Sec. 132.15. Apportionment and allocation of income from business carried on partly within and partly without New York State

(a) If a nonresident individual, or a partnership of which a nonresident individual is a member, carries on a business, trade, profession or occupation both within and without New York State, the items of income, gain, loss and deduction attributable to such business, trade, profession or occupation must be apportioned and allocated to New York State on a fair and equitable basis in accordance with approved methods of accounting.

(b) If the books of the business are so kept as regularly to disclose, to the satisfaction of the Tax Commission, the proportion of the net amount of the items of income, gain, loss and deduction derived from or connected with New York State sources, the New York State nonresident personal income tax return of the taxpayer must disclose the total amount of such items, the net amount of such items allocated to New York State, and the basis upon which such allocation is made.

(c) If the books and records of the business do not disclose, to the satisfaction of the Tax Commission, the proportion of the net amount of the items of income, gain, loss and deduction attributable to the activities of the business carried on in New York State, such proportion will, except as provided in section 132.16 of this Part and section 112.7(b) of this Title, be determined by multiplying (1) the net amount of the items of income, gain, loss and deduction of the business by (2) the average of the percentages described in subdivisions (d) through (f) of this section.

(d) Property percentage.

(1) General.

The property percentage is computed by dividing (i) the average of the values, at the beginning and end of the taxable year, of real and tangible personal property owned by or rented to the taxpayer, which is connected with the business and located within New York State, by (ii) the average of the values, at the beginning and end of the taxable year, of all real and tangible personal property owned by or rented to the taxpayer, which is connected with the business and located both within and without New York State. For this purpose, real and tangible personal property includes real and tangible personal property rented to the taxpayer and used in the business. Real property the income or gain from which is allocated pursuant to section 132.16 of this Part is disregarded in computing the property percentage described in this paragraph.

(2) Rented real and tangible personal property.

(i) The fair market value of real and tangible personal property, both within and without New York State, which is rented to the taxpayer is determined by multiplying the gross rents payable during the taxable year by eight.

(ii) Gross rent, as used in this paragraph, is the actual sum of money or other consideration payable directly or indirectly by the taxpayer or for the taxpayer’s benefit for the use or possession of the property, and includes:

(a) any amount payable for the use or possession of real and tangible personal property, or any part thereof, whether designated as a fixed sum of money or as a percentage of sales, profits or otherwise;

(b) any amount payable as additional rent or in lieu of rent, such as interest, taxes, insurance, repairs or any other amount required to be paid by the terms of a lease or other arrangement;

(c) a proportionate part of the cost of any improvement to real and tangible personal property made by or on behalf of the taxpayer which reverts to the owner or lessor upon termination of a lease or other arrangement, based on the unexpired term of the lease commencing with the date the improvement is completed (or the life of the improvement if its life expectancy is less than the unexpired term of the lease); provided, however, that where a building is erected on leased land by or on behalf of the taxpayer, the value of the land is determined by multiplying the gross rent by eight, and the value of the building is determined in the same manner as if owned by the taxpayer. The proportionate part of the cost of an improvement (other than a building on leased land) is generally equal to the amount of amortization allowed in computing New York adjusted gross income, whether the lease does or does not contain an option of renewal.

(iii) Gross rents do not include:

(a) any portion of a payment or credit, to the proprietor of the business or to a partner in the partnership conducting the business, for the use of real and tangible personal property;

(b) amounts payable as separate charges for water and electric service furnished by the lessor;

(c) amounts payable for storage, where no designated space under the control of the taxpayer as a tenant is rented for storage purposes; or

(d) that portion of any rental payment which, in the discretion of the commissioner, is applicable to property subleased by the taxpayer and not used by the taxpayer in the carrying on of the business.

(3) Other valuation methods. If the general method outlined in this subdivision results in valuations which are inaccurate or which are not fair and equitable, any other method which will fairly and equitably reflect the value may be adopted by the commissioner, either on the commissioner’s own motion or on request of a taxpayer. A request by a taxpayer for an alternative method may be made at the time the New York State nonresident personal income tax return to which the request relates is filed. A request is made by using the proposed method in the personal income tax return. The proposed method must be fully explained in the personal income tax return. Any request must contain all facts with respect to the property forming the basis for the proposed valuation and also a computation of the value of the rented real and tangible personal property based on gross rents in accordance with paragraph (2) of this subdivision. Once approved by the commissioner, such basis or such other method must be used for subsequent years until the facts upon which it is based are materially changed.

(e) Payroll percentage.

The payroll percentage is computed by dividing (1) the total wages, salaries and other personal service compensation paid or incurred during the taxable year to employees, in connection with business carried on within New York State, by (2) the total of all wages, salaries and other personal service compensation paid or incurred during the taxable year to employees in connection with the business carried on both within and without New York State.

(f) Gross income percentage.

The gross income percentage is computed by dividing (1) the gross sales or charges for services performed by or through an office, branch or agency of the business located within New York State, by (2) the total of all gross sales or charges for services performed within and without New York State. The sales or charges to be allocated to New York State include all sales negotiated or consummated, and charges for services performed, by an employee, agent, agency or independent contractor chiefly situated at, connected by contract or otherwise with, or sent out from, offices, branches of the business, or other agencies, situated within New York State.