when there is multistate business operations states have rules for dividing the net income
some use a 1-factor formula - sales in each state
others use a 2-factor formula - usually sales and either wages or the cost basis of property and equipment
others use a 3-factor formula - sales, wages, and property
some states that have a multi-factor formula give twice the weight to sales as the other factors
under these rules it is possible that the US return shows $100 of profit but the total of the state returns is more or less than the $100
another issue is whether you really have multistate sales. normally to be taxed their must be "nexus" (a connection) to the state
in it's simplest some sort of presence in the state. state laws vary greatly on this
examples:
storing inventory in the state creates nexus
have a salesperson make sales calls in a state. while calling on a phone from a different state does not create nexus
manufacturing facilities in a sate
even where the title transfers from the seller to the buyer.
each state should have tax forms that guide you through the allocation.
just one federal return that shows it all the state returns with the income allocation form
in my state for an 1120-S it uses only in-state sales to total sales
the rules are basically the same regardless of te type of business.
