States Continue To Withdraw From Multistate Tax Compact

In light of the potential unintended consequences of the Multistate Tax Compact and the California Court of Appeal's decision in Gillette, some states have begun to withdraw from the Compact. The Gillette decision held that a group of taxpayers was entitled to make the compact three-factor election in lieu of California's standard double-weighted sales factor. In contrast, the Michigan Court of Appeals held in International Business Machines Corp. v. Department of Treasury that a taxpayer was not allowed to elect to use the compact's three-factor apportionment formula for purposes of the Michigan Business Tax. Both cases have been appealed to each state's respective supreme court.