Net Corporation's sales office and manufacturing plant are located in State X. Net also maintains a manufacturing plant and sales office in State W. For purposes of apportionment, State X defines payroll as all compensation paid to employees, including contributions to § 401(k) deferred compensation plans. Under State W's statutes, neither compensation paid to officers nor contributions to § 401(k) plans are included in the payroll factor. Net incurred the following personnel costs: $\begin{array}{llr}
\text { Wages and salaries for emplovees other } &\$500,000&\$300,000&\$800,000\
\text { than officers } &\
\text { Salaries for officers } &300,000&150,000&450,000\
\text {Contributions to $ \S 401(\mathrm{k}) $ plans } &200,000&50,000&250,000\
\text { Totals } &\$1,000,000&\$500,000&\$1,500,000\
\end{array}$

$\text {Net's pavroll factor for State $ W $ is:}$

Question

Net Corporation's sales office and manufacturing plant are located in State X. Net also maintains a manufacturing plant and sales office in State W. For purposes of apportionment, State X defines payroll as all compensation paid to employees, including contributions to § 401(k) deferred compensation plans. Under State W's statutes, neither compensation paid to officers nor contributions to § 401(k) plans are included in the payroll factor. Net incurred the following personnel costs: $\begin{array}{llr}
  \text { Wages and salaries for emplovees other  } &\$500,000&\$300,000&\$800,000\
 \text { than officers } &\
 \text { Salaries for officers } &300,000&150,000&450,000\
 \text {Contributions to $ \S 401(\mathrm{k}) $ plans  } &200,000&50,000&250,000\
 \text { Totals } &\$1,000,000&\$500,000&\$1,500,000\
\end{array}$

$\text {Net's pavroll factor for State $ W $ is:}$

Quizplus · Accepted Answer

State W's statutes exclude compensation paid to officers and contributions to § 401(k) plans from the payroll factor. Therefore, only the wages and salaries for employees other than officers are included, which amount to $800,000. Since the total personnel costs are $1,500,000, and State W only considers $800,000 of that amount, the payroll factor for State W is $800,000 / $1,500,000 = 53.33%. However, the question seems to ask for the percentage of payroll costs located in State W relative to the total payroll costs considered by State W's statutes. In State W, the wages and salaries for employees other than officers amount to $300,000. Therefore, the correct calculation for the payroll factor in State W should be $300,000 (wages and salaries in State W) / $800,000 (total wages and salaries considered by State W's statutes) = 37.5%.

Net Corporation's Sales Office and Manufacturing Plant Are Located in State