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Take One More Step, and I’m Taxing You! State Apportionment Formulas

August 08, 2023 (3 min read)

States need money to provide services and government. That comes from all sorts of taxes on individuals, businesses, and other entities. For businesses, absent residency, taxes may apply based on some connection of activities within the state. It may be tenuous! Oregon's highest court is scheduled to hear arguments this fall about whether an out-of-state tobacco seller is subject to the Oregon excise tax because the company participated in activities in the state at more than a minimal level. In a Michigan case to be heard in the coming months, the question is whether the Michigan Department of Treasury’s use of a statutory formula to allocate income and calculate business tax violates the Commerce Clause and Due Process as applied to the taxpayer because it was determined in a year that the out-of-state business had an especially high level of activity in Michigan. 

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  • Apportionment Formula State Law Survey
    See how one of the greatest problems for many corporations is how to apportion their income among the different states in which they are doing business. Apportionment is often weighted equally among three factors: property, payroll, and sales (gross receipts). But many states instead focus on the sales factor in their apportionment. Learn more by referencing this state survey. 

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