More Uniformity Sought in State Income Tax Procedures

Article excerpt

Imagine 50 parallel universes with different levels of gravity and types of atmospheres.

That's about what multi-state corporations deal with when they try to file state income taxes, according to an American Institute of Certified Public Accountants study.

Futurist Isaac Asimov gets to explore those uncharted nethermost regions from the comfort of his armchair when he wants to; corporate tax divisions explore those regions quarterly, and have found no two flight manuals are the same.

The gist of the institute's study was that a little more uniformity among states' income tax administrative procedures could go a long way toward reducing corporate taxpayers' frustrations.

"It's just a nightmare," said James Wallace, assistant secretary and director of corporate taxes for the Oklahoma City-based Fleming Companies Inc. "Everybody complains that the federal laws are complex, and they are, but just multiply those by 50 states."

The variety of state income tax administrative rules affects the planning process when companies do business in a state and look at expanding into other states, he said.

"The lack of uniformity can make a transaction favorable in one state and unfavorable in another state just because of their tax treatment," Wallace said.

Fleming has 11 employees that calculate and file state and federal income, franchise, property and net worth taxes for its divisions in 21 states that ship to retail stores in 36 states. Wallace had no estimate of the cost of tax compliance, but increased uniformity among the states could reduce costs, he said.

Uniformity among state income tax administrative rules would require less effort by corporate taxpayers to comply, said Leonard Francis, assistant general tax officer for Phillips Petroleum Co. of Bartlesville.

"It would be much easier to mechanize the system to meet the compliance standards," Francis said.

"It would just be easier in terms of costs, not so much manpower cost - you'd still have to file the same forms - but you're not figuring out the impact if you buy a plant in one state versus buying a plant in other states," Francis said. "It would make planning easier, by taking the state ramifications out of the choice of where to build a plant. You'd just base it on operating factors."

"The biggest problem is complexity. You're never sure of the rules until you research those rules for a given state."

Phillips Petroleum Co. operates in all 50 states and files tax returns in every state using eight full-time employees for dealing with state income taxes and administrative audits.

The institute surveyed:

- Interest rates on tax assessments corporations pay to states and the interest rates on refunds states pay to corporations. …