Question

State and Local Tax Question:

9. There is a variance in how the states approach the unitary principal which is discussed in the book? For example, Arizona adopts to the "Operational Interdependence Test. Can the State rules be less stringent than the federal concept of unitary? More stringent?

Answer 1

A country may said to possess either a unitary or ferferal system.

In a unitary system the only level of government besides the central is the local or municipal government. Although local governments may enjoy considerable autonomy, their powers are not accorded constitutional status. The central goverment is supreme and the adminstrative divisions exercise only powers that the central goverment has delegated to thm

A federal system is one which that divided the power of goverment between the national goverment and the state and local goverments . State or provinces  in federal systems also have their own constitutions that define the institutions of their respective governments, as well as the powers that are devolved further to their local governments.

State rules can be less or more stringent that the federal concept of unitary. States or provinces have constitutionally protected sovereignty with the central goverment having final juridiction over a broad range shared sovereignty is a hallmark of federalism.