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.
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.  ​
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

To apportion José Corporation's taxable income to state Z, we need to calculate the sales factor for both states. Because Z utilizes a double-weighted sales factor, sales will have twice the impact as property and payroll.

For state X, the sales factor is calculated using the following formula:

Sales Factor = (Sales in State X) / (Total Sales)

Sales Factor = ($600,000) / ($1,500,000)

Sales Factor = 0.4

For state Z, the sales factor is calculated using the following formula:

Sales Factor = 2 x (Sales in State Z) / (Total Sales)

Sales Factor = 2 x ($300,000) / ($1,500,000)

Sales Factor = 0.4

The total apportionment percentage for state Z will be the sum of the double-weighted sales factor and the payroll and property factors, divided by 4 (the total weight of the three factors).

Apportionment Percentage for Z = (2 x 0.4 + 0.2 + 0.3) / 4

Apportionment Percentage for Z = 0.55

To calculate the amount of taxable income apportioned to state Z, we multiply José Corporation's taxable income by the apportionment percentage for Z:

Apportioned Taxable Income for Z = $900,000 x 0.55

Apportioned Taxable Income for Z = $495,000

Therefore, the answer is C) $180,000.

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