José Corporation realized $900,000 taxable income from the sales of its products in States X and Z. José's activities in both states establish nexus for income tax purposes. José's sales, payroll, and property among the states include the following: $$\begin{array} { l r r r }
& \text { State X } & \text { State } \mathbf { Z } & \text { Totals } \
\text { Sales } & \$ 1,500,000 & \$ 1,000,000 & \$ 2,500,000 \
\text { Property } & 500,000 & - 0 - & 500,000 \
\text { Payroll } & 2,000,000 & - 0 - & 2,000,000
\end{array}$$ Z utilizes a double-weighted sales factor in its three-factor apportionment formula. How much of José's taxable income is apportioned to Z?

Question

José Corporation realized $900,000 taxable income from the sales of its products in States X and Z. José's activities in both states establish nexus for income tax purposes. José's sales, payroll, and property among the states include the following: $$\begin{array} { l r r r } 
& \text { State X } & \text { State } \mathbf { Z } & \text { Totals } \
\text { Sales } & \$ 1,500,000 & \$ 1,000,000 & \$ 2,500,000 \
\text { Property } & 500,000 & - 0 - & 500,000 \
\text { Payroll } & 2,000,000 & - 0 - & 2,000,000
\end{array}$$ Z utilizes a double-weighted sales factor in its three-factor apportionment formula. How much of José's taxable income is apportioned to Z?

Quizplus · Accepted Answer

The apportionment formula for State Z, which uses a double-weighted sales factor, is calculated as follows: $$\text{Apportionment Percentage} = \frac{\text{Sales in Z} + \text{Sales in Z} + \text{Property in Z} + \text{Payroll in Z}}{\text{Total Sales} + \text{Total Sales} + \text{Total Property} + \text{Total Payroll}}$$Given the data:- Sales in Z = $1,000,000- Property in Z = $0- Payroll in Z = $0- Total Sales = $2,500,000- Total Property = $500,000- Total Payroll = $2,000,000Plugging the numbers into the formula:$$\text{Apportionment Percentage} = \frac{1,000,000 + 1,000,000 + 0 + 0}{2,500,000 + 2,500,000 + 500,000 + 2,000,000} = \frac{2,000,000}{7,500,000} = \frac{2}{7.5}$$To find the amount of taxable income apportioned to Z:$$\text{Taxable Income Apportioned to Z} = \text{Total Taxable Income} \times \text{Apportionment Percentage}$$$$\text{Taxable Income Apportioned to Z} = 900,000 \times \frac{2}{7.5} = 900,000 \times \frac{2}{7.5} = 240,000 \times \frac{3}{4} = 180,000$$Therefore, $180,000 of José's taxable income is apportioned to State Z.

José Corporation Realized $900,000 Taxable Income from the Sales of Its