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Exam 12: State and Local Taxes

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Question 71

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Business income is allocated to the state of commercial domicile.

A) True
B) False

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Question 72

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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.

A) $171,300
B) $173,800
C) $199,633
D) $207,133

E) None of the above
F) A) and B)

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Question 73

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Assume Tennis Pro discovered that one salesperson has gone into Arkansas once each year for the past four years and performed activities that create both sales tax nexus and income tax nexus. Assume that Arkansas sales were $25,000 each year. Assume that Tennis Pro 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?

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 $50,000 and $15,000, respectively. What is Lefty's Mississippi property numerator? (Round your answer to the nearest whole number.)

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?

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

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 $2,000 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 liabilityof 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.)

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

List the steps necessary to determine an interstate business's state income tax liability.

All 50 states impose a sales and use tax system.

Tennis Pro is headquartered in Virginia. Assume it has a state income tax base of $216,000. Of this amount, $92,000 was nonbusiness income. Assume that Tennis Pro's Virginia apportionment factor is 73.28 percent. The nonbusiness income allocated to Virginia was $31,000. Assuming a Virginia corporate tax rate of 5.5 percent, what is Tennis Pro's Virginia state income tax liability? (Round your answer to the nearest whole number.)

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

The state tax base is computed by making adjustments to federal taxable income.

Which of the following activities will create sales tax nexus?

Gordon operates the Tennis Pro Shop in Blacksburg, Virginia. Tennis Pro has payroll as follows: The other total includes $20,000 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 is not a general rule for calculating the payroll factor?

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? (Round the property factor to two places.)

A gross receipts tax is subject to Public Law 86-272.

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