Hermann Corporation is based in State A (corporate income tax rate 10%).It sells its goods to customers in both A and State B (corporate income tax rate 4%). Hermann's state taxable income for the year is $1 million, 30% of which relates to B customers. Hermann's level of activities in B is insufficient to create nexus there, but A has adopted a throwback rule as to multistate sales. Would Hermann reduce its total state income tax liability by creating nexus with B, say by allowing its sales force to make credit decisions? Elaborate.

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The Answer of Hermann Corporation is based in State A (corporate income tax rate 10%).It sells its goods to customers in both A and State B (corporate income tax rate 4%). Hermann's state taxable income for the year is $1 million, 30% of which relates to B customers. Hermann's level of activities in B is insufficient to create nexus there, but A has adopted a throwback rule as to multistate sales. Would Hermann reduce its total state income tax liability by creating nexus with B, say by allowing its sales force to make credit decisions? Elaborate.

Hermann Corporation Is Based in State a (Corporate Income Tax