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Exam 12: State and Local Taxes

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Question 21

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

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$20,000.$5,000 of di...

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Question 22

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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) $934,589
B) $1,134,589
C) $1,215,347
D) $2,657,275

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

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Question 23

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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 sales is likely subject to sales and use tax in a state that assesses a sales and use tax?

Tennis Pro has the following sales, payroll, and property factors: What are Tennis Pro's Virginia and Maryland apportionment factors if both states use an equally weighted three-factor formula?

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. Arizona has a 6 percent sales tax, but Arizona sales thresholds don't exceed the Wayfair limits. Determine the sales tax liability that the shop must collect and remit if it sells a $1,000 racquet order to an Arizona customer (assume the shop has no sales personnel or property in Arizona) that purchases the merchandise from the Virginia store over the internet?

Della Corporation is headquartered in Carlisle, Pennsylvania. Della has a Pennsylvania state income tax base of $431,000. Of this amount, $76,200 was nonbusiness income. Della's Pennsylvania apportionment factor is 28.52 percent. The nonbusiness income allocated to Pennsylvania was $61,600. 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.)

Rental income is allocated to the state of commercial domicile.

Public Law 86-272 protects certain business activities from creating income tax nexus.

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

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. Assume that a District of Columbia customer picks up a $3,800 racquet order in the Blacksburg store and drives it back to the District of Columbia (where the sales tax rate is 8.5 percent). Determine the sales and use tax liability of the customer. (Assume the shop has no sales personnel or property in District of Columbia, and District of Columbia sales don't exceed the Wayfair thresholds.)

Businesses must collect sales tax only in states where they have sales tax nexus.

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

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

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

Which of the following is an income-based tax?

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

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

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