International and State and Local Transactions
SUMMARY OF CHAPTER
Chapter 25 provides an overview of both international taxation and state and local taxation (SALT). SALT is
addressed in the first half of the chapter. International transactions are discussed in the second half.
State and Local Taxation
¶25,001 Types of SALTs
There are numerous types of state and local taxes (SALTs). Common ones include: the individual income tax,
the corporate income tax, the sales tax, the use tax, the gross receipts tax, the franchise tax, the real property tax,
the personal property tax, the unemployment insurance tax, excise taxes, transfer taxes, and severance taxes.
¶25,015 Estate, Inheritance, Gift, and Generation-Skipping Transfer Taxes
Many states impose a tax on the property of a decedent, either in the form of a tax on the estate or the
beneficiary of that property. State-resident-decedents are typically subject to the state tax on all property owned,
within and without the state; while nonresident decedents are taxed, in most states, on real or tangible personal
property located within a state.
¶25,025 Property Taxes
Property taxes are levied on owners of real and personal tangible property, although a few states also impose
this tax on intangibles.
¶25,035 Franchise Taxes
States impose franchise taxes on corporations, limited liability companies, and other business entities for the
privilege of doing business within the state. The amount of the franchise tax usually depends on a business’ capital
or net worth and its income attributable to activities within the state.
Some states have entered into reciprocal personal income agreements with one or more neighboring states.
Such agreements provide that a person working in a state that is a party to such an agreement but residing in
another state that is a party to the agreement will be taxed by his or her state of residence.
¶25,045 Sales and Use Taxes (SUTs)
Sales and use taxes (SUT) are serious considerations for entities involved in the sale of goods. Sales and use
taxes are imposed by most states on retail sales of tangible personal property. The retailer is the typical tax
collector (and then remits to the state) for sales taxes. Use taxes are paid by consumers on out-of-state purchases.
¶25,055 State Income Taxes
Forty-six states and the District of Columbia impose a state income tax on corporations, and 43 states and the
District of Columbia impose an income tax on individual taxpayers.
¶25,061 State Income Tax Formula
Federal income tax base
State adjustments (such as interest on state and local