Sante Fe Corporation’s sales office and manufacturing plant are located in State

Question

Sante Fe Corporation’s sales office and manufacturing plant are located in State A. Sante Fe also maintains a manufacturing plant and sales office in State B. For purposes of apportionment, State A defines payroll as all compensation paid to employees, including contributions to § 401(k) deferred compensation plans. Under the statutes of State B, neither compensation paid to officers nor contributions to § 401(k) plans are included in the payroll factor. Sante Fe incurred the following personnel costs. State A State B Total Wages and salaries for employees other than officers $60,000 $40,000 $100,000 Salaries for officers $40,000 $20,000 $60,000 Contributions to § 401(k) plans $20,000 $10,000 $30,000 Total $120,000 $70,000 $190,000 If required, round your answers to two decimal places.

The payroll factor for State A is 63.16 %

State B's payroll factor is_____

Explanation / Answer

Solution - Payroll factor is a fraction where total amount paid in the state is divided by the total compensation paid anywhere & everywhere -

State A defines payroll as all compensation paid to employees, including contributions to § 401(k) deferred compensation plans so total payroll in state : 60000 + 40000 + 20000 = 120000

payroll in divided by total compensation paid state A + state B

The payroll factor for State A = 120000 / 190000 = 63.16% =

Under the statutes of State B, neither compensation paid to officers nor contributions to § 401(k) plans are included in the payroll factor

total payroll in state B : 40000

payroll in divided by total compensation paid state A + state B

The payroll factor for State B = 40000/ 190000 = 63.16% = 21.05%

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