[Solved] 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 “Company”) 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 State’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 A’s apportionment calculation was unconstitutional when applied to the taxpayer? Is State A’s use of a single-sales factor formula unconstitutional?

 

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