(1) A taxpayer may have more than one
"trade or business." In such
cases, it is necessary to determine the business income attributable to each
separate trade or business. The income
of each business is then apportioned by an apportionment formula which takes
into consideration the in-state and out-of-state factors which relate to the
trade or business income being apportioned.
(2) The determination of whether the activities
of the taxpayer constitute a single trade or business will depend on the facts
in each case. In general, the
activities of the taxpayer will be considered a single business if there is
evidence to indicate that the segments under consideration are integrated with,
dependent upon, or contribute to each other and the operations of the taxpayer
as a whole. The following factors are
considered to be good indicia of a single trade or business, and the presence
of any of these factors creates a strong presumption that the activities of the
taxpayer constitute a single trade or business:
(a) A taxpayer is generally engaged in a single
trade or business when all of its activities are in the same general line. For example, a taxpayer which operates a
chain of retail grocery stores will almost always be engaged in a single trade
or business.
(b) A taxpayer is almost always engaged in a
single trade or business when its various divisions or segments are engaged in
different steps in a large, vertically structured enterprise. For example, a
taxpayer which explores for and mines copper ores; concentrates, smelts, and
refines the copper ores; and fabricates the refined copper into consumer products
is engaged in a single trade or business regardless of the fact that the
various steps in the process are operated substantially independently of each
other with only general supervision from the taxpayer's executive offices.
(c) A taxpayer which might otherwise be
considered as engaged in more than one trade or business is properly considered
as engaged in one trade or business when there is a strong central management,
coupled with the existence of centralized departments for such functions as financing,
advertising, research, or purchasing.
Thus, some conglomerates may properly be considered as engaged in only
one trade or business when the central executive officers are normally involved
in the operations of various divisions and there are centralized offices which
perform for the divisions the normal matters which a truly independent
business would perform for
itself, such as accounting, personnel, insurance, legal, purchasing, advertising, or financing.