Apportionment formulas are used throughout the country to determine the share of a multistate corporation's income that an individual state may tax. Corporations with a presence in Massachusetts and other states generally apportion income to the Commonwealth using a three-factor apportionment formula. A corporation's sales, payroll, and property in Massachusetts are compared to those outside Massachusetts.
Double-Weighted Sales
An apportionment calculation that counted the sales factor twice (so-called "double-weighted sales") was adopted for most business corporations beginning with taxable years ending on or after December 31, 1976. Exporters with property and payroll in Massachusetts tend to benefit from an apportionment formula that weights sales more heavily than the other factors. On the other hand, businesses located outside of the state with a large volume of sales into Massachusetts are hurt by double-weighted sales. On balance, double-weighted sales is an expenditure.
Single-Sales Factor
Certain corporations are permitted to apportion their income using only the corporation's sales factor (so-called "single-sales factor").
Eligible defense corporations have apportioned using a single-sales factor formula since 1996. Single-sales factor was extended to other qualified manufacturers effective January 1, 2000. Effective July 1, 1997, corporations that perform services for mutual funds are allowed to apportion their income to Massachusetts based solely on the percentage of sales to Massachusetts residents.
As is the case with double-weighted sales, not all corporations that apportion using single-sales factor benefit from the rule, in particular those that are located outside of Massachusetts. However, on balance single-sales factor is an expenditure.
Origin: M.G.L. c. 63, § 38 (c), (k), (l), (m)
Corporate Excise Tax
Adjustments to Apportionment Formula
2.401
Unequal Weighting of Sales, Payroll, and Property in the Apportionment Formula
Apportionment formulas are used throughout the country to determine the share of a multistate corporation's income that an individual state may tax. Corporations with a presence in Massachusetts and other states generally apportion income to the Commonwealth using a three-factor apportionment formula. A corporation's sales, payroll, and property in Massachusetts are compared to those outside Massachusetts. <BR><BR>Double-Weighted Sales <BR>An apportionment calculation that counted the sales factor twice (so-called "double-weighted sales") was adopted for most business corporations beginning with taxable years ending on or after December 31, 1976. Exporters with property and payroll in Massachusetts tend to benefit from an apportionment formula that weights sales more heavily than the other factors. On the other hand, businesses located outside of the state with a large volume of sales into Massachusetts are hurt by double-weighted sales. On balance, double-weighted sales is an expenditure.<BR><BR>Single-Sales Factor<BR>Certain corporations are permitted to apportion their income using only the corporation's sales factor (so-called "single-sales factor"). <BR><BR>Eligible defense corporations have apportioned using a single-sales factor formula since 1996. Single-sales factor was extended to other qualified manufacturers effective January 1, 2000. Effective July 1, 1997, corporations that perform services for mutual funds are allowed to apportion their income to Massachusetts based solely on the percentage of sales to Massachusetts residents.<BR><BR>As is the case with double-weighted sales, not all corporations that apportion using single-sales factor benefit from the rule, in particular those that are located outside of Massachusetts. However, on balance single-sales factor is an expenditure.
<a href="https://malegislature.gov/Laws/GeneralLaws/PartI/TitleIX/Chapter63/Section38" target="_blank">M.G.L. c. 63, § 38 (c), (k), (l), (m)</a>
371.2
382.4
394.0
405.9
418.1
