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Exam 23: State and Local Taxes

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Question 61

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The annual value of rented property is not included in the property factor.

A) True
B) False

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Question 62

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Businesses engaged in interstate commerce are subject to income tax in every state in which they operate.

A) True
B) False

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Question 63

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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 $2,400 dress that is shipped to her Maryland residence using a common carrier. Roxy's total Maryland sales are $31,200 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?

In recent years, states are weighting the sales factor because it is easier to calculate.

A state's apportionment formula usually is applied using some variation of sales, payroll, and property factors.

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

Most services are sourced to the state where the services were performed.

Giving samples and promotional materials without charge is a protected solicitation activity.

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

Handsome Rob provides transportation services in several western states. Rob has payroll as follows: Rob is a California corporation and the following is true: Rob has income tax nexus in Arizona, California, Nevada, and Washington. The Washington drivers spend 25 percent of their time driving through Oregon. California payroll includes $200,000 of payroll for services provided in Nevada by California-based drivers. What is Rob's California payroll numerator?

A state's apportionment formula divides nonbusiness income among the states where income tax nexus exists.

Nondomiciliary businesses are subject to tax everywhere they do business.

Businesses must pay income tax in their state of commercial domicile.

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.

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

Gordon operates the Tennis Pro Shop in Blacksburg, Virginia. Tennis Pro has payroll as follows: The other total includes $10,000 of salary of a Virginia employee that works part time in another state. What is Tennis Pro's Virginia payroll numerator and payroll factor? (Round the payroll factor to two places.)

Which of the following isn't a requirement of Public Law 86-272?

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

The Wrigley case held that the sale of intangibles is protected by Public Law 86-272.