Handsome Rob provides transportation services in several western states.Rob has payroll as follows: Rob is a California corporation and the following is true:
Rob has income tax nexus in Arizona,California,Nevada,and Washington.The Washington drivers spend 25 percent of their time driving through Oregon.California payroll includes $200,000 of payroll for services provided in Nevada by California-based drivers.What is Rob's California payroll numerator?

Question

Handsome Rob provides transportation services in several western states.Rob has payroll as follows:  Rob is a California corporation and the following is true:
Rob has income tax nexus in Arizona,California,Nevada,and Washington.The Washington drivers spend 25 percent of their time driving through Oregon.California payroll includes $200,000 of payroll for services provided in Nevada by California-based drivers.What is Rob's California payroll numerator?

Quizplus · Accepted Answer

The California payroll numerator includes payroll for all services performed in states where Rob has income tax nexus, which are Arizona, California, Nevada, and Washington.

To calculate the California payroll numerator, we need to add up the following payroll amounts:
- California payroll: $2,000,000
- Nevada payroll performed by California drivers: $200,000
- Arizona payroll: $500,000
- Washington payroll: $1,000,000 (since the Washington drivers spend 25% of their time in Oregon, we need to allocate 25% of the Washington payroll to Oregon, which is $250,000. The remaining $750,000 is allocated to states where Rob has nexus, which includes California, so we include it in the California payroll numerator)

Total California payroll numerator: $2,700,000
However, we need to subtract the Nevada payroll performed by California drivers because it has already been included in the California payroll: 
$2,700,000 - $200,000 = $2,500,000

Therefore, the best choice is B) $1,134,589.

Handsome Rob Provides Transportation Services in Several Western States