Florida Corporate Income Tax: Including Intercompany Transfers in the Sales Factor

Florida’s corporate income tax apportionment rules are layered and complex. While the default formula under section 220.15, Florida Statutes, uses a three-factor method (property, payroll, and double-weighted sales), that framework is not universally applied. Certain special industries—such as transportation and financial companies—may use alternative apportionment formulas that are generally one-factor methods based solely on sales.

Even for taxpayers using the standard three-factor formula, further complexity arises when determining how to source sales. Florida applies different sourcing rules depending on the type of transaction, such as tangible goods, services, or intangibles.

This article focuses on a particularly nuanced area of Florida apportionment: whether intercompany transfers qualify for inclusion in the sales factor when a consolidated return is filed. The analysis hinges on Florida law, agency rules, precedent-setting case law, and technical advisements.

Florida’s Apportionment and Sales Factor Framework

Florida’s default apportionment method under section 220.15 uses three weighted components:

• Property factor
• Payroll factor
• Double-weighted sales factor

The sales factor is defined under section 220.15(5)(a), Florida Statutes, as a fraction with the taxpayer’s Florida sales in the numerator and total sales everywhere in the denominator. The definition of “sales” excludes receipts from interest, dividends, rents, royalties, and securities.

Sales must be from transactions and activities in the regular course of the taxpayer’s trade or business. Intercompany sales can qualify, but only if they meet specific criteria under Florida law and regulations.

Rule 12C-1.0155(1)(j): When Are Intercompany Sales Included?

Rule 12C-1.0155(1)(j), Fla. Admin. Code, governs intercompany sales in the sales factor. It permits inclusion when a consolidated return is filed and the following indicia of a true sale are met:

• Amounts are called sales on the books;
• Amounts are invoiced as sold to a related party;
• There is actual payment from the related party;
• The amounts are included in the federal consolidated return as “gross receipts or sales.”

All four are not required, but the more present, the stronger the case for inclusion.

The Leading Case: Department of Revenue v. Anheuser-Busch

In Department of Revenue v. Anheuser-Busch, Inc., 527 So. 2d 877 (Fla. 1st DCA 1988), the Florida court held that intercompany transfers between a beer manufacturer and its affiliated can-producing subsidiary qualified as sales for purposes of the apportionment formula.

The beer cans were invoiced, recorded as accounts receivable and payable, and payment was made via journal entries and advances. The transactions were also reported in the federal consolidated return as gross receipts. The court rejected the argument that the consolidated return eliminated the sales for apportionment purposes.

Key holding: Consolidated return filing does not collapse the identity of separate corporate taxpayers. Each entity’s sales can count toward the apportionment formula if the transactions are real and recorded accordingly.

Technical Assistance Advisement 18C1-005: Intercompany Product Sales

This 2018 TAA addressed whether intercompany product sales to foreign affiliates could be included in the Florida sales factor. The Department concluded they could, because the transactions:

• Were booked as sales,
• Used intercompany invoicing and accounting entries,
• Were contractually supported, and
• Were reported in the federal return as gross receipts.

This TAA reinforces Anheuser-Busch and confirms that Florida allows substance-over-form when evaluating intercompany sales for sales factor inclusion.

Technical Assistance Advisement 12C1-007: Hedging and Non-Sales Activity

In contrast, this 2012 TAA involved a taxpayer that used derivatives to hedge the sale and purchase of commodities internally. The Department ruled that neither gross receipts nor net gains from these transactions were includable in the sales factor.

Because the hedging activities were not in the regular course of business and were not recorded as sales, including them would misrepresent the taxpayer’s Florida business activity. The Department emphasized that apportionment should reflect actual market-facing business operations, not internal financial adjustments.

Verizon v. Florida Department of Revenue (2025): Refund Litigation Over Intercompany Sales

In 2025, Verizon Communications filed suit against the Florida Department of Revenue after a $3.7 million portion of its corporate income tax refund claim was denied. The issue? Intercompany sales excluded by the Department despite meeting all four indicia in Rule 12C-1.0155(1)(j).

Verizon alleges that the Department previously accepted similar intercompany sales and that the exclusion now violates Florida law and is inconsistent with Anheuser-Busch. The outcome of this case may significantly impact future refund claims and consolidated filer audit risk.

Conclusion: What Taxpayers Should Do

Florida’s sales factor apportionment rules turn on substance. Intercompany transfers may be included if they are properly invoiced, recorded, paid, and disclosed in the federal return as gross receipts.

Yet these rules sit within a broader apportionment framework that is itself complex. While most taxpayers apply the three-factor method, special industries may use single-factor formulas, and sourcing sales varies by transaction type. Understanding the **rules, exceptions, and documentation thresholds** is critical when calculating or defending your Florida corporate income tax liability.

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