Lexington Corporation conducts business in four states. In state A, its sales factor is 50%, its payroll factor is 14%, and its property factor is 29%. State A uses an equally-weighted three-factor apportionment formula, but plans to change to a formula that double-weight the sales factor. Which is of the following statements is true?

Question

Quizplus · Accepted Answer

Double-weighting the sales factor will result in a higher relative weight given to the sales factor, which is typically a larger value for most businesses. This will increase Lexington's overall apportionment percentage in state A, leading to a higher tax liability in that state. This change is unlikely to be offset by changes in tax liability in other states, as each state has its own method for apportioning income.

Lexington Corporation Conducts Business in Four States