Resumen de Corporate multistate tax planning: benefits of multiple jurisdictions

Sanjay Gupta, Lillian F. Mills

• We investigate how firms use differences in state income tax regimes to lower their state tax burdens. We develop a model that predicts that firms’ state effective tax rates first decrease then increase as a function of the number of states in which they file returns. Using firm-level data, we find evidence consistent with the model's predictions and we estimate that such rates are minimized at 24 states. Consistent with predictions from prior literature, our evidence also suggests that firms use sales factor apportionment to reduce state tax burdens.