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Exam 12: State and Local Taxes

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Question 41

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Businesses must pay income tax in their state of commercial domicile.

A) True
B) False

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Question 42

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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 $119,000. If Illinois only requires Illinois taxes to be added back, calculate PWD's Illinois state tax base.

A) $134,943
B) $149,447
C) $150,418
D) $165,479

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

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Question 43

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Several states are now moving from a strict physical presence test toward an economic presence test for income taxes.

Use tax liability accrues in the state where taxable purchased property will be used when the seller of the property is not required to collect sales tax.

A state's apportionment formula usually is applied using some variation of sales, payroll, and property factors.

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

State tax law is comprised solely of legislative authority.

Delivery of tangible personal property through common carrier is a protected activity.

All 50 states impose a sales and use tax system.

Which of the following isn't a criterion used to determine whether a unitary relationship exists?

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

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

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?

Gordon operates the Tennis Pro Shop in Blacksburg, Virginia. Tennis Pro decides to expand into Pennsylvania during the current year and try some new sales techniques. Tennis Pro advertises on local radio and television as well asin national tennis magazines sent into Pennsylvania. Salespeople give away promotional materials and occasionally sell demonstration models to local shop employees to build goodwill for Tennis Pro. Tennis Pro holds sales meetings at rented space in local hotels. Personnel occasionally fix minor problems such as tape and strings without charge. One employee performed a credit check for a major account that needed merchandise immediately. Each salesperson is allowed an allowance for a car and office equipment to be maintained in an in-home office. Do any of Tennis Pro's activities have the potential to create income tax nexus?

What was the Supreme Court's holding in Wayfair?

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

On which of the following transactions should sales tax generally be collected?

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 $100,000. If Illinois only requires Illinois taxes to be added back, calculate PWD's Illinois state tax base.

Most state tax laws adopt the federal tax law as of a specific date in time.

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