Exam 16: Multistate Corporate Taxation

In most states,a limited liability company (LLC)is subject to the state income tax:

Trayne Corporation's sales office and manufacturing plant are located in State X.Trayne also maintains a manufacturing plant and sales office in State W.For purposes of apportionment,X defines payroll as all compensation paid to employees,including elective contributions to § 401(k)deferred compensation plans.Under the statutes of W,neither compensation paid to officers nor contributions to § 401(k)plans are included in the payroll factor.Trayne incurred the following personnel costs. Trayne's payroll factor for State X is:

Determine Bowl's sales factors for States K,M,and N. Bowl Corporation's manufacturing facility,distribution center,and retail store are located in State K.Bowl 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 Bowl's sales representative,who has the authority to accept and approve sales orders.Residents of N can purchase Bowl's product only if they place an order online and arrange to take delivery of the product at Bowl's shipping dock.Bowl's sales were as follows. Bowl'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.K sources dock sales to the destination state.

An assembly worker earns a $30,000 salary and receives a fringe benefit package worth $15,000.The payroll factor assigns $30,000 for this employee.

The property factor includes business assets that the taxpayer owns,but also those merely used under a lease agreement.