Question

Difference between w allocation and apportionment

Answer 1

The allocation method applies solely to income from assets held exclusively for investment purposes. These assets can include stock dividends, loan interest, property rents, publishing royalties and some types of capital gains. Allocation also applies to any other passive income that does not originate from business operations. It does not cover property used to conduct business operations, such as offices or manufacturing facilities, as those would be subject to property taxes from the site's home state.

Apportionment uses a formula to calculate the average amount of business income a company brings in by conducting operations within that state. The formula includes factors such as payroll, sales revenue and other property used to generate business-related income. Any income deriving from either tangible or intangible property -- such as software development, graphic design or other intellectual properties -- that are vital parts of the business's regular operations are also subject to taxation by apportionment.

Answer 2

Answer:

The states use two primary methods to determine a company's tax exposure: allocation and apportionment. Allocation is used to designate the non-business income to a specific state or local tax authority. Apportionment is used to assign the business income among the states.