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Exam 12: State and Local Taxes

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Question 21

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

A) True
B) False

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Question 22

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Della Corporation is headquartered in Carlisle, Pennsylvania. Della has a Pennsylvania state income tax base of $425,000. Of this amount, $75,000 was nonbusiness income. Della's Pennsylvania apportionment factor is 28.52 percent. The nonbusiness income allocated to Pennsylvania was $61,000. 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)

A) $8,821
B) $9,084
C) $12,464
D) $13,549

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

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Question 23

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Super Sadie, Incorporated manufactures sandals and distributes them across the southwestern United States. Assume that Super Sadie has sales and use tax nexus in Arizona, California, Colorado, New Mexico, and Texas. Super Sadie has sales as follows: Assume the following sales tax rates: Arizona (6 percent), California (8 percent), Colorado (7 percent), New Mexico (6.5 percent), Oregon (7.25 percent), Texas (8 percent), and Utah (5 percent). What is Super Sadie's total sales and use tax liability? (Round your interim calculations to the nearest whole number)

Public Law 86-272 protects solicitation from income taxation. Which of the following activities exceeds the solicitation threshold?

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

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

The payroll factor includes payments to independent contractors.

Assume Tennis Pro attends a sports equipment expo in Washington State. Assume this activity creates nexus of the Business and Occupation (B&O) tax. Assume the tax is .5% of gross receipts for retailers and 1.5% of gross receipts on services. If Tennis Pro has $20,000 of Washington retail sales and $2,000 of services performed, calculate Tennis Pro's B&O tax.

Which of the following is an income based tax?

Gordon operates the Tennis Pro Shop in Blacksburg, Virginia. Tennis Pro sells, manufacturers, 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 10 states (Virginia, North Carolina, South Carolina, Georgia, Tennessee, Kentucky, Ohio, Maryland, District of Columbia, New Jersey). All in state activity is limited to solicitation. Orders are taken 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?

The Quill decision reaffirmed that out-of-state businesses must have physical presence within a state before the state may require the collection of sales taxes from in-state customers.

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

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 Illinois state tax base. $\begin{array} { | l | c | l | } \hline \text { Item } & \text { Amoun } & \text { Federal Treatment } \\\hline \text { Illinois Income Taxes } & \$ 33,333 & \begin{array} { l } \text { Deducted on federal } \\\text { return }\end{array} \\\hline \text { Indiana Income Taxes } & \$ 18,500 & \begin{array} { l } \text { Deducted on federal } \\\text { return }\end{array} \\\hline \begin{array} { l } \text { Ohio Commercial } \\\text { Activity Tax }\end{array} & \$ 4,000 & \begin{array} { l } \text { Deducted on federal } \\\text { return }\end{array} \\\hline \text { Depreciation } & \$ 40,000 & \begin{array} { l } \text { Deducted on federal } \\\text { return }\end{array} \\\hline \text { Illinois Bond Interest } & \$ 10,000 & \begin{array} { l } \text { Excluded from federal } \\\text { return }\end{array} \\\hline \text { Indiana Bond Interest } & \$ 15,000 & \begin{array} { l } \text { Excluded from federal } \\\text { return }\end{array} \\\hline \text { Federal T-Note Interest } & \$ 2,500 & \begin{array} { l } \text { Included on federal } \\\text { return }\end{array} \\\hline\end{array}$

Wyoming imposes an income tax on corporations.

Interest and dividends are allocated to the state of commercial domicile.

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

Roxy operates a dress shop in Arlington, Virginia. Lisa, a Maryland resident, comes in for a measurement and purchases a $1,500 dress. Lisa returns to Virginia a few weeks later to pick up the dress and drive it back to her Maryland residence where she will use the property. Assuming that Virginia's sales tax rate is 5 percent and that Maryland's sales tax rate is 6 percent, what is Roxy's sales and use tax liability?

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

State tax law is comprised solely of legislative authority. Like federal tax law, state tax law includes legislative, administrative, and judicial law.

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, Iowa, Michigan, Minnesota, and Wisconsin. It has sales personnel only where discussed. Determine the state in which Mighty Manny does not have sales and use tax nexus given the following scenarios: