Bill > S1564

This bill proposes to change how certain corporations calculate their income tax when they have business activities both inside and outside of the state, a process known as apportionment. Currently, a three-factor formula is used, which considers property, payroll, and sales. This bill would gradually shift towards a "single sales factor apportionment" for retail corporations, defined as businesses primarily involved in activities classified under NAICS Sectors 44-45, and wholesale corporations, defined as businesses primarily involved in activities classified under NAICS Sector 42. Starting in tax years beginning on or after January 1, 2016, and progressively increasing the weight of the sales factor each year, by tax years beginning on or after January 1, 2019, these retail and wholesale corporations will have their taxable net income multiplied by 100% of their sales factor, meaning their tax liability will be solely based on where their sales occur. The bill also clarifies how these definitions apply to combined groups of corporations, stating that a member will be considered a retail or wholesale corporation if 50% or more of the group's non-intercompany receipts come from retail or wholesale sales, respectively.