Companies will use debt financing or conduct business in a partnership form---takes out solvency.
David Gamage 17, Professor of Law at Indiana University-Bloomington, Darien Shanske, Professor of Law, UC Davis School of Law, 2017, “Tax Cannibalization And Fiscal Federalism In The United States,” Northwestern University Law Review, 111 Nw. U.L. Rev. 295, lexis
Similar logic holds when taxpayers shift to the use of partnership forms or to the use of debt financing to reduce their domestic federal- and state-level corporate income tax liabilities. These distortionary responses again directly reduce the taxpayers’ corporate income tax liabilities, but do not directly affect the taxpayers’ sales tax liabilities. After all, conducting business in a partnership form looks the same from the perspective of a sales tax as does conducting business in a corporate form. Likewise, the sales and purchasing activities of a corporation appear the same from the perspective of a sales tax regardless of the extent to which the corporation is financed with debt or with equity