Chipper Corporation realized $1,000,000 taxable income from the sales of its products in States X and Z.Chipper's activities establish nexus for income tax purposes only in Z, the state of its incorporation.Chipper's sales, payroll, and property among the states include the following. $$\begin{array} { l r r r }
& \text { State X } & \text { State Z } & \text { Totals } \
\text { Sales } & \$ 1,000,000 & \$ 2,000,000 & \$ 3,000,000 \
\text { Property } & 200,000 & 2,300,000 & 2,500,000 \
\text { Payroll } & 100,000 & 1,900,000 & 2,000,000
\end{array}$$ ? X utilizes a sales-only factor in its three-factor apportionment formula.How much of Chipper's taxable income is apportioned to X?

Question

Chipper Corporation realized $1,000,000 taxable income from the sales of its products in States X and Z.Chipper's activities establish nexus for income tax purposes only in Z, the state of its incorporation.Chipper's sales, payroll, and property among the states include the following. $$\begin{array} { l r r r } 
& \text { State X } & \text { State Z } & \text { Totals } \
\text { Sales } & \$ 1,000,000 & \$ 2,000,000 & \$ 3,000,000 \
\text { Property } & 200,000 & 2,300,000 & 2,500,000 \
\text { Payroll } & 100,000 & 1,900,000 & 2,000,000
\end{array}$$ ? X utilizes a sales-only factor in its three-factor apportionment formula.How much of Chipper's taxable income is apportioned to X?

Quizplus · Accepted Answer

Since Chipper Corporation only has nexus for income tax purposes in State Z, the state of its incorporation, none of its taxable income would be apportioned to State X. Nexus is a legal term referring to the requirement for companies to collect and pay tax in a state. If there's no nexus in State X, then Chipper Corporation is not required to apportion any income to that state for tax purposes.

Chipper Corporation Realized $1,000,000 Taxable Income from the Sales of Its