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Exam 23: State and Local Taxes

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Question 1

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Della Corporation is headquartered in Carlisle,Pennsylvania.Della has a Pennsylvania state income tax base of $425,000.Of this amount,$75,000 was nonbusiness income.Della's Pennsylvania apportionment factor is 28.52 percent.The nonbusiness income allocated to Pennsylvania was $61,000.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.)

A) $8,821
B) $9,084
C) $12,464
D) $13,549

E) B) and C)
F) All of the above

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Question 2

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The property factor is generally calculated as being the average of the beginning and ending property values.

A) True
B) False

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Question 3

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Gordon operates the Tennis Pro Shop in Blacksburg,Virginia.Tennis Pro sells,manufactures,and customizes tennis racquets for serious amateurs.Tennis Pro's business has expanded significantly over the last few years.Currently,it has sales personnel in 9 states (Virginia,North Carolina,South Carolina,Georgia,Tennessee,Kentucky,Ohio,Maryland,and New Jersey)and the District of Columbia.All sales activity in all of these states is limited to solicitation.Orders are received by the sales team and forwarded to Blacksburg for approval.All orders are sent by common carrier to customers.Tennis Pro owns retail and warehouse space in Virginia and has another warehouse in Kentucky.Is Tennis Pro subject to Ohio's Commercial Activity Tax (a nonincome-based tax)?

All 50 states impose a sales and use tax system.

Mighty Manny,Incorporated,manufactures ice scrapers and distributes them across the midwestern United States.Mighty Manny is incorporated and headquartered in Michigan.It has product sales to customers in Illinois,Indiana,Iowa,Michigan,Minnesota,and Wisconsin.It has sales personnel only in the states discussed and all these states have adopted Wayfair legislation.Determine the state in which Mighty Manny does not have sales and nexus given the following scenarios:

Which of the following is not a general rule for allocating nonbusiness income?

Assume Tennis Pro attends a sports equipment expo in Washington state.Assume this activity creates nexus for the Business & Occupation (B&O)tax.Assume the tax is 0.5 percent of gross receipts for retailers and 1.5 percent of gross receipts on services.If Tennis Pro has $20,000 of Washington retail sales and $2,000 of services performed,calculate Tennis Pro's B&O tax.

Use tax liability accrues in the state where purchased property will be used when the seller of the property is not required to collect sales tax.

Business income is allocated to the state of commercial domicile.

Which of the following is true regarding state and local taxes?

Roxy operates a dress shop in Arlington,Virginia.Lisa,a Maryland resident,comes in for a measurement and purchases a $1,500 dress.Lisa returns to Virginia a few weeks later to pick up the dress and drive it back to her Maryland residence,where she will use the dress.Assuming that Virginia's sales tax rate is 5 percent and that Maryland's sales tax rate is 6 percent,what is Roxy's sales tax liability?

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

Mighty Manny,Incorporated,manufactures ice scrapers and distributes them across the midwestern United States.Mighty Manny is incorporated and headquartered in Michigan.It has product sales to customers in Illinois,Indiana,Iowa,Michigan,Minnesota,Wisconsin,and Wyoming.It has sales personnel only in the states discussed and all these states have adopted Wayfair legislation.Determine the state in which Mighty Manny does not have sales tax nexus given the following scenarios:

Discuss the steps necessary to determine whether a sales tax applies and how the tax is collected.

The Wayfair decision held that an out-of-state mail-order company did not have sales tax collection responsibility because it lacked physical presence.

Which of the following statements regarding income tax commercial domicile is incorrect?

Purchases of inventory for resale are typically exempt from sales and use taxes.

Gordon operates the Tennis Pro Shop in Blacksburg,Virginia.Tennis Pro sells,manufactures,and customizes tennis racquets for serious amateurs.Tennis Pro's business has expanded significantly over the last few years.Currently,it has sales personnel in 9 states (Virginia,North Carolina,South Carolina,Georgia,Tennessee,Kentucky,Ohio,Maryland,and New Jersey)and the District of Columbia.All sales activity in all of these states is limited to solicitation.Orders are taken by the sales team and forwarded to Blacksburg for approval.All orders are sent by common carrier to customers.Tennis Pro owns retail and warehouse space in Virginia and has another warehouse in Kentucky.Where does Tennis Pro have income tax nexus?

Gordon operates the Tennis Pro Shop in Blacksburg,Virginia.The shop sells,manufactures,and customizes tennis racquets for serious amateurs.Virginia has a 5 percent sales tax.Tennessee has a 4 percent sales tax.Determine the sales and use tax liability that the shop must collect and remit if it sells a $500 racquet to a Tennessee resident that purchases the merchandise in the Virginia retail store?

Assume Tennis Pro discovered that one salesperson has gone into Arkansas once each year for the past four years and performed activities that create both sales tax nexus and income tax nexus.Assume that Arkansas sales were $25,000 each year.Assume that Arkansas business income would be $200,000 each year and that Tennis Pro's Arkansas apportionment percentage would be 1 percent.Assume there would be no Arkansas nonbusiness income.Assume that Arkansas sales and use tax rate was 6.5 percent and corporate income tax rate was 5 percent.What would Tennis Pro's Arkansas sales and use tax and income tax liability be,ignoring any possible penalties and interest?