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Exam 23: State and Local Taxes

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Question 61

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Public Law 86-272 protects only companies selling tangible personal property.

A) True
B) False

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Question 62

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The Mobil decision identified three factors to determine whether a group of companies are unitary.

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B) False

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Question 63

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Gordon operates the Tennis Pro Shop in Blacksburg, Virginia. Tennis Pro sells, manufacturers, 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 10 states (Virginia, North Carolina, South Carolina, Georgia, Tennessee, Kentucky, Ohio, Maryland, District of Columbia, New Jersey). All in state activity 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. Is Tennis Pro subject to Ohio's Commercial Activity Tax?

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

Which of the items is correct regarding a use tax?

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

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

Gordon operates the Tennis Pro Shop in Blacksburg, Virginia. Tennis Pro has payroll as follows: Tennis Pro's Payroll: $\begin{array}{lr}\text { State } &{\text { Pavroll }} \\\hline\text { DC } & \$ 45,500 \\\text { Georgia }&\$ 80,000\\\text { Veorgia } & \$ 250,000 \\\text { Other } & \underline{\$ 90,000} \\\text { Totals } & \$ 465,500\\\end{array}$ 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?

Mighty Manny, Incorporated manufactures and services deli machinery and distributes them across the United States. Mighty Manny is incorporated and headquartered in New Jersey. It has sales and use tax nexus in Connecticut, New Jersey, New York, Pennsylvania, Rhode Island, and South Carolina. Mighty Manny has sales as follows: $\begin{array}{l}\quad\quad\quad\quad\quad\quad\quad\text { Mighty Manny's Sales }\\\\\begin{array} { l r r r } { \text { State } } & { \text { Goods } } & \text { Services } & { \text { Total } } \\\hline \text { Connecticut } & \$ 359,294 & \$ 39,201 & \$ 398,495 \\\text { New Jersey } & 1,304,292 & 382,984 & 1,687,276 \\\text { New York } & 929,402 & 325,327 & 1,254,729 \\\text { Pennsylvania } & 320,481 & 93,203 & 413,684 \\\text { Rhode Island } & 85,419 & 0 & 85,419 \\\text { South } & & & \\\text { Carolina } & \underline { 52,427 } & \underline { 0 } & \underline { 52,427 } \\\text { Totals } & \$ 3,051,315 & \$ 840,715 & \$ 3,892,030\end{array}\end{array}$ Assume the following sales tax rates: Connecticut (6.75 percent), New Jersey (7.5 percent), New York (8.5 percent), Pennsylvania (6.5 percent), Rhode Island (7.25 percent), and South Carolina (5.5 percent). Assume that Connecticut also taxes Mighty Manny's services. What is Mighty Manny's total sales and use tax liability?

Tennis Pro has the following sales, payroll and property factors: $\begin{array} { l r r } & \text { Virginia } & \text { Maryland } \\\text { Sales } & 40 \% & 20 \% \\\text { Payroll } & 70 \% & 5 \% \\\text { Property } & 90 \% & 5 \%\end{array}$ What would Tennis Pro's Virginia and Maryland apportionment factors be if Virginia used a double-weighted sales four factor method and Maryland used a single-factor sales formula?

Several states are now asserting economic nexus.

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

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

Historically, most states used an equally weighted three-factor apportionment formula.

Super Sadie, Incorporated manufactures sandals and distributes them across the southwestern United States. Assume that Super Sadie has sales and use tax nexus in Arizona, California, Colorado, New Mexico, and Texas. Super Sadie has sales as follows: $\begin{array}{l}\quad\quad\text { Super Sadie Sales }\\\begin{array} { l r } \text { State } & \underline { \text { Goods } } \\\text { Arizona } & \$ 583,194 \\\text { California } & 1,003,923 \\\text { Colorado } & 487,204 \\\text { New } & \\\text { Mexico } & 201,932 \\\text { Oregon } & 502,940 \\\text { Texas } & 892,048 \\\text { Utah } & \underline { 302,109 } \\\text { Totals } & \$ 3,973,350\end{array}\end{array}$ Assume the following sales tax rates: Arizona (6 percent), California (8 percent), Colorado (7 percent), New Mexico (6.5 percent), Oregon (7.25 percent), Texas (8 percent), and Utah (5 percent). What is Super Sadie's total sales and use tax liability?

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

Business income includes all income earned in the ordinary course of business.