Receipts factor calculation examples

Receipts factor calculation examples

Example A

Company A is an in-state entity reporting under the Service & Other Activities B&O tax with the following receipts:

State/Country   Gross receipts* Gross Service & Other Activities Income
Washington 157,000 62,000
Colorado 73,700 4,700
Florida 11,000 6,000
Idaho 105,700 700
Illinois 65,000 3,000
Nebraska 103,000 2,000
Oregon 89,100 2,100
Totals 604,500 80,500

*Gross receipts means income from all classifications.

Based on the information above, Company A is taxable in Idaho and Nebraska because they have more than $100,000 annual gross income in those states. This means income from Idaho and Nebraska is not considered throw-out income.
 
Now let’s determine if the income attributable to the remaining states is considered taxable in those states or whether it is considered throw-out income. The states where Company A is already considered taxable are greyed out.

State/Country    Subject to business activities tax? Taxable in the prior year? Physical presence? Organized or commercially domiciled? Work performed in Washington?
Washington Yes        
Colorado Yes        
Florida NO Yes      
Idaho Yes        
Illinios NO NO NO NO Yes
Nebraska Yes        
Oregon NO NO Yes    


Based on the information above, Company A is taxable in Colorado because they are subject to a business activities tax there and in Florida because they were taxable there in the prior year, also known as trailing nexus. We can also see that Company A is taxable in Oregon because they have a physical presence. This means income attributed to Colorado, Florida and Oregon is not considered throw-out income.

Since there was work performed in Washington, but no other criteria are met, the income attributed to Illinois is considered throw-out income. 

We can now determine that Company A has a receipts factor of 80%. 

Gross Washington apportionable income (62,000)

=80%
Worldwide gross apportionable income minus Throw-out (80,500-3,000


Example B

State/Country   Gross receipts* Gross Service & Other Activities Income
Washington 80,000 77,000
Colorado 115,000 111,800
Florida 50,800 41,800
Idaho 85,310 74,310
Illinois 40,980 33,980
Nebraska 20,640 16,640
Oregon 90,500 81,500
Totals 484,030 437,030

*Gross receipts means income from all classifications.

Based on the information above, Company B is taxable in Colorado because they have more than $100,000 annual gross income in that state. This means income attributed to Colorado is not considered throw-out income.
 
Now let’s determine if the income attributable to the remaining states is considered taxable in those states or whether it is considered throw-out income. The states where Company B is already considered taxable are greyed out.

State/Country    Subject to business activities tax? Taxable in the prior year? Physical presence? Organized or commercially domiciled?
Washington YES      
Colorado YES      
Florida NO NO YES NO
Idaho YES      
Illinios NO NO YES NO
Nebraska NO NO YES NO
Oregon YES      


Based on the information above, we can see that Company B is taxable in Idaho and Oregon because they are subject to a business activities tax in those states. We can also see that Company B is taxable in Florida, Illinois and Nebraska because they have a physical presence. This means income attributed to Florida, Idaho, Illinois, Nebraska and Oregon is considered taxable in these states, so this income is not considered throw-out income.

Company B has no throw-out income.

We can now determine that Company B has a receipts factor of 17.62%

Gross Washington apportionable income (77,000) =17.62%
Worldwide gross apportionable income minus Throw-out (437,030-0)


Example C

Company C is an out-of-state entity with nexus in Washington reporting Service & Other Activities B&O tax with the following receipts:

State/Country   Gross receipts* Gross Service & Other Activities Income
Washington 121,000 42,000
New York 690,000 112,000
Rhode Island 17,400 2,400
Vermont 18,500 1,500
Virginia 51,800 6,800
Totals 898,700 164,700

*Gross receipts means income from all classifications.

Based on the information above, Company C is taxable in New York because they have more than $100,000 annual gross income in that state. Income attributed to New York is not considered throw-out income.

Now let’s determine if the income attributable to the remaining states is considered taxable in those states or whether it is considered throw-out income. The states where Company C is already considered taxable are greyed out.

State/Country    Subject to business activities tax? Taxable in the prior year? Physical presence? Organized or commercially domiciled? Work performed in Washington?
Washington YES        
New York YES        
Rhode Island NO NO NO NO YES
Vermont NO NO NO NO NO
Virgina NO NO NO NO NO


Based on the information above, we can see that Company C is not taxable in Rhode Island, Vermont, or Virginia.
 
In this case, a Washington employee performed work related to the income earned in Rhode Island. No work was performed in Washington for income earned in Vermont or Virginia. 
Income attributed to Rhode Island is considered throw-out income because it is not taxable in Rhode Island and work was performed in Washington.
 
Income attributable to Vermont and Virginia is not considered throw-out income because it is not taxable in those states and no work was performed in Washington.

We can now determine that Company A has a receipts factor of 25.88%

Gross Washington apportionable income (42,000) =25.88%
Worldwide gross apportionable income minus Throw-out (164,700-2,400)