Does a firm with sales benefit from any government services

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Question: 1. According to the "benefit principle" of taxation, a business' tax in a state should be related to the benefits to the business from services provided by the state and local governments. Practically, a firm's business activity or tax base is usually divided among states based on the state's share of the firm's capital, employment, and/or sales. Discuss how well each of those components of the allocation formula might correspond to service benefits. Does a firm with sales (through the internet or mail order, perhaps) but no employees or capital in a state benefit from any state or local government services?

2. Gross receipts, value added, and net income are three different potential business tax bases. For each of three firms-an automobile manufacturer (assembly plant), a food retailer, and a private-practice physician-list the components of each potential tax base and describe how the bases differ among each other for one tax and among the three taxes.

Reference no: EM132288692

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