SECTION 1. Chapter 63 of the General Laws, as appearing in the 2004 Official Edition, is hereby amended by deleting subsection (c) of section 38 and replacing it with the following new subsection:-

            (c) If a corporation, other than a defense corporation as described in subsection (k), a manufacturing corporation as described in subsection (l), a mutual fund service corporation to the extent of its mutual fund sales as described in subsection (m), a retail corporation as described in subsection (o), or a wholesale corporation as described in subsection (p), has income from business activity which is taxable both within and without this commonwealth, its taxable net income, as determined under the provisions of subsection (a), shall be apportioned to this Commonwealth by multiplying said taxable net income by a fraction, the numerator of which is the property factor plus the payroll factor plus twice times the sales factor, and the denominator of which is four.

SECTION  2. Section 38 of Chapter 63 of the General Laws, as so appearing, is hereby further amended by inserting the following new subsection:-

(o)  (1) As used in this section, the following words shall, unless the context otherwise requires, have the following meaning: “Retail corporation”, a corporation that is engaged in retailing. In order to be engaged in retailing, the corporation must be engaged, in substantial part, in the ordinary course of business of making sales of tangible personal property or associated services at retail; engaged in the business of making sales of tangible personal property at retail at an auction; engaged in the business of making sales for storage, use or other consumption, or makes sales at auction for storage, use or other consumption. A sale “at retail” is a sale for any purpose other than resale. A domestic or foreign retail corporation's activities will be considered to be substantial if any one of the following five tests are met: 1.  twenty-five percent or more of its gross receipts are derived from sales at retail;

2.  twenty-five percent or more of its payroll is paid to employees working in its retailing operations and fifteen percent or more of its gross receipts are derived from sales at retail;

3.  twenty-five percent or more of its tangible property is used in its retailing operations and fifteen percent or more of its gross receipts are derived from sales at retail;

4.  thirty-five percent or more of its tangible property is used in its retailing operations; or

5. the corporation's retailing activities are deemed substantial under relevant regulations promulgated by the commissioner.

(2) If a retail corporation, as defined in paragraph (o), has income from business activity which is taxable both within and without this commonwealth, its taxable net income, determined under the provisions of subsection (a), shall not be apportioned pursuant to the percentage that results from the three-factor formula set forth in subsection (c) but, instead, shall be apportioned by multiplying said taxable net income by one hundred percent of the sales factor.

SECTION  2. Section 38 of Chapter 63 of the General Laws, as so appearing, is hereby further amended by inserting the following new subsection:-

(p)  (1) As used in this section, the following words shall, unless the context otherwise requires, have the following meaning: “Wholesale corporation”, a corporation that is engaged in wholesaling.  In order to be engaged in wholesaling, the corporation must be engaged, in substantial part, in the ordinary course of business of making sales of tangible personal property at wholesale; engaged in the business of making sales of tangible personal property at wholesale at an auction.  A sale “at wholesale” is a sale whereby the purchaser intends to resell the purchased items.  A domestic or foreign wholesale corporation's activities will be considered to be substantial if any one of the following five tests are met:

1.  twenty-five percent or more of its gross receipts are derived from sales at wholesale;

2.  twenty-five percent or more of its payroll is paid to employees working in its wholesaling operations and fifteen percent or more of its gross receipts are derived from sales at wholesale;

3.  twenty-five percent or more of its tangible property is used in its wholesaling operations and fifteen percent or more of its gross receipts are derived from sales at wholesale;

4.  thirty-five percent or more of its tangible property is used in its wholesaling operations; or

5. the corporation's wholesaling activities are deemed substantial under relevant regulations promulgated by the commissioner.

(2) If a wholesale corporation, as defined in paragraph (p), has income from business activity which is taxable both within and without this commonwealth, its taxable net income, determined under the provisions of subsection (a), shall not be apportioned pursuant to the percentage that results from the three-factor formula set forth in subsection (c), but instead, shall be apportioned by multiplying said taxable net income by one hundred percent of the sales factor.