(1) The following special criteria are established in respect to the sales factor of the apportionment formula:

(a) Insubstantial amounts of gross receipts arising from incidental or occasional transactions or activities may be excluded from the sales factor unless such exclusion would materially affect the amount of income apportioned to this state.   For example, the taxpayer ordinarily may include or exclude from the sales factor gross receipts from such transactions as the sale of office furniture, business automobiles, etc.

(b) Where the income-producing activity in respect to business income from intangible personal property can be readily identified, such income is included in the denominator of the sales factor and, if the income-producing activity occurs in this state, in the numerator of the sales factor as well.   For example, usually the income-producing activity can be readily identified in respect to interest income received on deferred payments on sales of tangible property (ARM 42.26.251) and income from sale, licensing, or other use of intangible personal property (ARM 42.26.257) .

(2) Where business income from intangible property cannot readily be attributed to any particular income-producing activity of the taxpayer, such income cannot be assigned to the numerator of the sales factor for any state and shall be excluded from the denominator of the sales factor.   For example, where business income in the form of dividends received on stock, royalties received on patents or copyrights, or interest received on bonds, debentures, or government securities results from the mere holding of the intangible personal property by the taxpayer, such dividends and interest shall be excluded from the denominator of the sales factor.

(3) Section 631 of the IRC (gains) which are attributable to internal transactions must be eliminated from the sales factor.   The ultimate sale to outsiders will be included in line 1 sales.   IRC section 631(A) (log sales) and section 631(B) (gains) should be included in the factor at the gross sales price used to calculate the gain.   IRC section 631(C) (gains) should be included to the extent of gross royalties received prior to the capital gains offset and prior to the netting of long-term capital gains and losses.