Your client is forming a new internet business and wants advice as to which state they should base their business in.
S'AMATTA-U, INC. will be a limited internet seller. Their projected sales for the coming year by state, along with additional by-state information is as follows:
Sales Throwback? Factor State Tax Rate
State A 1,500,000 yes Sales only 4.00%
State B 3,000,000 no 3 Factor 5.00%
State C 2,000,000 no 3 Factor with double weighted sales 5.00%
State D 3,500,000 no Sales only 9.00%
10,000,000
S'AMATTA-U, INC projects it will have property of $5.0 million, annual payroll of $2.0 million, and annual taxable income of $4 million. All property and payroll will be located in the base state. The clients want to base all of their operations in a single state. They do not anticipate having nexus in any other state other than the base state.
Which state would result in the lowest state income tax and therefore be the state you advise your client to base their business in?