These investments may then result in increased personal income tax collections and increased property tax revenues for state and local governments. In addition, several states treat manufacturers differently than other types of firms, further increasing the weight given to sales in order to stimulate payroll and property investments by manufacturers. All other firms subject to the Rhode Island corporate income tax must use the aforementioned three-factor equal weight formula. By way of example, consider the company with an option to locate a manufacturing plant in Massachusetts or Rhode Island. For those manufacturers with significant in-state payroll and property, the corporate income tax liability for firms located in Massachusetts would be significantly less than the tax liability for Rhode Island firms.
Formulas listed are for general manufacturing businesses.
Some industries have special apportionment formula that may differ from the reported formulas. A three-factor formula is used for corporations not subject to the corporation business franchise tax. A change to a single sales factor for manufacturers in Rhode Island would eliminate the corporate income tax differential between Rhode Island and Massachusetts. In addition, many states use a throwback rule for sales made to the U.S. government. Rhode Island has neither while Massachusetts uses a throwback rule in both cases.