§ 7-01 Definitions.
RCNY § 7-01
Allocation of single rent for two or more taxable premises. Where, under the terms of a lease, the lessee pays a single rent to the lessor for two or more taxable premises, the rent applicable to each such premises shall be ascertained in accordance with the allocation formula prescribed herein. The allocation formula is based on three factors as follows: (1) Property factor.
(i)The lessee is required to set forth: (A) the average value of the tangible personal property employed or used by him in each taxable premises occupied or used by him during the tax period, and (B) the average value of all tangible personnel property employed or used by him in all of the taxable premises occupied or used by him during the tax period.
(ii)The words "tangible personal property" as used herein, mean and include all corporeal personal property, such as furniture, furnishings, machinery, tools, implements, goods, wares and merchandise, and do not mean or include money, deposits in banks, shares of stock, bonds, notes, credits, or evidences of an interest in property and evidences of debt. The values as at the beginning and the end of each tax period may be averaged to obtain the value of the tangible personal property employed or used in the taxable premises.
(iii)A percentage for each taxable premises is then to be computed on the basis of a fraction, using the average value of the property of each taxable premises under (A) as the numerator, and the average value of all tangible personal property in all of the taxable premises under (B) as the denominator.
(2)Wages and salaries factor.
(3)Receipts factor. The lessee is required to ascertain the receipts from sales and services during each taxable period applicable to each taxable premises. A percentage is then to be computed for each taxable premises on the basis of a fraction, using as the numerator the total receipts from each such taxable premises and, as the denominator, the total receipts from all such taxable premises. The percentages which are determined for the three factors for each taxable premises are to be added and the total thereof is to be divided by three to obtain the average percentage for each taxable premises. If the numerator and denominator of any fraction are both zero, the factor is deemed to be non-existent and shall be omitted in calculating the average of the percentage. In such event, the total of the remaining percentages is to be divided by the existing factors. If, however, the numerator alone is zero and the denominator is represented by an amount, there is a resultant factor, viz., zero, which is to be included in the calculation of the average of the percentages. The average percentages thus obtained for each taxable premises is to be applied to the total single rent paid for all taxable premises to obtain the amount of the rent applicable to each taxable premises as illustrated below. The allocation formula shall be employed, even though included in the total number of premises for which a single rent is paid there may be included one or more premises which are not taxable premises. In such case, the premises which are not taxable premises shall, for the purposes of the allocation formula, be included in each factor. Whenever the Commissioner of Finance shall determine, either upon his own initiative or upon application by the taxpayer, that the prescribed allocation formula works unfairly or inequitably to a particular taxpayer or class of taxpayers, he may provide for a different or other method of allocation which is calculated to effect a fair and proper apportionment of rent applicable to each taxable premises. When preparing a final return for a tax year for each taxable premises, the factors described above shall cover the full tax year. Example 1: Taxable and/or Non-Taxable Premises Item No.FactorsA B C Total 1)Tangible personal property$10,000 $15,000 $25,000 $50,000 2)Salaries and wages$30,000 $36,000 $54,000 $120,000 3)Receipts from sales and services$105,000 $150,000 $245,000 $500,000 4)Rent paid $50,000 Percent to Total* A B C Total 5)Tangible personal property20% 30% 50% 100% 6)Salaries and wages25% 30% 45% 100% 7)Receipts21% 30% 49% 100% 8)Total percentage (Items 5 to 7)66% 90% 144% 9)Average percentage (Item 8÷ 3)22% 30% 48% 10)Rent applicable to each premises (Item 9 × Item 4) Where premises are taxable, include applicable amount in base rent$11,000 $15,000 $24,000 $50,000 * To obtain percentage of each factor for each premises, divide the amount of the factor for each premises by the total amount of the same factor for all premises. Base rent. The rent paid for each taxable premises by a tenant to his landlord for a period, less the amounts received by or due such tenant for the same period from any subtenant of any part of such premises, as provided in the law. These allowable deductions are: (1) Amounts received or due as rent for premises which constitute taxable premises of such subtenant. Example 2: A tenant rents a store for business purposes for a rent of $34,000 per year. He sublets part of the store to a concessionaire for business purposes for a rent of $18,000 per year. The tenant's base rent is $16,000.
(4)Amounts received or due from a subtenant who is exempt from tax under subdivisions (a) through (f) of 19 RCNY § 7-04. Example 7: A lessee of an office building rents office space in the building to commercial tenants and to a charitable organization which uses the office for non-profit purposes. The lessee, in order to arrive at the amount of his base rent, may deduct from the rent paid by him the rent received by him from the charitable organization, as well as the rent received by him from the commercial tenants.
(5)Amounts received or due as rent for premises which do not constitute taxable premises where such rent is, or to the extent that such rent is deductible from the base rent of such tenant by reason of the fact that such premises are taxed pursuant to the Tax on Occupancy of Hotel Rooms imposed by Chapter 25 of Title 11 of the Administrative Code of the City of New York City or, effective August 1, 1965, pursuant to the Sales Tax Law imposed by Subchapter 1 of Chapter 20 of Title 11 of the Administrative Code of the City of New York, to the extent that such premises are subject to, and during the period they are subject to, such tax. To illustrate: The owner of a hotel leases the hotel to an operating company, which pays an agreed rent to the owner. The operator rents a meeting room to a civic association, which pays the operator the tax on occupancy of hotel rooms imposed by Chapter 25 of Title 11 of the Administrative Code of the City of New York, or, effective August 1, 1965, the Sales Tax imposed by Subchapter 1 of Chapter 20 of Title 11 of the Administrative Code of the City of New York. The operator, in order to arrive at the amount of his base rent, may deduct the amount of rent paid to it by the civic association.
(6)Amounts received as rent for premises which do not constitute taxable premises, pursuant to a common-law relationship of landlord and tenant (notwithstanding the definition given to those terms in 19 RCNY § 7-01 "Landlord" and "Tenant"), except where it is received as rent, whether or not such landlord-tenant relationship exists, for premises which are occupied as or constitute: (i) a locker, safe deposit box or beach cabana; (ii) storage space in part of a warehouse or in part of any other structure or area in which goods are stored; (iii) garage space or parking space in any part of a garage, of a parking lot or of a parking area where the entire garage, entire parking lot or entire parking area accommodates more than two motor vehicles; (iv) an occupancy of a type which customarily has not been the subject of such a common-law relationship of landlord and tenant. Thus, where the occupancy does not give rise to a common-law relation ship of landlord and tenant, the amount received for such occupancy may not be deducted from rent for the purpose of computing base rent subject to the tax, unless the occupancy is one for the conduct of business, in which case, the rent may be deducted by reason of the provisions of paragraph (1) above.
(v)A civic organization enters into a lease with a sublessor of a building for a period of two years. Under the lease, the civic organization agrees to pay the lessor an annual rental of $3,000. The premises occupied by the civic organization does not constitute taxable premises. Accordingly, the rental paid by the civic organization to the sublessor may be taken as a deduction from the rent paid by the sublessor in determining the sublessors base rent.
(vi)The lessee of a public garage rents space in the garage to a private individual for the storage of the latter's automobile which is devoted solely to personal use. The lessee, for the purpose of determining the amount of his base rent, may not deduct from the rent paid by him to his landlord the amounts received by him from the owner of the automobile for storage of the car. If the space were rented for the storage of motor vehicles used in business, such as trucks, the lessee would be permitted to deduct the amounts received by him for the storage of such trucks in arriving at the amount of his base rent unless the subtenant is exempt from tax thereon under 19 RCNY § 7-04(f).
(vii)A broker holding securities for the account of its customers places such securities in a safe deposit box rented from a bank, for which the broker pays a fixed rental charge. The bank is a tenant of the premises. No common-law relationship exists between the bank and the broker. The rent received by the bank from the broker may be deducted from its rent for the purpose of computing its base rent subject to tax. The broker must report the rent paid by him to the bank as his base rent for the occupancy of the safe deposit box. Where the consideration paid or required to be paid by a tenant is for the use or occupancy of taxable premises and services, such as stenographic services, answering services, mail services and the like, furnished by the landlord or lessor, the total consideration paid or required to be paid shall be deemed to be base rent. However, if the agreement between the landlord or sublessor with the tenant separately states the amount of the consideration applicable to the rent for the premises and the amount applicable to the services, the amount applicable to the rent for the premises only shall be deemed to be base rent of the tenant. In such case the lessor, if a tenant, may deduct from his base rent the amount received from his tenant as such base rent. Where a theatre owner and a theatrical producer enter into an agreement for the rental of a certain theatre on the basis of what is commonly known as a "four wall contract," whereby the theatre owner, as landlord, merely leases the theatre building to the producer for a fixed rental, the amount of rent paid by the producer to the theatre owner constitutes base rent and is subject to the tax. Where a theatre owner and a theatrical producer enter into an agreement for the use of a certain theatre on the basis of what is commonly known as a "booking contract," whereby the theatre owner agrees to furnish to the producer a lighted, heated and cleaned theatre, with the scenery and equipment contained therein, the necessary stage hands, carpenters, electricians, property men, janitors, ushers, ticket sellers, doorkeepers, house orchestra, etc. for a percentage of the box office receipts, that portion of the receipts paid by the producer to the theatre owner which is applicable to the use or occupancy of the theatre shall be deemed to be base rent and subject to the tax. In such case, the burden of establishing the amount of the receipts not applicable to the use or occupancy of the theatre shall be on the producer. Where the rent paid for each taxable premises by a tenant to his landlord for a period is equal to, or is exceeded by, the amounts received by or due such tenant for the same period from any sublessees of all or any part of said premises, which are deductible in determining the base rent, the tenant is not required to pay any tax. However, both the tenant and sublessees are required to file returns for such periods. Nothing contained in these regulations shall be construed to permit a tenant to deduct the same rent from his base rent more than once.
(7)(i) For tax periods beginning on and after June 1, 1967, whenever the rent paid by a tenant for his occupancy of taxable premises is measured in whole or in part by the gross receipts from his sales within such premises, his rent, to the extent paid on the basis of such gross receipts, shall not be deemed to exceed 15 percent of such gross receipts. This 15 percent limitation applies where the rental agreement provides for a rent based wholly or partly on a percentage of sales receipts and the stated percentage exceeds 15 percent. The maximum rent in such cases is the higher of 15 percent of gross receipts or the fixed rental plus 15 percent of sales subject to the percentage. To illustrate: (A) A tenant leases a store for an annual rental of 25 percent of his gross receipts from sales. The gross receipts for the year total $200,000 and the tenant pays his landlord $50,000. The rent subject to tax is $30,000 (15 percent of $200,000). (B) A tenant leases a store for an annual rental of $50,000 plus 25 percent of his gross receipts from sales in excess of $200,000. The gross receipts for the year total $300,000 and the tenant pays his landlord $75,000. The rent subject to tax is $65,000 ($50,000 fixed rental plus 15 percent of sales over $200,000).
(8)Operating and maintenance expenditures other than those deemed to be in the nature of capital expenditures, such as expenditures for normal repairs, salaries and wages paid to elevator operators and doormen, superintendents and other personnel for the proper functioning and use of the" premises by the tenant-owner. Any rent paid by a tenant shall be included as base rent and reported as such in the return for the period when paid. However, any rent due a tenant from his sublessee for the period for which a return is filed, whether or not actually received by the tenant during the period covered by the return, shall be deducted, if deduction is permitted, (See 19 RCNY § 7-01 "base rent") from the rent paid by the tenant during such period irrespective of the method of accounting employed by the tenant. The tenant may not again deduct such rent when received. Return. "Return" shall mean any return filed or required to be filed as herein provided other than an information return. Tax period. "Tax period" shall be the period for which any return is required to be filed under these regulations. Tax year. "Tax year" shall be June first of any calendar year through May thirty-first of the following calendar year. Taxable premises. "Taxable premises" shall mean any premises in the City occupied, used or intended to be occupied or used for the purpose of carrying on or exercising any trade, business, profession, vocation or commercial activity, including any premises so used even though it is used solely for the purpose of renting, or granting the right to occupy or use, the same premises in whole or in part to tenants; except premises within the area leased by the City of New York to the New York World's Fair 1964-1965 Corporation pursuant to Chapter 428 of the Laws of 1960, as amended, during the period of such lease. The following illustrate types of premises occupied by a tenant as taxable premises: (1) Premises occupied or used as leased departments in department stores, as florists, beauty parlors, barber shops, lunchrooms, shoe repairing shops, optometrists, or any other commercial activity.
