Chapter+16+_International+Taxation_ - Chapter 16 Multijurisdictional Taxation Multijurisdictional Issues State and Local Taxation Chapter 25 State

Chapter+16+_International+Taxation_ - Chapter 16...

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Chapter 16 Multijurisdictional Taxation
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Multijurisdictional Issues – State and Local Taxation Chapter 25
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State Income Taxation square6 46 states and District of Columbia impose a tax based on taxable income rhombus6 Majority of states “piggyback” onto Federal income tax base 3 pentastar2 Essentially, they have adopted part or all of the Federal tax provisions
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square6 Individual income tax square6 Corporate income tax square6 Sales tax Gross receipts tax square6 Personal property tax square6 Unemployment insurance tax square6 Use tax Excise tax Types of State and Local Taxes square6 square6 Franchise tax square6 Real property tax square6 square6 Transfer tax square6 Severance tax Chapter 25, Exhibit 17a
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Types of State and Local Taxes Types of Tax Description of Tax Individual Income Tax Tax imposed on taxable income of state residents and nonresidents Corporate Income Tax Tax imposed on taxable income of corporations conducting business in the state Sales Tax Tax levied on retail sales Gross Receipts Tax Tax levied on the total revenue of a business operating in the state Chapter 25, Exhibit 17b Franchise Tax Tax on the right to conduct business in the state Real Property Tax Tax on the assessed value of land and improvements in the taxing jurisdiction
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Types of State and Local Taxes Types of Tax Description of Tax Personal Property Tax Tax on the assessed value of personalty located or used in the taxing jurisdiction Unemployment Insurance Tax Tax on an employee’s wages; designed to fund state unemployment programs Use Tax A tax on property purchased outside a taxing jurisdiction but used in the taxing jurisdiction that has not otherwise been subject to a sales tax Chapter 25, Exhibit 17c Excise Tax A tax typically imposed on sales of alcohol, tobacco, and gasoline Transfer Taxes Included in this category of taxes are gift, estate, and inheritance taxes and taxes imposed on sales of real property Severance Tax Tax imposed on the right to extract or sell natural resources from the jurisdiction
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Corporate State Income Tax Formula for Multistate Corporation Federal income tax base + State adjustments (such as interest on state and local bonds) - State adjustments (such as interest on federal obligations) Income tax base to be allocated and apportioned - Allocable income (income specifically allocated to particular states) Total income eligible for overall apportionment x State apportionment percentage State apportioned income + Income specifically allocated to the state State income tax base x State's income tax rate Tentative state income tax - Tax credits State income tax liability N.B.: State taxable income is composed of income specifically allocable to the state, plus a percentage of residual income not specifically allocable to any state.
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Nexus for Income Tax Purposes square6 Nexus is the degree of business activity which must be present before a state can impose tax on an out-of-state entity’s income square6 Sufficient nexus typically exists if: rhombus6
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  • Fall '14
  • fabioambrosio
  • Accounting, Taxation in the United States

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