Tax Law, § 210(8)

Government contracts are awarded on several bases including cost sharing, time and materials, fixed price and cost plus a fee. Reimbursed costs as well as fees, commissions, incentive payments and any other type of remuneration paid to a taxpayer for the performance of a government contract must be included in the computation of the allocation factors. Reimbursed costs must be included in computing the allocation factors even though reimbursed costs are not reported as receipts in the taxpayer's Federal income tax return. Where reimbursed wages are not deducted by the taxpayer on its Federal income tax return, such wages should be allocated in the year in which the net fee is included in gross income for Federal income tax purposes. The terms of the contract are used to determine when ownership of property has passed but, in the absence of a contract provision, property is treated as belonging to the taxpayer until shipment is made to the government. Property owned by the government may not be included in the property factor.