Supporters say the current formula, which factors in a company's in-state payroll and property, penalizes companies that hire and add offices in New Jersey and rewards those that sell a lot there but have little physical presence.
"It seems perverse, and I think that's why [the single-sales factor] has picked up steam over the last few years in a lot of states," said Philip Kirschner, president of the New Jersey Business and Industry Association, which has been lobbying for the change.
Though the measure offers no guarantee that beneficiaries will add jobs and expand factories, about two dozen states have adopted some form of it as a way to keep and attract major corporations.
States are attempting to "game" corporate tax revenues from other states, said Joe Henchman, tax counsel for the Tax Foundation, a Washington organization that ranks state business climates.
"We are not big on advising a state to play this game. . . . Ultimately, it's not tax reform. It's playing games with the interstate division of corporate taxes," Henchman said.
Gov. Christie and legislative leaders say they support the move because they want the state to compete better with nearby states, including New York and Connecticut.
Gov.-elect Tom Corbett wants Pennsylvania to move fully toward the single-sales factor by 2014. The state has been phasing in the change.
A single-sales factor would have no effect on businesses that conduct all of their operations and sales in one state.
New Jersey now averages a company's fraction of in-state sales, employees, and property to determine how much of its nationwide profits are subject to the state's 9 percent corporate income tax. Sales are given double weight in the formula.
So, if a national corporation headquartered in New Jersey has 10 percent of its sales, 50 percent of its payroll, and 60 percent of its property in the state, it is taxed on about one-third of its profits.
