Corporate Multistate Tax Planning: Benefits of Multiple Jurisdictions

Posted: 7 Nov 2001

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

Abstract

We investigate how firms use differences in state income tax regimes to lower their state tax burdens. We develop a model that predicts that firms' state effective tax rates first decrease then increase as a function of the number of states in which they file returns. Using firm-level data, we find evidence consistent with the model's predictions and we estimate that such rates are minimized at 24 states. Consistent with predictions from prior literature, our evidence also suggests that firms use sales factor apportionment to reduce state tax burdens.

Keywords: Multistate taxation, Apportionment, Cross-jurisdiction, Compliance

JEL Classification: M41, H71, H25

Suggested Citation

Gupta, Sanjay and Mills, Lillian F., Corporate Multistate Tax Planning: Benefits of Multiple Jurisdictions. Journal of Accounting & Economics, Vol. 33, No. 1, February 2002. Available at SSRN: https://ssrn.com/abstract=289856

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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