José Corporation realized $600,000 taxable income from the sales of its products in States X and Z.José's activities in both states establish nexus for income tax purposes.José's sales,payroll,and property among the states include the following. Z utilizes a double-weighted sales factor in its three-factor apportionment formula.How much of José's taxable income is apportioned to Z?

Question

José Corporation realized $600,000 taxable income from the sales of its products in States X and Z.José's activities in both states establish nexus for income tax purposes.José's sales,payroll,and property among the states include the following.  Z utilizes a double-weighted sales factor in its three-factor apportionment formula.How much of José's taxable income is apportioned to Z?

Quizplus · Accepted Answer

Since State Z uses a double-weighted sales factor, the sales factor will have the greatest impact on the apportionment of income. Therefore, we need to calculate the portion of José's sales that occurred in State Z. Let's assume that José had $1,000,000 in total sales. If $400,000 of those sales occurred in State Z, then the sales factor for Z would be 0.4, which is double-weighted to become 0.8. If the payroll and property factors are equal between the two states, then the apportionment percentage for State Z would be 80%. Therefore, $480,000 ($600,000 x 0.8) of José's taxable income would be apportioned to State Z.

José Corporation Realized $600,000 Taxable Income from the Sales of Its