Ch25IM - 477 Chapter 25 Multijurisdictional Taxation...

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© 2009 CCH. All Rights Reserved. Chapter 25 477 Chapter 25 Multijurisdictional Taxation: 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 fi rst 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 owned by a person at death, either in the form of a tax on the estate or the bene fi ciary of that property. State-resident-decedents are typically subject to the state tax on all property owned, within and without the state; nonresident decedents are taxed, in most states, on real and tangible personal property located within a state. ¶25,025 Property Taxes Property taxes are levied on owners of real and personal tangible property. A few states also tax intangible property. ¶25,035 Franchise Taxes States impose franchise taxes on corporations 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. ¶25,045 Sales and Use Taxes (SUTs) 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.
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478 CCH Federal Taxation—Comprehensive Topics Chapter 25 © 2009 CCH. All Rights Reserved. ¶25,061 Computing State Income Tax 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 speci fi cally allocated to particular states) Total income eligible for apportionment × State apportionment percentage State apportioned income + Income allocated to the state State income tax base × State's income tax rate Tentative state income tax Tax credits State income tax liability ¶25,065 Nexus A state’s power to impose taxes on a nonresident or require a nonresident to collect and remit taxes to the state is limited by the United States Constitution. The Due Process and Commerce clauses of the United States Constitution prohibit a state from taxing a nonresident unless the nonresident has suf fi cient connection to the state.
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