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Exam 23: State and Local Taxes

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Question 71

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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 sales tax nexus in Connecticut, New Jersey, New York, Pennsylvania, Rhode Island, and South Carolina. Mighty Manny has sales as follows: 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 only Connecticut taxes Mighty Manny's services. What is Mighty Manny's total sales and use tax liability? (Round your answer to the nearest whole number.)

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Question 72

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Economic presence always creates sales tax nexus.

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B) False

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Question 73

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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.)

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.)

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

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

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 certain business activities from creating income tax nexus.

PWD Incorporated is an Illinois corporation. It properly included, deducted, or excluded the following items on its federal tax return in the current year: PWD's federal taxable income was $113,000. If Illinois only requires Illinois taxes to be added back, calculate PWD's Illinois state tax base.

Roxy operates a dress shop in Arlington, Virginia. Roxy also ships dresses nationwide upon request. Roxy's Virginia sales are $1,000,000 and out-of-state sales are $200,000. Assuming that Virginia's sales tax rate is 5 percent, what is Roxy's Virginia sales and use tax collection obligation?

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?

Tennis Pro is headquartered in Virginia. Assume it has a Kentucky state income tax base of $220,000. Of this amount, $40,000 was nonbusiness income. Assume that Tennis Pro's Kentucky sales, payroll, and property apportionment factor are 12, 5, and 3 percent, respectively. Assume that Kentucky uses a single-factor sales formula apportionment method. The nonbusiness income allocated to Kentucky was $1,000. Assuming Kentucky's corporate tax rate is 6 percent, what is Tennis Pro's Kentucky stateincome tax liability?

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

Mahre, Incorporated, a New York corporation, runs ski tours in a several states. Mahre also has a New York retail store and an Internet store, which ships to out-of-state customers. Assume sales transactions in all states, except New York, are under 200 and that all states have adopted Wayfair legislation. The ski tours operate in Maine, New Hampshire, and Vermont, where Mahre has employees and owns and uses tangible personal property. Mahre has real property only in New York. Mahre has the following sales: Assume the following sales tax rates: Alaska (0 percent) , Colorado (7.75 percent) , Maine (8.5 percent) , New Hampshire (0 percent) , New York (8 percent) , and Vermont (5 percent) . How much sales and use tax must Mahre collect and remit?

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

Lefty provides demolition services in several southern states. Lefty has property as follows: Lefty is a Mississippi corporation. Lefty also rents property in Mississippi and Tennessee with annual rents of $62,000 and $27,000, respectively. What is Lefty's Mississippi property numerator? (Round your answer to the nearest whole number.)

Which of the following is incorrect regarding nondomiciliary businesses?

The throwback rule requires a company, for apportionment purposes, to include all sales of inventory sold into a state without income tax nexus rather than from the state from where the inventory was shipped.

In Complete Auto Transit the U.S. Supreme Court determined eight criteria for determining whether a state can tax a nondomiciliary company.