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Exam 23: State and Local Taxes

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Question 51

True/False

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

A) True
B) False

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Question 52

Multiple Choice

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Which of the following isn't a typical federal/state adjustment?

A) Dividends received deduction.
B) Depreciation.
C) Meals and entertainment.
D) U.S.obligation interest incomE.Meals and entertainment is a typical book/federal tax adjustment rather than a federal/state adjustment.

E) A) and B)
F) B) and C)

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Question 53

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Which of the following is not a primary revenue source for most states?

Rental income is allocated to the state of commercial domicile.

Assume Tennis Pro discovered that one salesman has gone into Arkansas once each year of the past 4 years and performed activities creating both sales and use 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?

Businesses must collect sales tax only in states where it has sales and use tax nexus.

Bethesda Corporation is unprotected from income tax by Public Law 86-272. Which of the following characteristics creates a problem for Bethesda in states other than Maryland?

Failure to collect and remit sales taxes often results in a larger tax liability than failure to pay income taxes.

All states employ some combination of sales and use tax, income or franchise tax, or property tax to fund their government operations.

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

Gordon operates the Tennis Pro Shop in Blacksburg, Virginia. Tennis Pro has property as follows: What is Tennis Pro's Virginia property numerator and property factor?

The sales and use tax base varies from state to state.

Physical presence does not always create sales and use tax nexus.

Which of the following is not a general rule for calculating the payroll factor?

The throwback rule includes inventory in transit in the numerator of the state from where it was shipped.

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

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, $30,000 of royalty income for an intangible used in Maryland (where nexus exists). Determine how much income is allocated to Virginia.

Which of the following law types is not a primary source type?

Public Law 86-272 protects solicitation from income taxation. Which of the following activities exceeds the solicitation threshold?

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)