• levied on tangible personal property and some services
• exemptions vary state to state but usually include items bought for resale and that are used in manufacturing

1. based on value of real property and personal property
2. exemptions for inventory
3. some states also tax intangible property
4. levied for property owned at a specific date

1. levied on privilege of doing business in a state
2. based on the value of the capital used in the jurisdiction (common stock, paid-in-capital, and retained earnings)

1. levied on the quantity of an item or sales price
2. can be charged to consumer or manufacturer
3. examples include gas, booze, cigarettes

1. business activity must have substantial nexus with state
2. tax must be fairly apportioned
3. tax can't discriminate against interstate commerce
4. tax must be fairly related to services that the state provides

1. soliciting sales of tangible personal property that are approved and shipped outside the state
2. advertising
3. determining reorder need of customers
4. furnishing autos to sales staff

1. approving/accepting orders
2. hiring/supervising/training employees other than sales staff
3. installation
4. maintaining an office or warehouse 
5. providing maintenance or engineering services
6. making repairs
7. investigating credit worthiness or collecting delinquent accounts

1. generated from business's regular operations (transactional test)-OR-
2. from sale of property that is an integral part of the business

• investment income and income from transactions not part of regular operations.
• allocated to state of incorporation

1. sales factor=total sales in state/total sales    
2. property factor= avg value of prop in state/value of all prop
3. payroll factor=compensation paid or accrued in state/total compensation paid or accrued

1. limited to real property and tangible personal property (not cash)
2. includes leased property (annual lease X 8)
3. only included if used for production of business income

1. compensation includes fringe benefits if taxable under federal law
2. payments to independent contractors and paid into sec. 401(k) plans usually not included
3. included only if relates to production of business income

1. adopted to promote uniformity in state allocation and apportionment rules.
2. says income goes to state with greatest cost-of-performance
3. intangible assets excluded
4. TP can petition for things if unhappy with result

1. ownership-more than 50%
2. opeerations
3. use- centralized management

can be included: partnerships, business even if not nexus 

add: DRD, expenses related to interest earned on U.S. bonds, state income taxes, depreciation in excess of that allowed for state, and municipal interest taxed for state purposes

subtract: federal income taxes paid, expenses related to municipal interest income, interest on U.S. bonds, and depreciation in addition to that allowed for federal purposes

based on resident of seller except...

1. inventory sourced where title transfers
2. for depreciable property, recapture is sourced where depreciation was claimed and  remaining gain is sourced where title transfers

1. u.s. government
2. noncorporate u.s. residents
3. domestic corporations

when would dividends received from a foreign corporation be considered U.S. source?

1. income not connected economically to the country in which the corporation is organized
2. income from insuring the risk of loss from outside the country in which the corporation is orgainzed

if U.S. effective tax rate > foreign effective rate then the credit is limited to

U.S. tax on worldwide income X (foreign sourse taxable income / Worldwide taxable income)

1. during a continuous periods that includes an intire tax year, individual must be a bona fide resident of at least one foreign country OR
2. must have a tax home in a foreign contry and must have been present in one or more foreign countries for at least 330 days during any 12 consecutive months (if there for 330-365 days, exclusion is pro-rated on daily basis)

1. foreign-earned income from personal services, limited to $92,900 in 2011
2. employer provided foreign housing income, limited to $13,006 in 2011 (only to the extent it exceeds $14,864 in 2011)

1. g/l resulting from the normal course of business operations are ordinary
2. g/l resulting from investment or personal transactions are capital