C Corp Tax Navigator: State, Local & International

Executive Summary

Growing and multi-jurisdictional C Corporations face an increasingly complex tax landscape. This interactive report breaks down the critical pillars of modern corporate taxation: State Nexus expansion following the Wayfair decision, the shift in Apportionment methodologies, strict Transfer Pricing enforcement, and International Withholding obligations. Use the navigation tabs above to explore detailed analyses, interactive calculators, and compliance simulations.

State Trend

Single Sales Factor

Moving away from property/payroll weighting.

Nexus Threshold

Economic Nexus

Physical presence no longer required.

Int'l Focus

Arm's Length

Strict transfer pricing documentation.

Compliance

30% Withholding

Base rate on outbound FDAP income.

Tax Risk Heatmap

Relative compliance risk areas for mid-market C Corps.

State Nexus & Apportionment

Nexus determines if a state can tax you. Historically based on physical presence (offices, employees), the 2018 South Dakota v. Wayfair decision introduced Economic Nexus.

Most states now assert nexus if you exceed sales thresholds (commonly $100,000 or 200 transactions), regardless of physical footprint.

Key Takeaway

Simply selling online into a state can trigger corporate income tax and sales tax obligations.

P.L. 86-272 Limitations

Public Law 86-272 protects companies from income tax if their only activity is solicitation of orders for tangible personal property. However, modern digital activities (cookies, chat bots) are increasingly viewed by states as exceeding this protection.

Economic Nexus Simulator

Adjust the sliders to see if your activity levels typically trigger economic nexus in major jurisdictions.

Annual State Sales ($)

$0 $50,000 $500k+

Annual Transactions (#)

0 50 500+

🛡️

Likely No Economic Nexus

Your activity is below the common thresholds ($100k sales / 200 transactions).

Threshold Proximity

Apportionment Formulas

Once Nexus is established, the state determines what portion of total income is taxable.

1 Three-Factor: Older method. Weights Property, Payroll, and Sales equally (33% each).
2 Single Sales Factor (SSF): Modern trend. Tax depends 100% on Sales within the state. Heavily penalizes out-of-state companies selling in-state, while rewarding companies with local property/payroll but few local sales.

Market-Based Sourcing

For services and intangibles, states are moving from "Cost of Performance" (where the work is done) to "Market-Based" (where the customer receives the benefit).

Impact Calculator: 3-Factor vs. Single Sales

Compare how a state's apportionment method changes your taxable income allocation. Assume $1M total corporate income.

State Property %

State Payroll %

State Sales %

Insight: If you have high sales in a state but low physical presence (property/payroll), a Single Sales Factor state will result in a much higher tax bill than a Three-Factor state.

Transfer Pricing Basics

When related entities (e.g., US Parent and Irish Sub) trade goods, services, or IP, they must charge an Arm's Length Price—the price unrelated parties would negotiate.

Common Methods

CUP (Comparable Uncontrolled Price) Direct comparison of prices. Best but hard to find data.

CPM (Comparable Profits Method) Compares profit margins (operating margin, markup) to industry peers. Most common in US.

Cost Plus Costs incurred + standard markup. Common for manufacturing/services.

Interquartile Range Visualizer

Tax authorities typically accept results falling within the "Interquartile Range" (25th to 75th percentile) of comparable companies.

Lower Quartile
1.5%

Median
3.2%

Upper Quartile
5.8%

Withholding Taxes (FDAP)

The US imposes a flat 30% withholding tax on Fixed, Determinable, Annual, or Periodical (FDAP) income paid to foreign persons. This includes dividends, interest, royalties, and rents.

Tax Treaties can reduce this rate, often to 0%, 5%, or 15%, provided the recipient is a "Qualified Resident" and provides a valid Form W-8BEN-E.

Form 1042 / 1042-S

US Payers must report these payments annually. Failure to withhold makes the US payer liable for the tax + interest + penalties.

Treaty Rate Estimator

Select a treaty partner to see how rates compare to the statutory 30% US withholding rate.

Select Treaty Country