IDAPA 35.01.01.390 — TAXABLE IN ANOTHER STATE: WHEN A TAXPAYER IS SUBJECT TO TAX (RULE 390)

Section 63-3027(4)(a), Idaho Code
01.
Subject to Tax. A taxpayer is subject to one of the taxes specified in Section 63-3027(4)(a), Idaho
Code, if it carries on business activity in a state and that state imposes one of those taxes on it. A taxpayer that claims
it is subject to one (1) of the taxes specified in Section 63-3027(4)(a), Idaho Code, is to furnish the Tax Commission,
at its request, evidence to support this claim. The Tax Commission may request that evidence include proof the
taxpayer has filed the required tax return in the other state and has paid any taxes imposed by the law of that state.
The taxpayer's failure to provide proof may be considered in determining whether the taxpayer is subject to one of
the taxes specified in Section 63-3027(4)(a), Idaho Code.
(4-6-23)
02.
Concept of Taxability. The concept of taxability in another state is based on the premise that every
state in which the taxpayer transacts business may impose an income tax even though every state does not do so. A
state may impose other types of taxes as a substitute for an income tax. Only those taxes specified in Section 63-
3027(4)(a), Idaho Code, that are revenue producing rather than regulatory in nature is to be considered in determining
taxability in another state.
(4-6-23)
03.
Examples of Taxability.
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IDAHO ADMINISTRATIVE CODE
IDAPA 35.01.01
Idaho State Tax Commission
Income Tax Administrative Rules
Section 395
Page 62
a.
State A requires each corporation that qualifies or registers in State A to pay the Secretary of State
an annual license fee or tax for the privilege of doing business in the state, regardless of whether it exercises the
privilege. The amount paid is determined according to the total authorized capital stock of the corporation; the rates
progressively increase. The statute sets a minimum fee of fifty dollars ($50) and a maximum fee of five hundred
dollars ($500). Failure to pay the tax bars a corporation from using the state courts to enforce its rights. State A also
imposes a corporation income tax. Corporation X is qualified in State A and pays the required fee to the Secretary of
State, but does not transact business in State A, although it may use the courts of State A. Corporation X is not taxable
in State A.
(4-6-23)
b.
Assume the same facts as in Subsection 390.03.a., except that Corporation X is subject to and pays
the corporation income tax. Payment is prima facie evidence that Corporation X is subject to the net income tax of
State A and is taxable in State A.
(4-6-23)
c.
State B requires all corporations qualified or registered in State B to pay the Secretary of State an
annual permit fee or tax for doing business in the state. The base of the fee or tax is the sum of: outstanding capital
stock, and surplus and undivided profits. The fee or tax base attributable to State B is determined by a three (3) factor
apportionment formula. Corporation X, which operates a plant in State B, pays the required fee or tax to the Secretary
of State. Corporation X is taxable in State B.
(4-6-23)
d.
State A has a corporation franchise tax measured by net income for the privilege of doing business
in that state. Corporation X files a return based on its business activity in the state, but the amount of computed
liability is less than the minimum tax. Corporation X pays the minimum tax. Corporation X is subject to State A's
corporation franchise tax.
(4-6-23)
04.
Voluntary Tax Payment. A taxpayer is not subject to one (1) of the taxes specified in Section 63-
3027(4)(a), Idaho Code, if the taxpayer voluntarily files and pays the tax when not required to do so by the laws of
that state.
(4-6-23)
05.
Minimum Tax or Fee. A taxpayer is not subject to one (1) of the taxes specified in Section 63-
3027(4)(a), Idaho Code if it pays a minimal fee for qualification, organization, or the privilege of doing business in
that state, but:
(4-6-23)
a.
Does not transact business in that state; or
(4-6-23)
b.
Engages in business activity not sufficient for nexus, and the minimum tax bears no relationship to
the taxpayer's business activity within that state.
(4-6-23)
c.
Example. State A has a corporation franchise tax measured by net income for the privilege of doing
business in that state. Corporation X files a return and pays the fifty dollar ($50) minimum tax, although it does not
transact business in State A. Corporation X is not taxable in State A.
(4-6-23)