7. RECENT TRENDS AND DEVELOPMENTS

7.03 State Income Tax

Traditionally, the states have allocated income using a 3 factor formula which gives equal weighting to sales, property and payroll. Some states used variations, such as a single factor, based on sales.

In recent years, there has been a marked trend towards a double-weighting of the sales factor. The obvious reason for this trend is that it gives an advantage to companies which are located in the state and which make sales to other states.

The effect on aircraft owners is that this lessens the weighting that will be given to the property and payroll factors, which are typically affected by the purchase of an aircraft. In fact, to the extent that an aircraft generates additional out-of-state sales, the purchase of an aircraft can actually reduce state income taxes.