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,X defines payroll as all compensation paid to employees,including contributions to § 401(k) deferred compensation plans.Under the statutes of W,neither compensation paid to officers nor contributions to § 401(k) plans are included in the payroll factor.Net incurred the following personnel costs. State X State W Totals Wages and salaries for employees other than officers $ 500,000 $300,000 $ 800,000 Salaries for officers 300,000 150,000 450,000 Contributions to § 401(k) plans 200,000 50,000 250,000 Totals $1,000,000 $500,000 $1,500,000 Net's payroll factor for State W is:

Question

Quizplus · Accepted Answer

For State X, Net includes all compensation paid to employees, including contributions to § 401(k) deferred compensation plans. Therefore, the payroll factor for State X is calculated as follows:

Payroll factor for State X = (Wages and salaries + § 401(k) contributions) / Total payroll
                                 = ($500,000 + $200,000) / $1,000,000
                                 = 70%

For State W, however, compensation paid to officers and contributions to § 401(k) plans are not included in the payroll factor. Therefore, the payroll factor for State W is calculated as follows:

Payroll factor for State W = Wages and salaries for employees other than officers / Total payroll
                                  = $300,000 / $800,000
                                  = 37.50%

Thus, the payroll factor for State W is 37.50%.

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