Does Disconformity in State Corporate Income Tax Systems Affect Compliance Cost Burdens?

Abstract

Prior multistate tax research on differences in state tax rules, while investigating the effects on revenue, investment, and tax burden, is silent regarding the effect on compliance costs. We investigate factors that explain state income tax compliance costs for large firms. We find that state compliance costs increase in the number of filing states and entities (or in the number of state tax returns), firm size and variables proxying for state tax complexity. Our evidence that multistate disconformity increases compliance cost burdens informs the debate about the costs of tax competition.

Keywords: multistate taxation, compliance costs, disconformity, burden

JEL Classification: H25, H70, M41