Contact Us

If you still have questions or prefer to get help directly from an agent, please submit a request.
We’ll get back to you as soon as possible.

Please fill out the contact form below and we will reply as soon as possible.

  • Courses
  • Home
  • Accounting, Taxation, and Reporting
  • Business Taxation

Throwback Rule - Definition

Written by Jason Gordon

Updated at December 16th, 2020

Contact Us

If you still have questions or prefer to get help directly from an agent, please submit a request.
We’ll get back to you as soon as possible.

Please fill out the contact form below and we will reply as soon as possible.

  • Marketing, Advertising, Sales & PR
    Principles of Marketing Sales Advertising Public Relations SEO, Social Media, Direct Marketing
  • Accounting, Taxation, and Reporting
    Managerial & Financial Accounting & Reporting Business Taxation
  • Professionalism & Career Development
  • Law, Transactions, & Risk Management
    Government, Legal System, Administrative Law, & Constitutional Law Legal Disputes - Civil & Criminal Law Agency Law HR, Employment, Labor, & Discrimination Business Entities, Corporate Governance & Ownership Business Transactions, Antitrust, & Securities Law Real Estate, Personal, & Intellectual Property Commercial Law: Contract, Payments, Security Interests, & Bankruptcy Consumer Protection Insurance & Risk Management Immigration Law Environmental Protection Law Inheritance, Estates, and Trusts
  • Business Management & Operations
    Operations, Project, & Supply Chain Management Strategy, Entrepreneurship, & Innovation Business Ethics & Social Responsibility Global Business, International Law & Relations Business Communications & Negotiation Management, Leadership, & Organizational Behavior
  • Economics, Finance, & Analytics
    Economic Analysis & Monetary Policy Research, Quantitative Analysis, & Decision Science Investments, Trading, and Financial Markets Banking, Lending, and Credit Industry Business Finance, Personal Finance, and Valuation Principles
  • Courses
+ More
Back to:ACCOUNTING & TAXATION

What is the Throwback Rule?

The throwback rule is a tax rule that allows a state to tax a corporation or business entity for the profits made in the state. Corporations, whose sales originate from certain states are subject to tax payment on those sales under the throwback rule. Also, the throwback rule allows states to tax corporations for their facilities in the state. The objective of the throwback rule is to minimize non-payment of taxes by corporations, it eradicates loopholes that lead to tax evasion. This rule empowers states to levy a corporate tax on sales, facilities, and income of corporations made from their states.

A Little More on What is a Throwback Rule

In the traditional taxation formulas used by many states, many corporations do not pay tax on certain involves because they are often tagged 'nowhere income'. These formulas not only aid tax avoidance or evasion, but they also do not achieve fairness since small businesses tend to have all their profits taxable while others do not pay tax on all their income. The throwback rule, however, came as a remedy for the loopholes created by traditional tax formulas. This rule states that 100% of the profits of a corporation are taxable by the states. With this rule, corporations are compelled to pay all taxes and tax escape through 'nowhere income' was eradicated.

References for Throwback Rule

https://www.investopedia.com/terms/t/throwback-rule.aspwww.businessdictionary.com/definition/throwback-rule.htmlhttps://definitions.uslegal.com/t/throwback-rule/https://ilsr.org/rule/throwback-rules/https://cdn2.hubspot.net/.../change_up_the_potential_evolution_of_the_throwback_ru...https://www.aprio.com/california-issues-guidance-throwback-rule-sales-factor-apporti...

Was this article helpful?

Yes
No

Related Articles

  • Elective Deferral Contribution - Definition
  • Employer Identification Number (EIN)
  • Child Tax Credit - Definition
  • Step Up in Basis - Definition

©2011-2021. The Business Professor, LLC.
  • Privacy

  • Questions

Definition by Author

0
0
Expand