APPORTIONMENT:

�BY� TOTAL INCOME� AND� SECTOR

What is "APPORTIONMENT?"

Apportionment is the technical term for deciding how much of a firm's business income is taxed in the state.� For a company with all of its business in Utah and which has no presence outside the state, the apportionment fraction is 100 percent.� A very large firm with operations all over the country, by contrast, may have a fraction less than 1 percent.

The rule adopted by Utah and by many other states uses a three-factor formula to determine a firm's Utah income.� The wage factor is the ratio of state wages to U.S (water's edge) wages; similar ratios are calculated for sales to Utah residents relative to U.S sales and property values.� The apportionment fraction is then the average of these three ratios.� (A firm with no wages company wide, for example, would only average two factors.)

The larger a firm is, generally, a smaller percentage of its income is taxed in Utah.� That of course is not surprising, since almost by definition a large company will be operating in many states and will only have a small portion of its activity in Utah.� By contrast, a company with all of its operation in Utah is bound to be small.

For a firm with a given amount of profits, the more that are apportioned to Utah the greater will be the state tax.