CHAPTER 24 MULTISTATE CORPORATE TAXATION
For the taxable year, the corporation’s activities within the two states were as follows.
|
State A |
State B |
Total |
|
|
Sales |
$500,000 |
$1,500,000 |
$2,000,000 |
|
Property |
250,000 |
–0– |
250,000 |
|
Payroll |
200,000 |
300,000 |
500,000 |
Dott has determined that it is subject to tax in both A and B. Both states utilize a three-factor apportionment formula which equally weights sales, property, and payroll. The rates of corporate income tax imposed in A and B are 7% and 10%, respectively. Determine Dott’s state income tax liability.
2. Flip Corporation operates in two states, as indicated below. All goods are manufactured in State A. Determine the sales to be assigned to both states to be used in computing Flip’s sales factor for the year. Both states follow the UDITPA and the MTC regulations in this regard.
|
|
State A |
State B |
|
Gross sales to purchasers in state |
$400,000 |
$350,000 |
|
Sales returns |
9,000 |
11,000 |
|
Discounts allowed |
21,000 |
31,000 |
|
Carrying charges collected back from customers, separately stated |
20,000 |
10,000 |
|
Rental income |
60,000* |
25,000** |
* Excess warehouse space, seasonal rental to a competitor.
** Land held for speculation.
3. Determine Drieser’s sales factors for States K, M, and N.
Drieser Corporation’s manufacturing facility, distribution center, and retail store are located in State K. Drieser sells
its products to residents located in States K, M, and N.
Sales to residents of K are conducted through a retail store. Sales to residents of M are obtained by Drieser’s sales representative, who has the authority to solicit, accept, and approve sales orders in State M. Residents of N can purchase Drieser’s product only if they place an order online and arrange to take delivery of the product at Drieser’s shipping dock.
Drieser’s sales this year were reported as follows.
|
Sales to residents of State K |
$1,000,000 |
|
Sales to residents of State M |
600,000 |
|
Sales to residents of State N |
900,000 |
|
Total |
$2,500,000 |
Drieser’s activities within the three states are limited to those described above. All of the states have adopted a
throwback provision and utilize a three-factor apportionment formula under which sales, property, and payroll are equally weighted. State K sources dock sales to the destination state.
4. Mercy Corporation, headquartered in State F, sells wireless computer devices, including keyboards and bar code readers. Mercy’s degree of operations is sufficient to establish nexus only in States E and F. Determine its sales factor in those states.
State E applies a throwback rule to sales, while State F does not. State G has not adopted an income tax to date. Mercy reported the following sales for the year. All of the goods were shipped from Mercy’s F manufacturing facilities.
|
Customer |
Customer’s Location |
This Year’s Sales |
|
NorCo |
E |
$ 60,000,000 |
|
Tools, Inc. |
F |
20,000,000 |
|
UniBell |
G |
50,000,000 |
|
U.S. Department of Defense |
All 50 U.S. States |
20,000,000 |
|
Total |
$150,000,000 |
5. Garcia Corporation is subject to tax in States G, H, and I. Garcia’s compensation expense includes the following.
|
State G |
State H |
State I |
Total |
|
|
Salaries and wages for nonofficers |
$600,000 |
$500,000 |
$500,000 |
$1,600,000 |
|
Officers’ salaries |
–0– |
–0– |
800,000 |
800,000 |
Officers’ salaries are included in the payroll factor for States G and H, but not for I. Compute Garcia’s payroll
factors for G, H, and I.
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Solution: CHAPTER 24 MULTISTATE CORPORATE TAXATION