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Exam 24: Multistate Corporate Taxation

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Question 61

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A state sales tax usually falls upon:

A) Sales of groceries.
B) Sales of widgets made to out-of-state customers.
C) Sales of widgets made to the ultimate consumer of the product or service.
D) Sales of real estate.

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

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Question 62

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Node Corporation is subject to tax only in State X.Node generated the following income and deductions.State income taxes are not deductible for X income tax purposes.

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Question 63

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Most states waive the collection of sales tax on medical equipment.

Discuss how a multistate business divides up its corporate taxable income among the states in which it operates. Hint: use the terms allocation and apportionment in your comments.

Simpkin Corporation owns manufacturing facilities in States A, B, and C. A uses a three-factor apportionment formula under which the sales, property and payroll factors are equally weighted.B uses a three-factor apportionment formula under which sales are double-weighted.C employs a single-factor apportionment factor, based solely on sales. Simpkin's operations generated $1,000,000 of apportionable income, and its sales and payroll activity and average property owned in each of the three states is as follows. Simpkin's apportionable income assigned to B is:

Apportionment is a means by which a corporation's _________________________ income is divided among the states in which it conducts business.

Identify some state/local income tax issues facing pass-through entities such as S corporations, partnerships, and LLCs.

Helene Corporation owns manufacturing facilities in States A, B, and C. A uses a three-factor apportionment formula under which the sales, property and payroll factors are equally weighted.B uses a three-factor apportionment formula under which sales are double-weighted.C employs a single-factor apportionment factor, based solely on sales. Helene's operations generated $1,000,000 of apportionable income, and its sales and payroll activity and average property owned in each of the three states is as follows. Helene's apportionable income assigned to A is:

General Corporation is taxable in a number of states. This year, General made a $100,000 sale from its A headquarters to a State B office of an agency of the U.S. government. General has not established nexus with B. State A does not apply a throwback rule. In which state(s) will the sale be included in the sales factor numerator?

Although apportionment formulas vary among jurisdictions, most states use the same three factors in the formula.The factors are ____________________, ____________________, and ____________________. or or

Milt Corporation owns and operates two facilities that manufacture paper products.One of the facilities is located in State D, and the other is located in State E.E does not distinguish between business and nonbusiness property.D apportions business income.Milt's activities within the two states are outlined below. Both D and E utilize a three-factor apportionment formula, under which sales, property, and payroll are equally weighted.Determine the amount of Milt's income that is subject to income tax by each state. E.Milt generated $1,200,000 of taxable income, comprised of $1,000,000 of income from its manufacturing facilities and a $200,000 gain from the sale of nonbusiness property located in

Usually a business chooses a location where it will build a new plant based chiefly on tax considerations.

An ad valorem property tax is based on the asset's current ____________________.

In most states, a limited liability company (LLC) is subject to the state income tax:

Kim Corporation, a calendar year taxpayer, has manufacturing facilities in States A and B.A summary of Kim's property holdings follows. *Unrelated to Kim's regular business and operations. Determine Kim's property factors for the two states. A's statutes provide that the average historical cost of business property is to be included in the property factor.B's statutes provide that the property factor is based on the average depreciated basis of in-state business property.

Parent and Junior form a non-unitary group of corporations.Parent is located in a state with an effective tax rate of 3%, while Junior's effective tax rate is 9%.Acting in concert to reduce overall tax liabilities, the group should:

Typically exempt from the sales/use tax base is the purchase of lumber by a do-it-yourself homeowner, when she builds a deck onto her patio.

Leased property, when included in the property factor, usually is valued at ____________________ times its annual rental, even though the taxpayer does not own the asset. or

Under Public Law 86-272, a state is prohibited from taxing a business if the only connection with the state is the _____________________ of orders for sales of tangible personal property that are sent outside the state for approval or rejection and, if approved, are filled and shipped by the business from a point outside of the state.

In some states, an S corporation must withhold Federal income tax for its shareholders who ____________________ (are/are not) state residents.