A. A
taxpayer is subject to the allocation and apportionment provisions of A.R.S.
§§
43-1131
through
43-1148
if it has income from business activity that is taxable both within and without
this state. A taxpayer's income from business activity is taxable without this
state if the taxpayer, by reason of the business activity, is taxable in
another state under either one of the two tests specified in A.R.S. §
43-1133.
A taxpayer is not taxable in another state with respect to a particular trade
or business merely because the taxpayer conducts activities in that other state
pertaining to the production of nonbusiness income or business activities
relating to a separate trade or business.
B. A taxpayer is "subject to" one of the
taxes specified in A.R.S. §
43-1133(1) if it carries on business activities in a
state and that state imposes one of the taxes on the taxpayer. Any taxpayer
that asserts that it is subject to one of the taxes specified in A.R.S. §
43-1133(1) in another state shall furnish to the
Department upon its request evidence to support that assertion. The Department
may request that the evidence include proof that the taxpayer has filed the
requisite tax return in the other state and has paid any taxes imposed under
the laws of the other state. The taxpayer's failure to produce this proof may
be taken into account in determining whether the taxpayer is subject to one of
the taxes specified in A.R.S. §
43-1133(1) in the other state.
1. A taxpayer that voluntarily files and pays
one or more of the taxes specified in A.R.S. §
43-1133(1) when not required to do so by the laws of
the other state or pays a minimal fee for qualification, organization, or the
privilege of doing business in that state is not "subject to" one of the taxes
specified in A.R.S. §
43-1133(1) if the taxpayer:
a. Does not engage in business activity in
that state; or
b. Engages in some
business activity, not sufficient for nexus, and the minimum tax bears no
relationship to the taxpayer's business activity within that state.
2. The concept of taxability in
another state is based upon the premise that every state in which the taxpayer
is engaged in business activity may impose an income tax even though every
state does not do so. In states that do not impose an income tax, other types
of taxes may be imposed as a substitute. Therefore, the Department shall
consider only those taxes enumerated in A.R.S. §
43-1133(1) that are basically revenue raising rather
than regulatory measures in determining whether the taxpayer is "subject to"
one of the taxes in another state.
Example 1: State A requires all nonresident corporations
that qualify or register in State A to pay to the Secretary of State an annual
license fee or tax for the privilege of doing business in the state regardless
of whether the privilege is in fact exercised. The amount paid is determined
according to the total authorized capital stock of the corporation; the rates
are progressively higher by bracketed amounts. The statute sets a minimum fee
of $50 and a maximum fee of $500. Failure to pay the tax bars a corporation
from using the state courts for enforcement of its rights. State A also imposes
a corporation income tax. Nonresident Corporation X is qualified in State A and
pays the required fee to the Secretary of State but does not carry on any
business activity in State A (although it may use the courts of State A).
Corporation X is not "taxable" in State A.
Example 2: The facts are the same as example one except
that Corporation X is subject to and pays the corporation income tax. Payment
is prima facie evidence that Corporation X is "subject to" the net income tax
of State A and is "taxable" in State A.
Example 3: State B requires all nonresident corporations
qualified or registered in State B to pay to the Secretary of State an annual
permit fee or tax for doing business in the state. The base of the fee or tax
is the sum of outstanding capital stock, and surplus and undivided profits. The
fee or tax base attributable to State B is determined by a three-factor
apportionment formula. Nonresident Corporation X, which operates a plant in
State B, pays the required fee or tax to the Secretary of State. Corporation X
is "taxable" in State B.
Example 4: State A has a corporation franchise tax measured
by net income for the privilege of doing business in that state. Corporation X
files a return based on its business activity in the state but the amount of
computed liability is less than the minimum tax. Corporation X pays the minimum
tax. Corporation X is subject to State A's corporation franchise tax.
C. A.R.S. §
43-1133(2) applies if the taxpayer's business activity
is sufficient to give the state jurisdiction to impose a net income tax by
reason of the business activity. Jurisdiction to tax is not present if the
state is prohibited from imposing the tax by reason of the provisions of Public
Law
86-272, 15 U.S.C.A. §§
381 -
384.
Notes
Ariz. Admin. Code §
R15-2D-403
Recodified at 6 A.A.R.
2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2).
Amended by final rulemaking at 7 A.A.R. 4973, effective October 5, 2001 (Supp.
01-4). Correction to manifest typographical error, under subsection
R15-2D-403(B), deleted "2" between "A.R.S." and "§" as adopted at 5 A.A.R.
3766 (Supp. 08-4).
