Multistate Tax Planning: Benefits of Multiple Jurisdictions and Tax Planning Assistance

35 Pages Posted: 9 Aug 2000

See all articles by Sanjay Gupta

Sanjay Gupta

Michigan State University - Eli Broad College of Business

Lillian F. Mills

University of Texas at Austin - McCombs School of Business

Date Written: June 2000

Abstract

This paper investigates corporate income tax planning at the state level. Specifically, we examine whether certain firm-specific characteristics ? the number of states in which corporations file tax returns and their state apportionment factors ? impact firms' overall state tax burdens. The analysis is based on confidential survey data from firms included in the IRS's Coordinated Examination Program that are rich in certain state-related data not available publicly for individual firms. We find that firms' state tax burdens decrease then increase in the number of states in which they file returns and are minimized at an estimated 21 states. Using the best available data to explore firm-level apportionment opportunities, we find our proxy for sales factor apportionment is related to lower state tax burdens, although this result is sensitive to sample composition. With regard to investments in state tax planning, we find that the average payoff of 100 to 1 is much higher than has been previously documented for federal tax planning.

Keywords: Multistate taxation, apportionment, cross-jurisdiction, compliance

JEL Classification: H17, H25

Suggested Citation

Gupta, Sanjay and Mills, Lillian F., Multistate Tax Planning: Benefits of Multiple Jurisdictions and Tax Planning Assistance (June 2000). Available at SSRN: https://ssrn.com/abstract=234611 or http://dx.doi.org/10.2139/ssrn.234611

Sanjay Gupta

Michigan State University - Eli Broad College of Business ( email )

632 Bogue Street, 520 BCC
East Lansing, MI 48824
United States
517-432-6488 (Phone)

HOME PAGE: http://www.broad.msu.edu/

Lillian F. Mills (Contact Author)

University of Texas at Austin - McCombs School of Business ( email )

Austin, TX 78712
United States

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