You are the tax advisor to a company (the â??Companyâ?) that had $1,000 in apportion able business
You are the tax advisor to a company (the “Companyâ€) that had $1,000 in apportion able business income for tax year 2013 The Company did business in 4 states in 2013 and had nexus in each of the 4 states The breakdown of its property, payroll and sales factors in each state is set forth below Each Stateâ€
s tax rate is set forth in the last column
Payroll Property
State A 100 100
State B 100 100
State C 200 200
State D 600 600
Total 1000 1000
State A uses a single-sales factor formula State B uses the three-factor formula, but it triple-weights the sales factor State C uses the three-factor formula, but it double-weights the sales factor State D uses the traditional three-factor formula (property, payroll and sales) and weights each factor equally Assume that no factors are thrown-out, even if zero
1 Calculate the taxes owed by the Company in each state for the 2013 tax year and the total taxes owed by the Company for the year
2 Would the total 2013 taxes owed by the Company be higher or lower if each of the States used the traditional three-factor formula (with each factor equally weighted) and why? (You are not required to calculate the exact taxes on this question, but you may)
3 If the Company were able to show using separate accounting that only $300 of its income for the tax year should be apportioned to State A (which would result in $150 taxes owed for 2013), would this prove that State Aâ€s apportionment calculation was unconstitutional when applied to the taxpayer? Is State Aâ€s use of a single-sales factor formula unconstitutional?
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