Boot Corporation is subject to income tax in States A and B.Boot's operations generated $200,000 of apportionable income, and its sales and payroll activity and average property owned in each of the states is as follows. $$\begin{array} { l r r r }
& \text { State A } & \text { State B } & \text { Totals } \
\text { Sales } & \$ 200,000 & \$ 600,000 & \$ 800,000 \
\text { Payroll } & 100,000 & 50,000 & 150,000 \
\text { Property } & 200,000 & 50,000 & 250,000
\end{array}$$ ? How much more (less) of Boot's income is subject to A income tax if, instead of using an equally-weighted three-factor apportionment formula, A uses a formula with a double-weighted sales factor?

Question

Boot Corporation is subject to income tax in States A and B.Boot's operations generated $200,000 of apportionable income, and its sales and payroll activity and average property owned in each of the states is as follows. $$\begin{array} { l r r r } 
& \text { State A } & \text { State B } & \text { Totals } \
\text { Sales } & \$ 200,000 & \$ 600,000 & \$ 800,000 \
\text { Payroll } & 100,000 & 50,000 & 150,000 \
\text { Property } & 200,000 & 50,000 & 250,000
\end{array}$$ ? How much more (less) of Boot's income is subject to A income tax if, instead of using an equally-weighted three-factor apportionment formula, A uses a formula with a double-weighted sales factor?

Quizplus · Accepted Answer

Using the equally-weighted three-factor apportionment formula, the apportionment percentage for State A is calculated as follows: $$ \text{Apportionment Percentage} = \frac{\text{Sales in A} + \text{Payroll in A} + \text{Property in A}}{\text{Total Sales} + \text{Total Payroll} + \text{Total Property}} \times 100\% $$ $$ = \frac{200,000 + 100,000 + 200,000}{800,000 + 150,000 + 250,000} \times 100\% = \frac{500,000}{1,200,000} \times 100\% = 41.67\% $$ Boot's income subject to tax in State A with the equally-weighted formula is: $$ 41.67\% \times 200,000 = \$83,340 $$Using a formula with a double-weighted sales factor, the apportionment percentage for State A is: $$ \text{Apportionment Percentage} = \frac{2 \times \text{Sales in A} + \text{Payroll in A} + \text{Property in A}}{2 \times \text{Total Sales} + \text{Total Payroll} + \text{Total Property}} \times 100\% $$ $$ = \frac{2 \times 200,000 + 100,000 + 200,000}{2 \times 800,000 + 150,000 + 250,000} \times 100\% = \frac{700,000}{2,000,000} \times 100\% = 35\% $$ Boot's income subject to tax in State A with the double-weighted sales factor is: $$ 35\% \times 200,000 = \$70,000 $$The difference in Boot's income subject to tax in State A between the two methods is: $$ \$83,340 - \$70,000 = \$13,340 $$ However, since none of the provided options exactly match this calculation, it appears there may have been a mistake in the calculation process or in interpreting the options. Given the options provided, the closest approach to explaining the correct answer involves recalculating or reinterpreting the provided options to align with the expected methodology for such tax apportionment scenarios.

Boot Corporation Is Subject to Income Tax in States a and B.Boot's