 10-2(a). Income from Trade or Busiriess. . If the :

are or business: is carried on entirely within the District,

_ the olin gross income from trade or business shall be allo-

” eated to the District. If the trade or business ‘is carried on *

‘partly -within and pdrtly without the District, that portion of .

the gross income from trade or business to be apportioned t to.

the ‘District shall be determined as follows:

‘*(1) Income from sales of tangible personal property.

‘ta. Whére gross income for any taxable year is Jerived & |

from the manufacture and sale or purclfase and sale of tangible

personal proptrty, the portion thereof to be apportioned to

the District shall be such percentage of the total of such gross

in¢ome as the District. sales made during such taxable year

o 2

year.

These regulations were stated in Section 7 to be effective from

January 1, 1948. In any event, the regulations of November 27,

1947, would, as the Tax Court recognized, have had, the same effect.

.The ‘regulations. issued on March 17, 1953, and August 6, 1953,

_ were substantially the same insofar as concerns the apportionment

formula: ef., ag to, the definition ‘of .“‘ District sales,’’ District of .

Columbia v. Radio Corporation of America, 98 U.S. App. D.C.

119, 232 F, 2d 376, cert. denied, 352 U.S. 845°(1956). We have:

nv occasion in this opinion to. consider. other parts of the August

6, 1953, regulations.

Although Sections 10-2(b) and 10-2(d), as quoted above; refer

to‘ income’’ we do not construe this as atirection for appor- ..

- tionnfént of-‘‘gross’’. income in view of the provisions of Section

10-2~which limit ‘the apportionment to net income. The word

“‘gross’’ was eliminated in the asad of the eves promul-

gated on A uguet 6, 1953.

bear to the total sales made spines during such taxable’

. 4a

The petitioner apparently, agrees that it ‘‘manufactures’’

and selly sand and gravel and that it falls within the

reach of the regulation.’ Its contentions here are that

under the language of the governing statute, its net in- |

come must be apportioned by a formula which takes into

account its property values and operating costs, as well

as sales; that the regulation is invalid because it directs

the apportionment of net ‘income by considering only

sales; and that this issue was not raised or decided in °

the Lever Bros. and RCA cases.

We agree that in Lever Bros. and RCA we were not

called on specifically to decide whether:the District statute

required the Commissioners’ regulations to provide for’ |

apportionment of net income on the basis of sales, prop-

erty values, and operating costs, instead of exclusively

on sales within the District. But we stated in ‘Lever Bros.:

‘Certainly the due process clause. does Not require

apportionment of part of the gross receipts from

sales to the -jurisdi¢tion of manufacture. [Citing

casés] _ We conelide, therefore, that the regulation

preseribed by the Commissioners for the year 1948

‘ .. and eis by the Assessor was valid under the

. \Aet -. 92 1.S.App.D-C. at 153, 204 F.2d at 45.

And in the ae and Eastman Kodak cases we ruled,

under earlier tax statutes, tat an apportionment formula

based solely on sales may validly be applied: to multi- ’

state business enterprises; even though produetion of thé.

‘article sold vee “yrred outside the District: Nevertheless,

we will consider here the gee contentions petitioner

makes.

The statute invdhved in this case imposes, for the priv-

ilege of carry ing oft har engaging in any tradé or business

within the I strict, ‘a Scsaeemaais tax at the rate, of 4%

e; In this case then we’ are: ‘not concerned with the rule prescribe!

or followed for other corporations which do not manufacture and

séll tangible .petyonal property,

5a

upon the net income of every corporation which is derived

from sources within -the District. D.C.Cope §§ 47-1571,

47: 157 1a; - and: 47-1580 (1951). Section 47-1580 provides

that the measure of the tax_‘‘shall be that portion of the

net income of the corporation . . . as is fairly attributable

to any mente Se business carried on or engaged in within

the District:’’ In addition, Section 47-1584 of the Code

- provides : tt:

*‘If the trade or business of any corporation ... is.

enrried on or engaged in both within and without

the District, the net income derived therefrom shall,

for the purposes of. this article, be deemed to be in-

come from sources within and without the District.

Where the net income of a corporation... is derived

-from sources both within and .without the District.

the portion thereof subject to tax under this article

shall be determined under regulation or regulations

‘preseribed by the Commissioners.’”’ ,

-It will tnemediately be noted that the “etatute. does, not

direct the Commissioners to give weight to any particu:

lar factors in prescribing a formula to determine the

portion of net income which is fairly attributable to the

business carried on*within the District. Thus the -resn-

lation in issue,. which relies on sales as the determina-

tive factok, does not violate a specific statutory pr ‘Ovision

as to the factors to be taken into account. -Nor does

_ violate the statutory direction that where

| is} carried on both within and without the -

District, the net income therefrom shall be deemed to be

income from sdyrces within and without the District. The

regulation in te reseribes a-formula-for apportion-

ment o¥ income in the situation where ‘sales are in fact’

made outside the District as well as within it, and we.

-read it as being so limited in application. The tegulation

thus will” inevitably apportion Or divide the net income,

- on the basis of sales, between the District — taxing

jurisdictions where sales are made. |

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nce a Af

* Nor is there any basis for reading into the statute ah

implied prohibition against use. of’ the sales factor alone

in making apportionment. The. present statute was en- »

acted in: 1947. This: was ‘some years after this court

~ had. upheld—in Eastman Kodak and Panitz—the use. of’.

. the formula here in question under earlier statutes. Al-

though for the first time the present statute used the

words -‘‘ fairly attributable,”’ and included the provision

that the net income of a multi-state businéss shall be

deemed to be income from sources within and without’

' the District, Congress delegated to the ‘Commissioners

the task ‘of making the rules to determine the part of

the nef income which is to be considered to be. derived

from sources within the District—and.it did this in the light

‘of the established regulation. Tf Congress’ had thought —

that the part of the net income which was fairly attrib-

~~ utable to the District in the case of.a manufacturing and

‘selling business could not properly be determined by an

apportionment formula which took into account the sole :

factor ‘of sales in the District as _compared with total -

2 sales,.it could easily have so stated. “In the circumstances

its failure to do so is significant, not only eliminating any

basis to infer disapproval of the rule,:: ‘but giving some -

basis to infer approval. ;

' Petitioner urges that the ‘aclusion of. these new: provi-

sions in the present statute was brought about by certain

Supreme Court decisions and that Congréss necessarily

_ intended to réquire the use of a three-factor apportion-

ment formula based on sales, manufacturing costs, and

property values. Of the, fives cases relied on by peti,

tioner, three—Underwood T1 ypewriter Co..v. Chamberlain,

254 U.S. 113. (1920); Bass, Ratcliff’ Gretton, Ttd. v.

State Tax Commission, 266 U.S. 271 (1924); National

Leather Co. v. Massachusetts, 277 U.S. 413 (1928)—sus-

tained use of a one- factor formula under+the proof ad-

duced. One—Hans Rees’ ‘Sons v. North Carolina, 283°

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U.S, 123°(1931)—held, ‘under ‘the proof, that the ‘stat.

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°

utory one-factor formula involved, -based’ on ‘property

values rather than- sales; achieved an arbitrary ‘and un-

reasonable result in respect of the taxpayer before it. The .

* fifth case—Butler Bros. .v.,McColgan, 315 U.S. 501 (1942)

| involved. a three-factor .formula, but’ not a formula.

/ -theSeeretary.””” =. , nw

“«" -

identical with the formula contended for by petitioner here.

_ We find nothing in these-decisions to support an inference

that in the District statute Congress intended to: direct

the use of any particular formula, much less the particular

‘three-factor formula urged by the petitioner.

A somewhat comparable provision of the Federal income

tax law. provides little assistahee here. Section 1/M(e) -

. of the. Internal Revenue ‘Code ‘of 1939, 43 Strat. %5, 26

U.S.C. §°119(e),® provides, fore Federal income tax pur-

poses, that income - ae ean *

(2). from the sale of personal property produced

(in whole or’in part) by the taxpayerwithin aiid sold:. |

“without the United States, or produced (in whole or

United States, shall he treated as derived partly

_-from sources within and partly from sources’ withopt \

the United States... +) Ay

And that. . ie | ; 6 ur ‘SS

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Within the United States may be. determined by

‘processes or formulas of general - apportionment -

-/ pres€ribed by the Commissienerwith the approval ‘of

rf ,

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The District statute undeniably’ has saqne similarities, but.

its énactment,_ in. 1947 does hot kequire the conclusion that

‘the District Commissioners were to he bound by the. regu-

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the portion of suc net income attributable to sources .

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= £9 $e also’ Int. Rew.Cove sf°1958%§ 863(/hp. Se Oe ee, oe

* . in part) by the taxpayer without and. sold within the . .

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"lations issued ren the Federal statute. This is con-

firmed by the omission in the pre Wat statute ~

_ of the previous provision that the Assessor ‘‘shall apply -

_as far as practicable the administrative ‘andyjudicial inter-

pretations of the Federaltiicome tax law.’ ‘The failure

{o reenact this provision, of one similar to. it, indicates

quite clearly that Congress _ aie t intend to direct that

_ the Commissiontrs base their réations on those promul. .

- gated under the Federal statute, particularly in view of

* the existing District regulations which were not repudiated. -

. Moreover, the District. statute levies. a franchise tax for

the privilege of doing businesg in the District, and the °

criteria which are to be taken into account for the taxing |

of such a privilege are not necessarily the same as, or,

even similar to, those for a Epderal tax. on income.

°

_There being -no statutory bar to the apportioament for- .

mula adepted in the regulation, ‘the questions remain

thet the regulation is inherently arbitrary and unrea-—

_ sonable’; or, if not inherently unreasonable, whether the pe:

_ titioner has showgf that, as applied to it, the regulation‘un-

reasonably apportions to the District income whi¢h.prop-

. erly has no relation to the privilege of doing business here.

® On the first question Eastman Kodak and Panitz would

seem to supply the answer. Apportionment of income by

using a one-factor formula. was upheld as against constitu-

‘tional attacks in the Underwood Typewriter, Bass, Ratcliff

& Gretton,.Ltd., and National Leather cases, supra. ‘And

the gross receipts formula has: been in operation too long +

and ‘upheld in the courts too ftequently to be attacked .

, ; ; ty ;

» e*

‘*In any event, the Federal regulations would not swpport use of”

“ formula urged by petitioner here. See Section are par. A °

ase 2A of Treas. Regs. 111, and Section 39.1 1(b) Case A2

oft Treas. Regs. 118, promulgated urtder the Intern evenue Code

of 1939. P : $5

®* See D.C.Cove § 47-15 29(a) (Supp. yI, 1957).

-

9a. ¥:

as unfair or unreason&ble per se or in the abstract!’”

See Ford Motor Co. v. Beauchamp, 308 U:S. 331 (1939) ;

International Harvester Co, v. Evatt, 329 U.S. 416, 420-21

-(1947); Norfolk & Western Ry. Co. v. North Carolina,

297 U.S. 682 (1936); Maine v] Grand“Trunk Ry. Co.,

142 U.S. 217, 228 (1891). The Ford Motor casptgs

-particularly, apropos. . If a le islgture can base appor-

tionment of the subject taxed 8 actor wf

gress receipts from sales, it must follow that thé Com-

missioners in the exercise of their delegated ‘rule-making

power may also do so, if the statute, as here, does not

forbid it, and if né' other compelling consideration pre-

verits it.7. a ; Grin ae |

There’is no basis for the view that the sales formula

adopted here bears 7° ‘*real and reasonable relation to

the,priyjlege\granted,”’ _ New York vy. Latrobe, 279 Y.S.

~ 421,427 (4929). Not only was.such a view rejected in the’

_ .Ford Motor case, but it seems obvious that sales made in

_ *. the District beara reasonable elation to the privilege

» of doing business here. , The weceipts from such ‘sales were

_ in,fact derived from District sources and they represented

a material attribute of the business earried.on hete. Al-

. though the product’ sold: in the District was ‘‘manufac- .

tured’’ to a large extent outside. the District, it is not

_ © Quoted from Household Finance Corp. v. State Tax Commis-

sion, 212 Md. 80, 93, 128 A. 2a B40; 646 (1957).

-" Tt may be noted that in the Ford Motor case the statute appar-

ently did not use the expression ‘‘fairly attributable,’ as does the’ .

statute now before-us. Nor, so far ag appears, did the statutes in-

volved in Underwood Typewriter, Bass, Ratcliff & Gretton, Ltd.,

and National Leather Co. contain such language. But in all bf

these cases the Supreme Court determined that, the statutory one-

factor apportionment formula, under the proof presented, did not

arbitrarily, unreasonably, or unjustly attribute to the state pPofits

earned elsewhere. Butler Bros. v. MeColgan, 315 U.S. 501 (1942),

construed the statutory phrase ‘‘reasonably attributable’’ in this .

light.on the authority of some of. these cases. We think the term

‘fairly attributable’’ in the District statute is to be construed in

the same way. . - ,

ae: 10a

inherently ‘arbitrary or unreasonabl to tax the privilege

of carrying on, husiness* in its setting as a part of the

activities and perquisites of a larger organization having

out-of-state business transactions as well. See Interna-

; a Harvester Co. v. Evatt, supra, p. 423; Ford Motor.

‘Co. Beauchamp, supra, pp. 336-37; Birvs, Ratcliff &

“pais Ltd. v. State Tax Commission, supra, p. 282.

The petitioner failed to show that the apportionment

gf ormula produces an arbitrary and unreasonable result as

*applied to it. Although it urges that the part of its net

incomé which is fairly attributable to business done in

the District ‘must be measured by a three-factor formula, .

- consisting of manufacturing costs incurred, and business

property located, in the District as well as sales made _.-

here, it offered. no evidence which would compel the usev

of these two additional factorsy The manufacturing costs

were deducted in their. entiret} in arriving at the net

income which was allocated. Certainly reason does not

require that they again be"considered as a factor in the

‘allocation, Fi the absence of evidence showing a neces-

sit: for.it. The value ‘nnd situs of thie corporation’s

property used in its operation. could doubtless have been

ruled to be a permissible factor in apportioning income

(ef. Bass, | atcliff & Gretton, Ltd. vy. State Tax Commis-

sion, 266-U.S, 271; National Leather Co. v. Massachusetts,

277 “U.S. 413), but to say that this would be permis-

sible denn not demonstrate that it must be considered

an indispersable factor. In shagt, the’ évidence fails to

demonstrate clearly angl cogen the use of either

or both factors would produce a rate apportion-

ef en se? ‘

e°

* Petitioner not only sold its product . here, but its patesiged

offive was in the District, where ots fetal and accounting affairs

were handled and the general management of all its affairs was

conducted. ,

‘

. e lla ;

we _—' »

ment,® or that any specified percentage of the net iricome

was alone attributable to either factér. (Cf. Norfolk

- Western Ry. Co. vy. North CareEna, 297 U.S. 682

(1936). Significantly there was also no proof tending to

show what part. of the net income was actually earned

ot produced by the business activities carried on in the *

District.. We thus are given no basis. to conclude that

_ the formula’ to apportion net income resulted in

attributing to -Petitioner’s -privilege of-doing business in

ee District a greater value than it actually had. This

case is far different from Hans Rees’ Sons vy. North Caro-

_ lina, 283 U.S. 423 (1931), where the proof showed .that

’

the income was derived from three sources, of which only

two—the manufacturing and tanning operations which

produced no more than 17% of the income—were carried

on in North Carolina., .

Not only is there ) express showing that the District

has allocated to itself tax values heyond its jurisdiction,

but the view that it has done so seems greatly weakened

- by the fact that thg petitioner has never been required

to pay any. income or franchisé taxes to the states of

Maryhnd or Virginia.” Cf. American Bemberq Corp, v. °

Carson, 188 Tenn. 263, 276-77, 219 S.W. 2d 169, 174 (1949).

Thus, we are not here presented with a situation where the

District is in competition with other taxing jurisdictions

for an apportionment of, petitioner's net income.

The regulations authorize the Assessor to give relief

to a taxpayer if the apportionment formala prescribed

results in an ‘‘inequitable’”’ tax in. any specific instance.

———

* We recognize of course that some, perhaps most, states take

one or both such factors, or even other factors, into account in’

apportion ¢ * income for tax purposes. Bat we are concerned here

= with apportionment, formula provided for the ‘District.

the Commissioners were of course not required to adopt what

some might deem to be ‘‘the best passible system of taxation.’

New York v. Latrobe, 279 U\S. at 427.

"It pays only personal and real property taxes to these states

t é

on

‘12a ig tes \. “

Section’ 10-2(d) (1)¢44) of the regulations of August ol,

1948 ;"!. Section 10-2(d) (4) of the regulations of August

6, 1958. 12 There is a reference in the record to-a protest

" filed’ bY the petitioner on March 13, 1952, but the protest

was not offered in evidence. We are not informed as to -

its contents and cannot assume that the petitioner sought

the administfative relief authorized by the regulations.

- In view of petitioner’s failure to show that it has ex-

hausted the administrative remedy,.and of our holding

upon the contentions advanced by it, petitioner cannot now

* ask this court to hold that the assessments,were invalid

and erroneous. Gorham Manufacturing Co. v.:-Tax Com-

~ mission, 266 U.S. 265 (1924); ef. Thomas Paper Stock Co.

V.. District of Columbia, ‘U.S. App. D.C. —, (255 F. e

— 2d 180 (1958). 5

Sic a" a - atiemea AN,

a

Ar This section reads as follows : >

‘Tf it shall appear to aly taxpayer that the hiniesten herein °

prescribed are inapplicable to its business or ‘will operate so

as to apportion to the District a greater portion of the net:

xable income of such taxpayer. than is fairly attributable

to the District, such- taxpayer may file with the Assessor -a

statement of its objection to the use of such formulae together

with a proposed alternative method of apportionment.

- ; “+ 4@ + . : TBE <=

“If, however, the Assessor shadeaonclude that Me use of any

of the formulae or methods herein réferred to would result

in an inequitable tax in any specific instance, he shall deter-

‘mine theagross income from within ‘the District by such other

methods as, in his opinion, is equitable. . ."

. The provision in the regulation of seb 6, 1953, is set out

in Thomas Paper Stock Co, v. District of Columbia, ‘US.

App. D.C. ——, 255 F. 2d 180, 181 (1958).

caus

—

~

Sd eee ae

UNITED STATES COURT OF APPEALS :

FOR THE DISTRICT OF COLUMBUA CIRCUIT

Nos. (14;290, 14,291, 14, 292, 14,293, 14,294

Tae Smoor SAND.AND Graven Corporation, Petitioner

e : Vv.

4 ’

% - District or Conus, Respondent

a

On Petitions ‘for Review of Decisions of the Distrid of |

Columbia Tax Court.

Before: Edgerton, Bazelon and WwW ashington, Ci ire uit

; Judges. ;

, v7 JUDGMENT (

These cases came on to be heard on the record on appeal .

from the District of Columbia Tax Court, and were argued

by counsel.

On ConstvERATION Wuenrror, it is ordered and ‘adjudged

by this court that the decisions of the said Tax Court en

review in these cases are affirmed, with costs. me Mi ,

Per Circuit Judge WasHINGTON:

Dated: Nov 26 1958

.REGULATIONS INVOLVED

, hie the Regulations under the District of Columbia In-

come and Franchise Tax Act of 1947, here involved, it was

_ proved inthe instant case that on March 19, 1948, Corpora-

tion, Counsel Verizon F.. West and Assistant Corporation

Counsel George C. Updegraff—in the presence of District

of Columbia Assessor Edward A. Dent—testified before a

Joint Subcommittee of the United States Congress, as re-

ported at page 105 of-‘‘Hearings Before the Joint Sub-

committee on Fiscal Affairs of the Committees on the Dis-

¢

7 ida

trict of Columbia, Congress of the United States’’ and

advised the Congress as follows:

. “Mr, West. Before you gét off that, I think I can ¢

clarify this and E think I am correct in my statement :

If forfexample, a company sells goods in the District of .

_ Columbia manufactured outside of the District of Co- -

~ lurnbia, from which it makes a net profit of $100,000,

- € Jet us say, we don’t treat that whole $100,000 profit as

_ being taxable in the District of Columbia... Becaase

part of that profit was earned by the manufacturer, |

and only part of it by the sale.

‘So under our system or formula, half of the profit _

— allocated to the District of Columbia and half

elsewhere, ,

‘*ls that not correct, Mr. Updegraff? |

‘‘Mr. Updegraff. That is correct. - |

‘Senator Cain. Tecan understand that. ° °° ».

Regulations promulgated by the Commissioners of the.

District of-Columbia #f August 31, 1948 were as follows:

‘*See. 10-2.. The measure of the franchise tax nel

he that portion of the net income of a corporation

unineerporated business as is fairly attributable to any.

trade or business carried on or engaged in within the

District, as defined in the Aet, and such other net in-

come as is. derived from sourcess within the District.

The portion of such net income which is “fairly attr7but:

able’ to any trade or business or »ach other net income

as is derived from sources within the District shall be .

determined by allocation and apportionment thereof ‘as

prescribed in Sections 10-2(b), 10-2(¢), 10-2(d), 10-2(e).

See. 10-2(b)- ** * If the gross income is derived —

from engaging in a trade or business partf¥ within and

partly without the District or from sources both within

- and without the District, such gross income shall! be

Le allocated and apportioned in accordance with the ‘spe.

_cifie provisions or formulae prescribed in these reg-

ulations. ih e

| a — eT ; .

cet:

15a

**See, 10-2( Income from Trade or Business. If

> the ‘trade or buginess is carried on entirely within the

District, the entwe gross income from trade or business

shall be allocateat tothe District. .1f the trade or busi-

ness is carried on partly within and partly without the

_ District, that portion of the. gross income from trade

or bysiness to be apportioned to the District shall be

determined as follows :

— 8g dancome from sales of tangible personal prop- ;

- erty. :

‘‘a. Where gross income for any taxable vear is de-

rived from the manufacture and sale or purchase and

sale of tangible personal property, the portion thereof

ti he apportioned’ to the District shall be such per-

centage of the total of such gross income as the Dis-

trict sales made during such taxable vear bear to the

total sales made. everywhere during such taxable vear.

For the purpose of this regulation the phrase ‘District

sales’ shall mean the gross receipts from all sales made

which were principally secured, negotiated, or effected

by owners, employees, agents, officers and branches of

the corporation or unincorporated business loeated in

. the Distri¢et ; and the phrase ‘total sates’ shall mean the

" gross’ receipts from all sales.

. e* .,@ . .

tte, © © © (4) * * * Tf it shall appear to any tax-

payer that the formulae herein prescribed are in,

_. applicable to its business or will operate se as to

apportion to the District a greater portion of the net

taxable income of such taxpayer than is fairly attribut-

able to the District, such taxpayer may file with the

Assessor a statement of its objection to the use of

such formulae togther with a proposed alternative

method of apportionment, “

. . .

“Tf, however, the Assessor shall conclude that the

use of any of the formulae or methods herein referred

to .would result in an inequitable tax in any specific

instance, he shall determine the gross income from

within the Distriet by such other method as, in his

- opinion, is equitable. * * *"’

ae

It

l6a .

<

appears that the inci Regulations of August 31, 1948

were again b aateonasel on Octdber 16, 1950, wit ut

change. :

Regulations promulgated on Mareh 17, 1953, were. dl

follows: .

$8 fee, 10-2(d) ( 1 Ja. ‘Where gross ineome for any tax-

able year -is derived from the. manufacture and sale-

or purchase and sale of tangible personal property,

the portion thereof to be apportioned to the District -

shall be such percentage of the total of such gross

income as the District sales made during such taxable

-vear- bear to the total sales made’ every where dur- .

ing such taxable venr. ‘For the parpose of this regu-

‘lation the phrase ‘District sales’ -shall a the gross |

receipts from All sales made which werd principally

secured, negotiated, or effected .by owners, employees,

agents, officers and. branch «-of. the corporation or

unineorporated business in the District ;.and the phrase

‘ ‘total sales’ shall. mean the. gross —— from all —

sales.2’ ,

Regitlations promulgated August 6, 1953, were as uiiee:

“See, 10-2. The measure of the franchise tax shall

be that portion of the net income of the corporation

and unincorporated business as is fairly attributable

_ to-any, trade or business: earried on .or engaged . in

within the District, as defined in the Aet, and such

wther net income-as is derived from sources within

the District. The -portion of such net income which

is ‘fairly attributable’ to any trade ‘or’ business or:

such other net. income as is derived from sources

within the District shall be determined ‘by allocation

and apportionment thereof: as “prescribed in Sees.

10-2(b), 10-2(d), 10:2(¢).

. * * fae) has

**See, 10-2(a). ** 1 ye net income is. derived

from engaging in a trade business partly withm

and partly without’the Distriet or from. sources both

within and without the District, such income shall be

allocated: and: apportioned in accordance with the

nan

17a:

apeciile provisions or formulae prescribed in these,

regulations.

eC * - *

Soe, 10:2(d). * * * If the trade or. business is °

carried on partly within and partly without the Dis-’

trict, that portion of the net income from trade or

business to. be apportioned to the District ‘Shall he .

\

. determined as follows:

‘*(1) Income from sales of tangible personal prop-

‘erty.

., Where income for any taxable vear is derived

from the manufacture and sale or purchase and sale

_of tangible personal property, the portion thereof to

he apportioned to the District shall he stich percent-

age of the total of such fneome as the District sales,

. made during such taxable vear bear. to the total sales

made everywhere during such. taxable ‘vear.” Every

corporation and unineorporated business which carries

on or engages’ in business in the District within the

meaning of the words ‘trade or business’ as defined °

in the Act is, unless specifically. exempted by some

provision of the Act; subject to tax. For the purpose

‘of this ,.regulation, the phrase ‘District sales’ shall

mean, all sales to District customers the income from

which is fairly attributable to the trade or business

carried on or éngaged in within the District, including.

solicitation in the District'by salesmen or other repre-

sentatives of the taxpayer,. that portion of sales to

customers outside the District the. ineome from which

is fairly attributable to the trade or business carried) .

on in the District, and sales of tangible personal prop-

erty the income from which is f rom District sources.

s6(2) Where income ‘for. any taxable year is derived

from work done or services performed, the. portion

thereof to be ‘apportioned:-to the District shall be such

‘percentage of the total of:such income as the aggre-

gate of charges for or costs of such work done and

services, performed.im the District bears to the aggre-

- gate of such charges for or costs of work done and

" services performed by the taxpayer everywhere. ‘The

“Assessor is authorized to use the aggregate of ‘charges’

Vor the aggregate of ‘costs? with ian te to: work done

e

a

and services performed if in his opinion it will produce |

@an ——- eaeanaen

« (4) Where the Assessor: shall determine that the

formulae herein prescribed are inapplicable or inequi-

table.to the taxpayer and.the District in any case,

‘and that the_net income’ of such taxpayer from within

the District may be more accurately determined by the’ .

use of separate accounting, such taxpayer shall report

ity net income from within-the District on ‘the basis

of separate ne and the tax = be assessed

on 7—_ basis.’ ‘

f

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