The client's home state apportioned taxable income solely on the basis of relative sales shipped to each state with sales "thrown back to the home state" if the company had no taxable presence in another state.
If all four states have the same tax rate and apportion income the same way using the average of property, payroll and double-weighted sales factors, the total tax would be $80,000.
State 1 State 2 (Home state) Taxable income to be apportioned $1,000,000 $1,000,000 Property factor 1 n/a Payroll factor 1 0 Sales factor 0.25 0.25 Sales factor 0.25 n/a Average factor 0.65 0.25 Apportioned income $625,000 $250,000 State tax rate 8% 8% Income tax $50,000 $20,000 State 3 State 4 Total Taxable income to be apportioned $1,000,000 $1,000,000 Property factor n/a n/a Payroll factor 0 0 Sales factor 0.25 0.25 Sales factor n/a n/a Average factor 0.25 0.25 Apportioned income $250,000 $250,000 State tax rate 8% 8% Income tax $20,000 $20,000 $110,000
If a state has adopted the relevant clauses of the MTC regulations, then paying franchise taxes in other states can be the basis for a company to apportion income out of that state.
However, if a company's home state apportioned income using a single relative sales factor, for example, and the other states where the company does business used a three-factor, double-weighted sales formula, the company might be able to reduce its overall effective tax rate.
The Court apportioned the tax only to those receipts for miles traveled in New York, noting the bus line was exposed to taxation by New Jersey and Pennsylvania on portions of the same receipts New York was taxing in their entirety.
This country has about 300,000 miles of high pressure transmission natural gas pipelines. Gas often moves substantial distances before or after crossing a state, and, in most cases, a state's fairly apportioned share of taxable income is less than total gross receipts.
Major oil company taxable income has been apportioned by averaging three ratios: in-state to total property, in-state to total receipts and in-state to total employee compensation. Single-factor formulae, such as in-state gross sales to total gross sales, have been approved. Apportionment on the in-state employment of capital, plant or other property has supported a liquefied petroleum products common carrier tax. For interstate pipeline gas commodity sellers, taxes apportioned on the value of capital used, invested or employed instate, and on net earnings in-state, have been sustained.
80 (1948)(at 87-88: Fairly apportioned, non-discriminatory Mississippi franchise tax "may be invalid" because levied on "privilege" of doing interstate business in-state).