Handsome Rob provides transportation services in several western states. Rob has payroll as follows: Rob is a California corporation and the following is true:
Rob hasincome tax nexus in Arizona, California, Nevada, and Washington. The Washington drivers spend 25 percent of their time driving through Oregon. California payroll includes $201,800 of payroll for services provided in Nevada by California-based drivers. What is Rob's California payroll numerator?

Question

Handsome Rob provides transportation services in several western states. Rob has payroll as follows:  Rob is a California corporation and the following is true:
Rob hasincome tax nexus in Arizona, California, Nevada, and Washington. The Washington drivers spend 25 percent of their time driving through Oregon. California payroll includes $201,800 of payroll for services provided in Nevada by California-based drivers. What is Rob's California payroll numerator?

Quizplus · Accepted Answer

To calculate the California payroll numerator, we need to add up all the payroll Rob has in each state where he has income tax nexus, and then allocate the appropriate amount to California based on the time his employees spent working there. Here's the breakdown:

- Arizona: no payroll provided 
- California: $3,580,000 ($201,800 of which is for services provided in Nevada)
- Nevada: $812,000 
- Washington: $700,000 (75% of which is allocated to Washington, and 25% of which is allocated to Oregon)

So, total payroll in states with income tax nexus = $4,092,000. To allocate the appropriate amounts to California, we use the percentage of time his employees spent working there:

- Arizona: 0% 
- California: 100% 
- Nevada: 100% 
- Washington: 75%

So, to calculate the California payroll numerator, we add up the payroll in California ($3,580,000) and the portion of payroll from other states allocated to California based on time worked there. That looks like this:

$3,580,000 (CA payroll) + ($812,000 + ($700,000 x 0.75)) (allocated payroll) = $1,134,751.

So the correct answer is B.

Handsome Rob Provides Transportation Services in Several Western States