Multi-State Income Taxes | Companies expanding into Florida

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Florida is a smart choice when it comes to expanding your business into another state. Not only can you propel your company’s growth in today’s competitive global market as the state comes with a talented workforce, top-ranked infrastructure and a blossoming market of start up businesses; but you can also grow your brand to new heights as the state-ranked fourth best state for business tax climate in 2021, and second best for doing business within the last five years.

Multi-state Income Taxes | Companies expanding into Florida

If you have recently expanded your business into this state, or if you’re considering doing so, understanding the cost of apportionment is important to help you accurately report earnings to the IRS and local governments. 

  • S Corporations

    • Filing Requirements
      • The Florida corporate income/franchise tax is imposed on all corporations for the privilege of conducting business, deriving income, or existing within Florida. Corporations, including entities that are taxed federally as corporations, are subject to the tax.
      • A corporation’s federal income, as adjusted by Florida additions, subtractions, and adjustments, is apportioned to Florida based on the corporation’s activities in Florida compared to its activities everywhere. In most cases, this comparison includes the corporation’s property, payroll and sales.
    • Allocation and Apportionment
      • Three-factor formula: Property, payroll, and sales
      • Cost of performance rule
        • Florida follows the cost of performance rule in sourcing receipts from the performance of services to the state. Gross receipts from the performance of services are sourced to Florida if the services are performed wholly within Florida. If the income-producing activity occurs inside and outside of Florida, the receipts are sourced to Florida if the greater proportion of the income-producing activity, based on the cost of performance, is performed in Florida

  • Partnerships

    • Filing Requirements
        • Every Florida partnership having any partner subject to the Florida Corporate Income Tax Code must file Florida Form F-1065. 
        • A limited liability company with a corporate partner, if classified as a partnership for federal tax purposes, must also file Florida Form F-1065. A Florida partnership is a partnership doing business, earning income, or existing in Florida.
        • Note: A foreign (out-of-state) corporation that is a partner in a Florida partnership or a member of a Florida joint venture is subject to the Florida Income Tax Code and must file a Florida Corporate Income/ Franchise Tax Return (Florida Form F-1120).
        • A corporate taxpayer filing Florida Form F-1120 may use Florida Form F-1065 to report the distributive share of its partnership income and apportionment factors from a partnership or joint venture that is not a Florida partnership
      • LLCs classified as partnerships should not file Form 565, Partnership Return of Income. The LLC will file Form 565 only if it meets an exception.
    • Allocation & apportionment
      • Three-factor formula: Property, payroll, and sales
      • Cost of performance rule
        • Florida follows the cost of performance rule in sourcing receipts from the performance of services to the state. Gross receipts from the performance of services are sourced to Florida if the services are performed wholly within Florida. If the income-producing activity occurs inside and outside of Florida, the receipts are sourced to Florida if the greater proportion of the income-producing activity, based on the cost of performance, is performed in Florida

Download our Multi-State Tax Filing Requirements Guide

Ensuring Accurate Tax Filing

Keeping a handle on these different laws and tax implications might be difficult for your staff members but can be accomplished by outsourcing a CPA. Allow an expert who deals with business structuring, accounting, and taxation regularly set up accounting software to factor in applicable tax laws for each US state.

Fusion CPA recently expanded into new states bringing us firsthand experience and knowledge. We have a team of certified public accountants who are highly skilled in handling multistate taxes. Our team of professionals understands the federal and state laws in various states and jurisdictions.

Fusion CPA recently expanded into new states bringing us firsthand experience and knowledge.

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This blog article is not intended to be the rendering of legal, accounting, tax advice, or other professional services. Articles are based on current or proposed tax rules at the time they are written and older posts are not updated for tax rule changes. We expressly disclaim all liability in regard to actions taken or not taken based on the contents of this blog as well as the use or interpretation of this information. Information provided on this website is not all-inclusive and such information should not be relied upon as being all-inclusive.

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