1. (a) Construction contractors — Arkansas Code § 26-51-718(c).

   1. (1) The following special rules are established with respect to the apportionment of income of construction contractors.

   2. (2)

      1. (A) When a taxpayer uses the percentage of completion method of accounting for long-term contracts and has income from sources both inside and outside of Arkansas, the amount of business income derived from such long-term contracts from sources within Arkansas shall be determined pursuant to this part.
      2. (B) A long-term construction contract covers a period in excess of one (1) year from the date of execution of the contract to the date on which the contract is finally completed.

   3. (3)

      1. (A) Business income is apportioned to Arkansas by a three-factor formula consisting of property, payroll, and sales for all construction.
      2. (B) The total of the property plus payroll plus two (2) times the sales percentage is divided by four (4) to determine the apportionment percentage.
      3. (C) The apportionment percentage is then applied to business income to determine the amount apportioned to Arkansas.

   4. (4) Percentage of completion method.

      1. (A) Under this method of accounting for long-term contracts, the amount to be included each year as business income from each contract is the amount by which the gross contract price (which corresponds to the percentage of the entire contract which has been completed during the tax year) exceeds all expenditures made during the tax year in connection with the contract.
      2. (B) In so doing, account must be taken of the material and supplies on hand at the beginning and end of the tax year for use in each such contract. Example: A taxpayer using the percentage of completion method of accounting for long-term contracts entered into a long-term contract to build a structure for nine million dollars ($9,000,000). The contract allowed three (3) years for completion, and, as of the end of the second income year, the taxpayer's books of account (kept on the accrual method) disclosed the following: Receipts Expenditures End of 1st income year $2,700,000 $2,400,000 End of 2nd income year 4,500,000 4,100,000 Totals $7,000,000 $6,500,000 In computing the above expenditures, consideration was given to material and supplies on hand at the beginning and end of each tax year. It was estimated that the contract was thirty percent (30%) completed at the end of the first tax year and eighty percent (80%) completed at the end of the second tax year. The amount to be included as business income for the first tax year is three hundred thousand dollars ($300,000) (30% of $9,000,000, or $2,700,000, less expenditures of $2,400,000 equals $300,000). The amount to be included as business income for the second tax year is four hundred thousand dollars ($400,000) (50% of $9,000,000, or $4,500,000, less expenditures of $4,100,000 equals $400,000).

   5. (5) Property factor.

      1. (A) In general the numerator and denominator of the property factor shall be determined as set forth in Arkansas Code §§ 26-51-710 [repealed] – 26-51-712 [repealed].
      2. (B)

2. (i) However, the following special rules also apply.

   1. (ii)
3. (a) (a) The average value of the taxpayer's cost (including materials and labor) of construction in progress, to the extent that such costs exceed progress billings (accrued or received, depending on whether the taxpayer is on the accrual or cash basis for keeping its accounts) shall be included in the denominator of the property factor.

4. (b) (b) The value of any such construction costs attributable to construction projects in Arkansas shall be included in the numerator of the property factor. Example 1: Taxpayer commenced a long-term construction project in Arkansas as of the beginning of a given year. By the end of its second year, its equity in the costs of production to be reflected in the numerator and denominator of its property factor for such year is computed as follows:

   1st Year	2nd Year
   Beginning Construction Costs -0-	Ending 1,000,000	Beginning	Ending
   Progress billings	-600,000
   Balance 12/31-01/01	$400,000	$400,000
   Construction Costs –Total from beginning of project			$5,000,000
   Progress billings –Total from beginning of project			$4,000,000
   Balance 12/31			$1,000,000
   Balance beginning of year			$ 400,000
   Total			$1,400,000
   Average - One-half (1/2) of value used in property factor			$ 700,000

   1. (c)
   2. (1) (c)(1) Note. It may be necessary to use monthly averages if yearly averages do not properly reflect the average value of the taxpayer's equity.

   3. (2) (2) See Arkansas Code § 26-51-712 [repealed]. Example 2: Same facts as in Example 1, except that progress billings exceeded construction costs. No negative value for the taxpayer's equity in the construction project is shown in the property factor.

      1. (iii) Rent paid for the use of equipment directly attributable to a particular construction project is included in the property factor at eight (8) times the net annual rental rate even though such rental expense may be capitalized into the cost of construction.

   4. (6) Payroll factor.

      1. (A) In general, the numerator and denominator of the payroll factor shall be determined as set forth in Arkansas Code §§ 26-51-713 [repealed] and 26-51-714 [repealed].

      2. (B)

         1. (i) However, the following special rules also apply.
         2. (ii) Compensation paid to employees that is attributable to a particular construction project is included in the payroll factor even though capitalized into the cost of construction.
         3. (iii) Compensation paid to employees who perform their services in a state to which their employer does not report them for unemployment tax purposes shall be attributed to the state in which the services are performed. Example: A taxpayer engaged in a long-term contract in Arkansas sends several key employees to Arkansas to supervise the project. The taxpayer, for unemployment tax purposes, reports these employees to another state where the main office is maintained and where the employees reside. For payroll factor purposes, the compensation is assigned to the numerator of Arkansas.

   5. (7) Sales factor.

      1. (A) In general, the numerator and denominator of the sales factor shall be determined as set forth in Arkansas Code §§ 26-51-715 [repealed] – 26-51-717.

      2. (B)

         1. (i) However, the following special rules also apply.
         2. (ii)
5. (a) (a) Gross receipts derived from the performance of a contract are attributable to Arkansas if the construction project is located in Arkansas.

6. (b) (b) If the construction project is located both inside and outside of Arkansas, the gross receipts attributable to Arkansas are based upon the ratio that construction costs for the project in Arkansas incurred during the tax year bear to the total construction costs for the entire project incurred during the tax year. Example 1: A construction project was undertaken in Arkansas by a calendar year taxpayer. The following gross receipts (progress billings) were derived from the contract during the three (3) tax years that the contract was in progress.

   Gross Receipts	1st Year	2nd Year	3rd Year
   $1,000,000	$4,000,000	$3,000,000

   The gross receipts to be reflected in both the numerator and denominator of the sales factor for each of the three (3) years are the amounts shown. Example 2: A taxpayer contracts to build a dam on a river at a point that lies half within Arkansas and half within another state. During the taxpayer's first tax year, construction costs in Arkansas were two million dollars ($2,000,000). Total construction costs for the project during the tax year were three million dollars ($3,000,000). Gross receipts (progress billings) for the year were two million four hundred thousand dollars ($2,400,000). Accordingly, gross receipts of one million six hundred thousand dollars ($1,600,000) ($2,000,000/$3,000,000 x $2,400,000) are included in the numerator of the sales factor.
   1. (iii) The sales factor includes only that portion of the gross contract price that corresponds to the percentage of the entire contract that was completed during the tax year. Example: A taxpayer entered into a long-term construction contract. At the end of its current tax year (the second since starting the project), it estimated that the project was thirty percent (30%) completed. The bid price for the project was nine million dollars ($9,000,000) and it had received two million five hundred thousand dollars ($2,500,000) from progress billings as of the end of its current tax year. The amount of gross receipts to be included in the sales factor for the current tax year is two million seven hundred thousand dollars ($2,700,000) (30% of $9,000,000), regardless of whether the taxpayer uses the accrual method or the cash method of accounting for receipts and disbursements.

7. (b) Television and radio broadcasting — Arkansas Code § 26-51-718(c).

   1. (1) The following special rules are established with respect to the apportionment of income from television and radio broadcasting by a broadcaster that is subject to income tax in both Arkansas and in one (1) or more other states.
   2. (2) When a taxpayer in the business of broadcasting film or radio programming, whether through the public airwaves, by cable, direct or indirect satellite transmission, or any other means of communication, either through a network (including owned and affiliated stations) or through an affiliated, unaffiliated, or independent television or radio broadcasting station, has income from sources both inside and outside of Arkansas the amount of business income from sources within Arkansas shall be determined pursuant to Arkansas Code §§ 26-51-702 – 26-51-718 and the rules issued thereunder, except as modified by this part.

   3. (3) Definitions. The following definitions apply to the terms contained in this part:

      1. (A)

         1. (i) "Film" or "film programming" means any and all performances, events, or productions telecast on television, including but not limited to news, sporting events, plays, stories, or other literary, commercial, educational, or artistic works, through the use of:
8. (a) (a) Video tape;

9. (b) (b) Disc; or

   1. (c) (c) Any other type of format or medium.

      1. (ii) Each episode of a series of films produced for television shall constitute a separate "film" notwithstanding that the series relates to the same principal subject and is produced during one (1) or more tax periods;
      2. (B) "Outer-jurisdictional property" means certain types of tangible personal property, such as orbiting satellites, undersea transmission cables, and the like, that are owned or rented by the taxpayer and used in the business of telecasting or broadcasting, but that are not physically located in any particular state;

      3. (C)

         1. (i) "Radio" or "radio programming" means any and all performances, events, or productions broadcast on radio, including but not limited to news, sporting events, plays, stories, or other literary, commercial, educational, or artistic works, through the use of:
10. (a) (a) An audio tape;

11. (b) (b) A disc; or

    1. (c) (c) Any other format or medium.

       1. (ii) Each episode of a series of radio programming produced for radio broadcast shall constitute a separate "radio programming" notwithstanding that the series relates to the same principal subject and is produced during one (1) or more tax periods;

       2. (D)

          1. (i) "Release" or "in release" means the placing of film or radio programming into service.
          2. (ii) A film or radio program is placed into service when it is first broadcast to the primary audience for which the program was created.
          3. (iii) Thus, for example, a film is placed in service when it is first publicly telecast for entertainment, educational, commercial, artistic, or other purpose.
          4. (iv) Each episode of a television or radio series is placed in service when it is first broadcast.
          5. (v) A program is not placed in service merely because it is:
12. (a) (a) Completed and therefore in a condition or state of readiness and availability for broadcast; or

13. (b) (b) Previewed to prospective sponsors or purchasers;

    1. (E) "Rent" shall include license fees or other payments or consideration provided in exchange for the broadcast or other use of television or radio programming;

       1. (F) A "subscriber" to a cable television system is the individual residence or other outlet that is the ultimate recipient of the transmission; and
       2. (G) "Telecast" or "broadcast" (sometimes used interchangeably with respect to television) means the transmission of television or radio programming, respectively, by an electronic or other signal conducted by radio waves or microwaves or by wires, lines, coaxial cables, wave guides, fiber optics, or satellite transmissions directly or indirectly to viewers and listeners or by any other means of communications.
    2. (4) Apportionment of business income. The property factor shall be determined in accordance with Arkansas Code §§ 26-51-710 [repealed] – 26-51-712 [repealed], the payroll factor in accordance with Arkansas Code §§ 26-51-713 and 26-51-714, and the sales factor in accordance with Arkansas Code §§ 26-51-715 [repealed] – 26-51-717, except as modified by this part.

    3. (5) The property factor.

       1. (A)

          1. (i) In the case of rented studios, the net annual rental rate shall include the amount of the basic or flat rental charge by the studio for the use of a stage or other permanent equipment (such as sound recording equipment).
          2. (ii) The net annual rental rate shall also include the rental charges for any additional equipment rented from other sources or from the studio that is:
14. (a) (a) Not covered in the basic or flat rental charge; and

15. (b) (b) Used for one (1) week or longer (even though rented on a day-to-day basis).

    1. (iii) Lump-sum net rental payments for a period that encompasses more than a single tax year shall be assigned ratably over the rental period.

       1. (B) No value or cost attributable to any outer-jurisdictional film or radio programming property shall be included in the property factor at any time.

    2. (6) Property factor denominator.

       1. (A) All real property and tangible personal property (other than outer-jurisdictional and film or radio programming property), whether owned or rented, that is used in the business shall be included in the denominator of the property factor.

       2. (B)

          1. (i) Audio or video cassettes, discs, or similar media containing film or radio programming and intended for sale or rental by the taxpayer for home viewing or listening shall be included in the property factor at the medium’s original cost.
          2. (ii) To the extent that the taxpayer licenses or otherwise permits others to manufacture or distribute such cassettes, discs, or other media containing film or radio programming for home viewing or listening, the value of such cassettes, discs, or other media shall include the license, royalty, or other fees received by the taxpayer capitalized at a rate of eight (8) times the gross receipts derived therefrom during the tax year.
       3. (C) Outer-jurisdictional and film and radio programming property shall be excluded from the denominator of the property factor.

    3. (7) Property factor numerator.

       1. (A) With the exception of outer-jurisdictional and film and radio programming property, all real and tangible personal property owned or rented by the taxpayer and used in Arkansas during the tax year shall be included in the numerator of the property factor as provided in Arkansas Code §§ 26-51-710 [repealed] – 26-51-712 [repealed].
       2. (B) Outer-jurisdictional and film and radio programming property shall be excluded from the numerator of the property factor. Example: XYZ Television Co. has a total value of all of its property everywhere of five hundred million dollars ($500,000,000), including a satellite valued at fifty million dollars ($50,000,000) that was used to telecast programming into Arkansas and one hundred fifty million dollars ($150,000,000) in film property of which one million dollars’ worth was located in Arkansas the entire year. The total value of real and tangible personal property, other than film programming property, located in Arkansas for the entire tax year was valued at two million dollars ($2,000,000). Movable and mobile property was determined to have a value of four million dollars ($4,000,000) and such movable and mobile property was used in Arkansas for one hundred (100) days. The total value of property to be attributed to Arkansas would be determined as follows:

          Value of property permanently located within Arkansas	$2,000,000
          Value of mobile and movable property (100/365 or .2739 x $4,000,000):	$1,095,600
          Total value of property to be included in Arkansas' property factor numerator(outer-jurisdictional and film property excluded):	$3,095,600
          Total value of property to be used in the denominator ($500,000,000-$200,000,000):	$300,000,000
          Total property factor ($3,095,600/$300,000,000):	.01031867

    4. (8) The payroll factor.

       1. (A) Payroll factor denominator. The denominator of the payroll factor shall include all compensation, including residual and profit participation payments, paid to employees during the tax year, including that paid to directors, actors, newscasters, and other talent in their status as employees.
       2. (B) Payroll factor numerator. Compensation for all employees shall be attributed to Arkansas as determined by the provisions of Arkansas Code §§ 26-51-713 [repealed] and 26-51-714 [repealed].

    5. (9) The sales factor.

       1. (A) Sales factor denominator. The denominator of the sales factor shall include the total gross receipts derived by the taxpayer from transactions and activity in the regular course of the taxpayer's trade or business.

       2. (B) Sales factor numerator. The numerator of the sales factor shall include all gross receipts of the taxpayer from sources within Arkansas, including, but not limited to, the following:

          1. (i) Gross receipts, including advertising revenue, from television, film, or radio programming in release to or by television and radio stations located in Arkansas;
          2. (ii)
16. (a) (a) Gross receipts, including advertising revenue, from television, film, or radio programming in release to or by a television station (independent or unaffiliated) or network of stations for broadcast shall be attributed to Arkansas in the ratio (hereafter "audience factor") that the audience for such station (or owned and affiliated stations in the case of networks) located in Arkansas bears to the total audience for such station (or owned and affiliated stations in the case of networks).

17. (b) (b) The audience factor for television or radio programming shall be determined by the ratio that the taxpayer's Arkansas viewing or listening audience bears to its total viewing or listening audience.

    1. (c) (c) Such audience factor shall be determined either by reference to the books and records of the taxpayer or by reference to published rating statistics, provided the method used by the taxpayer:
    2. (1) (1) Is consistently used from year to year and from state to state for such purpose; and

    3. (2) (2) Fairly represents the taxpayer's activity in Arkansas;

       1. (iii)
18. (a) (a) Gross receipts from film programming in release to or by a cable television system shall be attributed to Arkansas in the ratio (hereafter "audience factor") that the subscribers for such cable television system located in Arkansas bears to the total subscribers of such cable television system.

19. (b) (b) If the number of subscribers cannot be accurately determined from the books and records maintained by the taxpayer, such audience factor ratio shall be determined on the basis of the applicable year's subscription statistics located in published surveys, provided that the source selected is consistently used from year to year and from state to state for that purpose; or

    1. (iv) Receipts from the sale, rental, licensing, or other disposition of audio or video cassettes, discs, or similar medium intended for home viewing or listening shall be included in the sales factor as provided in Arkansas Code §§ 26-51-716 and 26-51-717.

       1. (c) Publishing — Arkansas Code § 26-51-718(c).

    2. (1) The following special rules are established with respect to the apportionment of income derived from the publishing, sale, licensing, or other distribution of:

       1. (A) Books;
       2. (B) Newspapers;
       3. (C) Magazines;
       4. (D) Periodicals;
       5. (E) Trade journals; or
       6. (F) Other printed material.
    3. (2) In general. Except as specifically modified by this part, when a taxpayer in the business of publishing, selling, licensing, or distributing newspapers, magazines, periodicals, trade journals, or other printed material has income from sources both inside and outside of Arkansas, the amount of business income from sources within Arkansas from such business activity shall be determined pursuant to Arkansas Code §§ 26-51-702 [repealed] – 26-51-718.

    4. (3) Definitions. The following definitions apply to the terms contained in this part:

       1. (A) "Outer-jurisdictional property" means certain types of tangible personal property, such as orbiting satellites, undersea transmission cables, and the like, that are owned or rented by the taxpayer and used in the business of publishing, licensing, selling, or otherwise distributing printed material, but which are not physically located in any particular state;

       2. (B)

          1. (i) "Print or printed material" includes, without limitation, the physical embodiment or printed version of any thought or expression including without limitation:
20. (a) (a) A play;

21. (b) (b) A story;

    1. (c) (c) An article;

       1. (d) (d) A column; or

22. (e) (e) Other literary, commercial, educational, artistic, or other written or printed work.

    1. (ii) Printed material may take the form of a book, newspaper, magazine, periodical, trade journal, or any other form of printed matter and may be contained on any medium or property;

       1. (C)

          1. (i) "Purchaser" and "subscriber" mean the individual, residence, business, or other outlet that is the ultimate or final recipient of the print or printed material.
          2. (ii) Neither of such terms shall include a wholesaler or other distributor of print or printed material; and
       2. (D) "Terrestrial facility" shall include any telephone line, cable, fiber optic, microwave, earth station, satellite dish, antennae, or other relay system or device that is used to receive, transmit, relay, or carry any data, voice, image, or other information that is transmitted from or by any outer-jurisdictional property to the ultimate recipient thereof.

    2. (4) Apportionment of business income.

       1. (A) The property factor.

          1. (i) Property factor denominator.
23. (a) (a) All real and tangible personal property, whether owned or rented, that is used in the taxpayer's business shall be included in the denominator of the property factor.

24. (b) (b) However, outer-jurisdictional property shall not be included in the property factor's denominator.

    1. (ii) Property factor numerator.
25. (a) (a) All real and tangible personal property owned or rented by the taxpayer and used in Arkansas during the tax year shall be included in the numerator of the property factor.

26. (b) (b) However, outer-jurisdictional property owned or rented by the taxpayer and used in Arkansas during the tax year shall be excluded from the numerator of the property factor. Example: ABC Newspaper Co. owns a total of four hundred million dollars ($400,000,000) of property everywhere, and, in addition, it owns and operates a communication satellite for the purpose of sending news articles to its printing plant in Arkansas, as well as for communicating with its printing plants, news bureaus, employees, and agents located in other states and throughout the world. The total value of its real and tangible personal property that was permanently located in Arkansas for the entire tax year was valued at three million dollars ($3,000,000). The total original cost of the satellite is one hundred million dollars ($100,000,000) for the tax year. The taxpayer's mobile property that was used partially within Arkansas, consisting of forty (40) delivery trucks, was determined to have an original cost of four million dollars ($4,000,000). The delivery trucks were used in Arkansas for ninety-five (95) days. The total value of property to be attributed to Arkansas would be determined as follows:

    Value of property permanently located within Arkansas	$3,000,000
    Value of mobile property(95/365 or .260274 x $4,000,000):	$1,041,096
    Total value of property attributable to Arkansas:	$4,041,096
    Total property factor % ($4,041,096/$400,000,000):	1.010274%

    1. (B) The payroll factor. The payroll factor shall be determined according to Arkansas Code §§ 26-51-713 [repealed] and 26-51-714 [repealed] and the rules promulgated thereunder.

       1. (C) The sales factor.

          1. (i) Sales factor denominator. The denominator of the sales factor shall include the total gross receipts derived by the taxpayer from transactions and activity in the regular course of the taxpayer's trade or business.
          2. (ii) Sales factor numerator. The numerator of the sales factor shall include all gross receipts of the taxpayer from sources within Arkansas, including, but not limited to, the following:
27. (a) (a) Gross receipts derived from the sale of tangible personal property, including printed materials, delivered or shipped to a purchaser or a subscriber in Arkansas;

28. (b)

    1. (1) (b)(1) Except as provided in subdivision (c)(4)(C)(ii)(c) of this section, below, gross receipts derived from advertising and the sale, rental, or other use of the taxpayer's customer lists or any portion thereof shall be attributed to Arkansas as determined by the taxpayer's "circulation factor" during the tax year.

    2. (2) (2) The circulation factor shall be:

       1. (A) (A) Determined for each individual publication by the taxpayer of printed material containing advertising; and
       2. (B) (B) Equal to the ratio that the taxpayer's Arkansas circulation to purchasers and subscribers of its printed material bears to its total circulation to purchasers and subscribers everywhere.
    3. (3) (3) The circulation factor for an individual publication shall be determined by reference to the rating statistics as reflected in such sources as Alliance for Audited Media or other comparable sources, provided that the source selected is consistently used from year to year and from state to state for such purpose.

    4. (4) (4) If none of the foregoing sources are available, or, if available, none is in form or content sufficient for such purposes, then the circulation factor shall be determined from the taxpayer's books and records;

       1. (c)
    5. (1) (c)(1) When specific items of advertisements can be shown, upon clear and convincing evidence, to have been distributed solely to a limited regional or local geographic area in which Arkansas is located, the taxpayer may petition, or the Department of Finance and Administration may require, that a portion of such receipts be attributed to the sales factor numerator of Arkansas on the basis of a regional or local geographic area circulation factor and not upon the basis of the circulation factor provided by subdivision (c)(4)(C)(ii)(b) above.
    6. (2) (2) Such attribution shall be based upon the ratio that the taxpayer's circulation to purchasers and subscribers located in Arkansas of the printed material containing such specific items of advertising bears to its total circulation of such printed material to purchasers and subscribers located within such regional or local geographic area.

    7. (3) (3) This alternative attribution method shall be permitted only upon the condition that such receipts are not double counted or otherwise included in the numerator of any other state; or

       1. (d) (d) In the event that the purchaser or subscriber is the United States Government or that the taxpayer is not taxable in a certain other state, the gross receipts from all sources, including the receipts from the sale of printed material, from advertising, and from the sale, rental, or other use of the taxpayer's customer lists, or any portion thereof that would have been attributed by the circulation factor to the numerator of the sales factor for such other state, shall be included in the numerator of the sales factor of Arkansas if the printed material or other property is shipped from an office, store, warehouse, factory, or other place of storage or business located in Arkansas.

          1. (d) Airlines — Arkansas Code § 26-51-718(c). Every taxpayer engaged in the business of transportation of passengers or freight by air both inside and outside of Arkansas shall determine its net income subject to Arkansas income tax by taking that portion of total net operating revenue that the total passenger and freight receipts in Arkansas bears to total receipts from both inside and outside of Arkansas. Example: Airline apportionment: Total Passenger & Freight Receipts $50,000,000 Arkansas Passenger & Freight Receipts $10,000,000 Operating Income $ 2,000,000 Operating Expenses $ 1,500,000 Net Operating Income $ 500,000 ($10,000,000 ÷ $50,000,000) x $500,000 = $100,000 Arkansas taxable income
29. (e) Bus lines and trucking companies — Arkansas Code § 26-51-718(c). Every taxpayer engaged in the business of operating a bus line or trucking company both inside and outside of Arkansas shall determine its net income subject to Arkansas income tax by taking that portion of the total net operating income that the total number of miles operated within Arkansas bears to the total system miles. Example: XYZ Trucking Company had federal taxable income of one million dollars ($1,000,000). It operated ten million (10,000,000) total miles and five hundred thousand (500,000) miles in Arkansas. The Arkansas apportionment factor is five hundred thousand (500,000) divided by ten million (10,000,000), or five percent (5%), and, assuming no adjustments to federal taxable income are necessary to arrive at apportionable income, Arkansas taxable income is $1,000,000 X 5%, or fifty thousand dollars ($50,000).

30. (f) Pipelines — Arkansas Code § 26-51-718(c).

    1. (1) Every taxpayer operating a pipeline for the transportation of oil or gas both inside and outside of Arkansas shall apportion its net operating income attributable to Arkansas by multiplying the net income by a fraction, the numerator of which is the property factor plus the payroll factor plus double the sales factor and the denominator of which is four (4).

    2. (2) Property factor.

       1. (A) The property factor is a fraction, the numerator of which is the average value of the taxpayer's real and personal property owned or rented and used in Arkansas and the denominator of which is the average value of all the taxpayer's real and personal property owned or rented during the tax year.

       2. (B)

          1. (i) Average value of the property owned by the taxpayer means the average of the original cost of the property at the beginning and ending of the tax year.
          2. (ii) Rental property is valued at eight (8) times the net annual rental.
    3. (3) Payroll factor. The payroll factor is a fraction, the numerator of which is compensation paid for services performed entirely within Arkansas plus a ratable part of compensation paid for services performed both inside and outside of Arkansas, based on the total number of barrel or unit miles in Arkansas, divided by the total barrel or unit miles system wide and the denominator of which is the total compensation paid everywhere during the tax year.
    4. (4) Sales factor. The sales factor is a fraction, the numerator of which is the total sales within Arkansas plus a proportionate part of system revenue earned in Arkansas determined on the basis of the total barrel or unit miles within Arkansas to the total barrel or unit miles in the system during the tax year and the denominator of which is the total revenue everywhere during the tax year. Example: Pipeline company: Property Factor: Total Property $1,000,000 Arkansas Property $ 100,000 ($100,000 ÷ $1,000,000) = 10.000000% Payroll Factor: (Assuming one pipeline and constant volume) Total Payroll $ 200,000 Multistate Payroll $ 100,000 Arkansas Payroll $ 20,000 Total Barrels 500,000 Arkansas Barrels 50,000 Total Pipeline Miles 1,000 Arkansas Pipelines Miles 100 $20,000 + ([50,000 x 100 miles] ÷ [500,000 x 1,000 miles] x $100,000) ÷ $200,000 = ($20,000 + $1,000) ÷ $200,000 = 10.500000% Sales Factor: Total Sales $1,000,000 Arkansas Sales $ 200,000 Multistate Sales $ 500,000 Barrel Miles Ratio (from the payroll factor) .01 $200,000 + (.01 x $500,000) ÷ $1,000,000 = 20.500000% x 2 = 41.000000% Operating Income $ 300,000 Operating Expense $ 200,000 Net Operating Income $ 100,000 Apportionment Factor: 10% (property) + 10.5% (payroll) + 41% (sales) = 61.5% 61.500000% ÷ 4 = 15.375000% $100,000 (net operating income) x 15.375000% = $15,375

Codification Notes: Arkansas Code §§ 26-51-710 – 26-51-715 were repealed by Acts 2019, No. 822, § 8.