Throwback Rule

A tax measure which allows a state to tax a corporation with facilities in that state. Traditionally, the law will not allow a state to tax a corporation if the corporation does not have any physical facilities in the state. As a result, sales to that state are not taxed even if the corporation sells its products to the state’s residents. The throwback rule removes this tax loophole by “throwing back” the income the company earned to the state where it has physical facilities in order for it to be taxed.

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