State Corporation Income Tax: Apportionment of service and intangibles
On our last episode, we discussed the basics of apportionment of Income to multiple states for companies that sell tangible products. This time we will consider companies whose business is to provide services or intangible related transaction to customers.
State Apportionment of Taxable Income
As the business grows and expands, it may create a nexus in other states, requiring the company to file tax returns in multiple states. Here, we will discuss how taxable income is allocated or apportioned in several states.
Concept of State Nexus
Let’s explain the concept of “nexus,” which is crucial for understanding state taxation, using specific examples. Remember that for a company to be required to file taxes in a state, it must have a nexus or business relationship with that state. In this discussion, we’ll focus on income tax nexus. Later on, we’ll also address sales tax nexus.