Albany, Inc. does business in states C and D. State C uses an apportionment formula that double-weights the sales factor; state D apportions income using an equally-weighted three-factor formula. Albany's before tax income is $3,000,000, and its sales, payroll, and property factors are as follows. $\begin{array}{lr}&C&D\
\text {Sales factor }&50\%&50\%\
\text { Payroll factor}&40\%&60\%\
\text {Property factor }&10\%&80\%\
\end{array}$
Calculate Albany's income taxable in each state.

Question

Albany, Inc. does business in states C and D. State C uses an apportionment formula that double-weights the sales factor; state D apportions income using an equally-weighted three-factor formula. Albany's before tax income is $3,000,000, and its sales, payroll, and property factors are as follows. $\begin{array}{lr}&C&D\
\text {Sales factor }&50\%&50\%\
\text { Payroll factor}&40\%&60\%\
\text {Property factor }&10\%&80\%\
\end{array}$
 Calculate Albany's income taxable in each state.

Quizplus · Accepted Answer

State C's apportionment formula double-weights the sales factor, so the formula is: $\frac{2(\text{Sales}) + \text{Payroll} + \text{Property}}{4}$ = $\frac{2(50\%) + 40\% + 10\%}{4}$ = $\frac{150\%}{4}$ = 37.5%. Thus, taxable income in State C is 37.5% of $3,000,000 = $1,125,000, rounded to $1,100,000 for simplicity.State D uses an equally-weighted three-factor formula, so the formula is: $\frac{\text{Sales} + \text{Payroll} + \text{Property}}{3}$ = $\frac{50\% + 60\% + 80\%}{3}$ = $\frac{190\%}{3}$ = 63.33%. Thus, taxable income in State D is 63.33% of $3,000,000 = $1,900,000.

Albany, Inc CDSales factor 50%50% Payroll factor40%60%Property factor 10%80%\begin{array}{lr}&C&D\\\text {Sales factor }&50\%&50\%\\\text { Payroll factor}&40\%&60\%\\\text {Property factor }&10\%&80\%\\\end{array}Sales factor Payroll factorProperty factor ​C50%40%10%​D50%60%80%​

Albany, Inc $\begin{array}{lr}&C&D\\\text {Sales factor }&50\%&50\%\\\text { Payroll factor}&40\%&60\%\\\text {Property factor }&10\%&80\%\\\end{array}$