What is apportionment and who has to do it?
Apportionment is the division of one tax base between the jurisdictions entitled to tax it, by formula rather than by tracing. It applies once a business is taxable in more than one state or province: the income is computed as a whole, then split. It is a second-stage question. First you establish which jurisdictions can tax you at all, and only then does apportionment decide how much of the base each one gets. Businesses often arrive at it having answered only the first half, so they are registered correctly and dividing the base by a method nobody has written down or checked against the rules.
How is a company's income divided between states?
By formula. The starting point is business income as a whole; the formula then assigns a share of it to each jurisdiction using measurable factors — commonly sales, payroll and property. Each jurisdiction writes its own formula and its own rules about what belongs in each factor, so the shares assigned by different jurisdictions need not add up to the whole, and frequently do not. That is the central difficulty. The calculation has to be run jurisdiction by jurisdiction on each one's definitions rather than once on a single house method used everywhere. Where the shares overstate the base, the cause is usually in the factor definitions rather than in the income.
Which factors go into an apportionment formula?
Sales, payroll and property are the usual three, and the weight given to each varies. Some jurisdictions look mainly or only at sales; others use several factors together. Within each factor the definitions do real work: whether a sale is sourced to where the customer is or where the work was done, whether payroll includes contractors, whether leased property is counted and on what value. Two jurisdictions using apparently the same three factors can produce very different shares from the same accounts. Reading the factor rules is therefore not optional detail — it is where most of the difference between a defensible calculation and a guess actually sits.
Can the same income be apportioned twice?
The base can certainly end up taxed in more than one place, and here that is the ordinary failure rather than an exotic one. It happens because each jurisdiction applies its own formula and its own sourcing rules to the same income, so one receipt can be sourced to two places, or counted by one jurisdiction and by none of the others. Nothing reconciles the result automatically. Fixing it means going back to the factor definitions in each jurisdiction, identifying the receipts or costs treated inconsistently, and either correcting the sourcing where it was wrong or documenting why the overlap is a consequence of the rules themselves.
How is income allocated between Canadian provinces?
The same way in structure, on a different formula. A business taxable in more than one province computes its income once and allocates it between provinces using prescribed factors rather than by tracing which province earned what. In practice the drivers are where revenue is earned and where the people are, and the allocation follows the permanent establishments the business has. The mistakes cluster in the same two places as on the United States side — deciding where a receipt belongs, and deciding what counts as an establishment in the first place. Settle the establishment list before arguing about the formula, because the list usually decides the argument.
What records do I need to support an apportionment calculation?
Records that tie each factor back to the accounts. For sales, a revenue listing by destination or by place of performance that reconciles to the total; for payroll, a register showing where each person actually worked rather than where they are contracted; for property, a schedule of owned and leased assets by location with the value used. Keeping the reconciliation is the step most often skipped and the one an examiner asks for first, because a factor that cannot be traced back to the trial balance is treated as an assertion. Build the schedules when the return is prepared, not when the question arrives.
I work remotely from another country for a company back home — who taxes me?
Usually the country you are physically in, because employment income is generally sourced where the work is done, with your residence country taxing it as well if you are resident there and giving credit. Three things follow: your employer may acquire withholding and social security obligations where you sit, a treaty tie-breaker may be needed if both countries call you resident, and a short trip that becomes a long stay can cross a residence threshold nobody was watching. See remote workers and digital nomads.
Do NRIs pay tax on money sent to India?
Sending your own funds to India is a transfer of capital, not income, so the remittance itself is not taxed. What is taxable is income the money then earns in India — interest, rent, capital gains — under the rules for the account type it sits in. Sending money out of India is the direction that needs certification before the bank will act. See NRE, NRO and FCNR accounts.
