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Exam 12: State and Local Taxes

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Question 51

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

A) True
B) False

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Question 52

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The Wayfair decision held that an out-of-state mail-order company did not have sales tax collection responsibility because it lacked physical presence.

A) True
B) False

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Question 53

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The Mobil decision identified three factors to determine whether a group of companies are unitary.

Commercial domicile is the location where a business is headquartered and from whence it directs its operations.

Business income is allocated to the state of commercial domicile.

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

What was the Supreme Court's holding in National Bellas Hess?

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?

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

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?

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 hasincome tax nexus in Arizona, California, Nevada, and Washington. The Washington drivers spend 25 percent of their time driving through Oregon. California payroll includes $201,800 of payroll for services provided in Nevada by California-based drivers. What is Rob's California payroll numerator?

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

Which of the following is not one of the Complete Auto Transit's criteria for whether a state can tax nondomiciliary companies?

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. Tennessee has a 4 percent sales tax. Determine the sales and use tax liability that the shop must collect and remit if it sells a $500 racquet to a Tennessee resident that purchases the merchandise in the Virginia retail store?

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

Mighty Manny, Incorporated manufactures ice scrapers and distributes them across the midwestern United States. Mighty Manny is incorporated and headquartered in Michigan. It has product sales to customers in Illinois, Indiana, Michigan, Minnesota, and Wisconsin. It has sales personnel only in the states discussed and all these states have adopted Wayfair legislation. Determine the state in which Mighty Manny does not have sales and nexus given the following scenarios:

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

The annual value of rented property is not included in the property factor.

Which of the following regarding the state tax base is incorrect?

The trade show rule allows businesses to maintain a sample room for up to four weeks per year.