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Exam 12: State and Local Taxes

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Question 1

True/False

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Businesses subject to income tax in more than one jurisdiction have the right to apportionment.

A) True
B) False

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Question 2

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Businesses must collect sales tax only in states where they have sales tax nexus.

A) True
B) False

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Question 3

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Which of the following businesses is likely to have taxable sales for purposes of sales and use tax?

Tennis Pro, a Virginia corporation domiciled in Virginia, has the following items of income: $5,000 of dividend income, $15,000 of interest income, $10,000 of rental income from Georgia property,and $30,000 of royalty income for an intangible used in Maryland (where income tax nexus exists). Determine how much income is allocated to Virginia.

Which of the following is an income-based tax?

Rental income is allocated to the state of commercial domicile.

Economic presence always creates sales tax nexus.

Most states have shifted away from an equally weighted three-factor to a heavily weighted sales apportionment formula.

A unitary-return group includes only companies included in the federal consolidated tax return filing.

Mighty Manny, Incorporated manufactures and services deli machinery and distributes it across the United States. Mighty Manny is incorporated and headquartered in New Jersey. It has product sales in all 50 states. New Jersey is the only state in which Mighty Manny exceeds the Wayfair sales thresholds. Mighty Manny's service employees work in Connecticut, New Jersey, New York, Pennsylvania, and Rhode Island. Mighty Manny also has an executive training seminar each year in South Carolina. Determine the states in which Mighty Manny has sales tax nexus.

Wacky Wendy produces gourmet cheese in Wisconsin. Wendy has sales as follows: Wendy is a Wisconsin corporation and has the following operations: Wendy hasincome tax nexus in Iowa, Minnesota, and Wisconsin. The Michigan sales are shipped from Wisconsin (a throwback state) . $101,500 of the Wisconsin sales were to the federal government. What is Wendy's Wisconsin sale numerator?

Hoosier Incorporated is an Indiana corporation. It properly included, deducted, or excluded the following items on its federal tax return in the current year: State depreciation expense was $50,000. Hoosier's federal taxable income was $150,300. Calculate Hoosier's Indiana state tax base.

Roxy operates a dress shop in Arlington, Virginia. Lisa, a Maryland resident, comes in for a measurement and purchases a $1,500 dress that is shipped to her Maryland residence using a common carrier. Roxy's total Maryland sales are $20,000 on 15 transactions. Assuming that Virginia's sales tax rate is 5 percent and that Maryland's sales tax rate is 7 percent, what is Roxy's sales and use tax collection obligation?

Super Sadie, Incorporated, manufactures sandals and distributes them across the southwestern United States. Assume that Super Sadie has sales tax nexus in Arizona, California, Colorado, New Mexico, and Texas. Super Sadie has sales as follows: Assume the following sales tax rates: Arizona (6 percent), California (8 percent), Colorado (7 percent), New Mexico (6.5 percent), Pennsylvania (7.25 percent), Texas (8 percent), and Utah (5 percent). What is Super Sadie's total sales and use tax liability? (Round your interim calculations to the nearest whole number.)

Public Law 86-272 protects a taxpayer from which of the following taxes?

What was the Supreme Court's holding in Complete Auto Transit?

Della Corporation is headquartered in Carlisle, Pennsylvania. Della has a Pennsylvania state income tax base of $431,000. Of this amount, $76,200 was nonbusiness income. Della's Pennsylvania apportionment factor is 28.52 percent. The nonbusiness income allocated to Pennsylvania was $61,600. Assuming a Pennsylvania corporate tax rate of 7.75 percent, what is Della's Pennsylvania state tax liability? (Round your answer to the nearest whole number.)

Which of the following sales is likely subject to sales and use tax in a state that assesses a sales and use tax?

Super Sadie, Incorporated, manufactures sandals and distributes them across the southwestern United States. Super Sadie is incorporated and headquartered in Arizona. It has product sales to customers in Arizona, California, Colorado, New Mexico, Oregon, Texas, and Utah. In each state it has sales of less than $100,000 on under 200 transactions. It has sales personnel in California, Colorado, and New Mexico. It also owns an office building in Arizona and a warehouse in Texas. Determine the states in which Super Sadie has sales tax nexus.

Carolina's Hats has the following sales, payroll, and property factors: What is Carolina's Hats North and South Carolina apportionment factors if North Carolina uses an equally weighted three-factor formula and South Carolina uses a double-weighted sales factor formula? (Round your answers to two decimal places.)