In Dispute With Gillette, CA Withdraws From Multistate Tax Compact

Which should make the state even less attractive while encouraging tax competition

A landmark agreement forged 45 years ago to make corporate taxation more uniform among U.S. states is at the center of a court fight between California and Gillette Co, potentially leading to more tax conflict between states and big businesses.

Gillette, the razor giant owned by Ohio-based Procter & Gamble Co, wants to be able to use the 1967 Multistate Tax Compact (MTC) to determine how much tax it owes California. This would cut Gillette's 1997-2004 tax bill by more than $4 million. The company is seeking a rebate of taxes already paid.

California wants Gillette to abide by more recent tax rules the state has written and, as a result of the dispute, has withdrawn from the MTC, reducing its membership to 18 states and raising questions about the compact's future.