Unitary tax system

Tax Glossary Definition

Unitary tax system

In a unitary tax system, the profits of a corporation’s branches or subsidiaries are treated collectively as a single entity. The total group income is then distributed among the individual parts using a formula, usually based on factors like property, payroll, sales, capital investment, or manufacturing costs.

Example: A multinational company with operations in three states calculates its total profits as one entity. A formula considering each state’s sales, payroll, and assets determines the share of profit attributed to each state for tax purposes.

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