Section 4 Introduction

• Library: Tax Law 2009

Missouri taxable income includes income from the transaction of business partly within and partly outside Missouri. Section 143.451.2, RSMo 2000. If the income and deductions relating to the portion of the taxpayer’s business conducted in Missouri “cannot be segregated,” income and deductions are to be allocated and apportioned among the relevant states in a manner that will “distribute to [Missouri] a portion based upon the portion of the transaction in this state and the portion in such other state or states.” Section 143.451.2(1).

Generally, a corporate taxpayer entitled to allocate and apportion its income must determine its Missouri taxable income in accordance with either the single-factor formula under § 143.451 or the three-factor formula under Article IV of the Multistate Tax Compact (the Compact), § 32.200, RSMo 2000; it must seek the permission of the Director of Revenue (the Director) to use another method of apportionment in accordance with § 143.461.2, RSMo 2000, or to use another method of allocation and apportionment in accordance with Article IV, § 18, of the Compact. 12 C.S.R. § 10-2.050(4). See Compact, Article III, § 1. A taxpayer’s apportionment election in Missouri is not conditioned on use of the same formula in other states where it files income tax returns. Id. But financial organizations and public utilities may not allocate and apportion their income in accordance with the provisions of the Compact. Compact, Article IV, § 2.

Special methods of allocation and apportionment are required for:

• trucking companies, 12 C.S.R. § 10-2.200; § 143.451.4
• railroads, 12 C.S.R. § 10-2.205; § 143.451.4
• airlines, 12 C.S.R. § 10-2.210; § 143.451.4
• other transportation companies, § 143.451.4; and
• telephone and telegraph companies, § 143.451.6

The special single-factor formulae have generated some controversy. Delta Air Lines, Inc. v. Director of Revenue, State of Mo., 908 S.W.2d 353 (Mo. banc 1995) (airlines not required to include “bridge miles”—miles flown by its airplanes over Missouri without landing in or taking off from a facility in Missouri—in the numerator of the apportionment factor; plain meaning of § 143.451.4...