43-1132. Taxpayers liable; exceptions to
allocation and apportionment; examination of evidence of income
and expenses
A. Any taxpayer having income from business activity which is taxable both within
and without this state shall allocate and apportion net income as provided in this
article, but net income of a foreign corporation which is not itself subject to the tax
imposed by this title shall not be allocated or apportioned to this state.
B. For the purposes of computing Arizona taxable income under this title, expenses
which are attributable to income of a foreign corporation which is not itself subject to
the tax imposed by this title shall not be allocated or apportioned to this state.
C. In the case of an audit performed on a taxpayer by the department, the
department may examine any books, papers, records or memoranda of the taxpayer relating
to income and expenses of the taxpayer both within and without the United States. The
information provided by the taxpayer is subject to title 42, chapter 2, article 1.
D. Subsections A and B of this section do not apply to a taxpayer that has elected
to file a consolidated return pursuant to section 43-947. An Arizona affiliated group, as
defined in section 43-947, that has income from business activity that is taxable both in
and outside this state shall allocate and apportion its net income as provided by this
article.
E. The net income of a taxpayer that would otherwise meet the requirements of 15
United States Code sections 381 through 384 but that is subject to the tax imposed by
this title solely because of the presence of consignment inventory in this state shall
not be allocated or apportioned to this state if all of the following conditions are met:
1. The presence of the consignment inventory is a requirement of the taxpayer's
contract with its customer.
2. The consignment inventory is located on the customer's property.
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