A state does not get to tax all the income belonging to a corporation doing business within its borders, but may only tax that part that represents its share of the income generated by the corporation. Determining the share is, however, fraught with difficulty, since assigning the actual profit created in a state is next to impossible. If XYZ Corporation produces composted fertilizer in Wyoming and ships it to a Utah outlet for sale, where does the profit occur? Utah may like to say that since all the sales occur in Utah, the only cost that can be subtracted from Utah sales is the actual cost of production in Wyoming. The firm may want to take as much of the profit in Wyoming as possible since profits are not taxed there, saying the only profit occurring in Utah is the revenue minus the retailing cost minus the price at the border which would include a healthy profit for Wyoming production.
To get around endless arguments about where the “true profit” occurred, the general practice among the states is to divide the total profit according to the firm's relative economic presence in the state. Utah defines the presence, as do many other states, as the average of the wage share, the sales share, and the property share in Utah. (See the section on apportionment for clarification.) The fraction is called the “apportionment fraction,” and when it is applied to an amount, such as “net income” it is called “apportioned net income.” In simple terms, an apportioned amount is that amount that is relevant for Utah purposes.
In this report, with the exception of the section on apportionment, all data is reported in apportioned form as it is relevant to Utah.
What goes in the corporate tax base and what is allowed as a deduction is very complicated, with many fine nuances and details. As a rule, the state tax base is close to the federal base, with minor exceptions, which we will survey here.
Table 1 reports the magnitude of various income measures for 2001. The first column designates the item from the form and the second column the line number from the form. (For a better understanding of the various lines, the state form should be studied.) The next column shows the raw apportioned data and the final shows the relation to federal taxable income.)
The Net Utah Taxable Income line shows that various state adjustments 80% of unadjusted income is taxed. Thus the effective rate is 4% as the final line shows.
The dollar amounts reported in this section are for firms paying taxes on the basis of income rather than due to the minimum tax, since the income magnitudes are irrelevant in determining taxes for these firms.
|
VARIABLE |
2001 LINE # |
$ Million |
RELATIVE TO UNADJUSTED INCOME |
|
RETURNS |
|
6,070 |
|
|
UNADJUSTED INCOME |
1 |
$3,106.1 |
100.0% |
|
ADJUSTED INCOME |
4 |
$2,818.6 |
90.7% |
|
APPORTIONABLE INCOME |
8 |
$2,740.7 |
88.2% |
|
UTAH TAXABLE |
12 |
$2,742.4 |
88.3% |
|
NET UTAH TAXABLE |
14 |
$2,508.8 |
80.8% |
|
TAX |
15 |
$125.4 |
4.0% |
Table 2 reports the dollar value and share of taxes paid for non-minimum taxpayers, as reported on tax returns for 2001. The most obvious fact is that the large corporations pay a very large share of taxes. Companies with a net apportioned income larger than $1 million paid nearly 80 percent of the taxes, and those with income less than $100,000 paid less than 4.8 percent of the taxes.
|
INCOME CLASS |
RETURNS |
TAX |
SHARE |
|
|
|
|
OF TAX |
|
$ 1 - 2,000 |
163 |
$16,300 |
0.0% |
|
$ 2,001 - 10,000 |
1,501 |
$388,994 |
0.3% |
|
$ 10,001 - 20,000 |
827 |
$599,228 |
0.5% |
|
$ 20,001 - 30,000 |
525 |
$652,101 |
0.5% |
|
$ 30,001 - 40,000 |
384 |
$666,677 |
0.5% |
|
$ 40,001 - 50,000 |
343 |
$773,632 |
0.6% |
|
$ 50,001 - 75,000 |
525 |
$1,595,486 |
1.3% |
|
$ 75,001 - 100,000 |
287 |
$1,228,262 |
1.0% |
|
$ 100,001 - 500,000 |
949 |
$10,512,981 |
8.4% |
|
$ 500,001 - 1,000,000 |
224 |
$7,858,912 |
6.3% |
|
$1,000,001 - 5,000,000 |
244 |
$26,452,490 |
21.1% |
|
$5,000,001 -10,000,000 |
49 |
$17,574,048 |
14.0% |
|
OVER $10,000,000 |
49 |
$57,121,112 |
45.5% |
|
TOTAL |
6,070 |
$125,440,223 |
100.0% |
Table 3 is similar in content and structure to the previous table but includes all corporate taxpayers. The Manufacturing, Finance and Insurance, Wholesale, and Retail were the four largest payers. Each paid over $15 million. The larges average payments were in the Management and Mining sectors.
|
|
|
|
SHARE |
TAX |
|
SECTOR |
RETURNS |
TAX |
OF TAX |
PER RETURN |
|
AGRICULTURE, FORESTRY, FISHING |
51 |
$80,466 |
0.1% |
$1,578 |
|
MINING |
98 |
$6,229,167 |
4.9% |
$63,563 |
|
UTILITIES |
13 |
$1,300 |
0.0% |
$100 |
|
CONSTRUCTION |
1,188 |
$3,736,427 |
2.9% |
$3,145 |
|
MANUFACTURING |
964 |
$20,320,407 |
16.0% |
$21,079 |
|
WHOLESALE |
1,480 |
$17,989,522 |
14.2% |
$12,155 |
|
RETAIL |
1,131 |
$16,704,178 |
13.1% |
$14,769 |
|
TRANSPORTATION, WAREHOUSING |
297 |
$4,298,043 |
3.4% |
$14,472 |
|
INFORMATION |
262 |
$1,773,245 |
1.4% |
$6,768 |
|
FINANCE, INSURANCE |
634 |
$18,002,020 |
14.2% |
$28,394 |
|
REAL ESTATE, RENTAL,LEASING |
433 |
$1,385,214 |
1.1% |
$3,199 |
|
PROFESSIONAL, SCIENTIFIC,TECHNICAL SERVICES |
1,322 |
$4,813,319 |
3.8% |
$3,641 |
|
MANAGEMENT |
53 |
$12,108,197 |
9.5% |
$228,457 |
|
ADMINISTRATIVE AND SUPPORT |
515 |
$2,167,760 |
1.7% |
$4,209 |
|
EDUCATIONAL SERVICES |
74 |
$92,833 |
0.1% |
$1,255 |
|
HEALTH CARE AND SOCIAL ASSISTANCE |
1,081 |
$1,894,117 |
1.5% |
$1,752 |
|
ARTS, ENTERTAINMENT, AND RECREATION |
85 |
$94,945 |
0.1% |
$1,117 |
|
ACCOMODATION AND FOOD SERVICE |
417 |
$1,715,125 |
1.3% |
$4,113 |
|
OTHER SERVICES |
446 |
$872,140 |
0.7% |
$1,955 |
|
OTHER, OR NON-DISCLOSABLE |
11,980 |
$12,807,198 |
10.1% |
$1,069 |
|
TOTAL |
22,524 |
$127,085,623 |
100.0% |
$5,642 |