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Exam 12: State and Local Taxes

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Question 31

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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) $\begin{array} { | l | r | r | } \hline{ \text { Property } } \\\hline \text { State } & \text { Begiming } & \text { Enoing } \\\hline \text { Alabama } & \$ 123,032 & \$ 204,235 \\\hline \text { Kentucky } & \$ 203,311 & \$ 185,102 \\\hline \text { Mississippi } & \$ 881,921 & \$ 1,002,384 \\\hline \text { Louisiana } & \$ 243,945 & \$ 350,304 \\\hline \text { Tennessee } & \$ 143,198 & \$ \$ 143,198 \\\hline \text { Total } & \$ 1,595,407 & \$ 1,885,223 \\\hline\end{array}$

A) $942,153
B) $1,002,384
C) $1,052,384
D) $1,342,153

E) C) and D)
F) A) and D)

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Question 32

Multiple Choice

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

A) The location where a business is headquartered
B) The location where a business is incorporated
C) The location from which a business directs its operations
D) None of these

E) All of the above
F) None of the above

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Question 33

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Tennis Pro, a Virginia Corporation domiciled in Virginia, has the following items of income: $5,000 of dividend income, $15,000 of interest income, $10,000 of rental income from Georgia property, $30,000 of royalty income for an intangible used in Maryland (where nexus exists). Determine how much income is allocated to Virginia.

Moss Incorporated is a Washington corporation. It properly included, deducted, or excluded the following items on its federal tax return in the current year: Moss' Oregon depreciation was $145,500. Moss' Federal Taxable Income was $549,743. Calculate Moss' Oregon state tax base.

All of the following are false regarding apportionment except:

A gross receipts tax is subject to Public Law 86-272. Public Law 86-272 does not apply to nexus for nonincome-based taxes.

The sales and use tax base varies from state to state.

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

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

Mighty Manny, Incorporated manufactures and services deli machinery and distributes them across the United States. Mighty Manny is incorporated and headquartered in New Jersey. It has sales and use 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 Connecticut also taxes Mighty Manny's services. What is Mighty Manny's total sales and use tax liability?

The Wrigley case held that the sale of intangibles is protected by Public Law 86-272.

Tennis Pro is headquartered in Virginia. Assume it has a Kentucky state income tax base of $220,000. Of this amount, $40,000 was non-business 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 non-business income allocated to Kentucky was $1,000. Assuming Kentucky's corporate tax rate of 6 percent, what is Tennis Pro's Kentucky state tax liability?

Wacky Wendy produces gourmet cheese in Wisconsin. Wendy has sales as follows: Wendy is a Wisconsin Corporation and has the following operations. Wendy has nexus in Iowa, Minnesota, and Wisconsin. The Michigan sales are shipped from Wisconsin (a throwback state) . $100,000 of the Wisconsin sales were to the federal government. What is Wendy's Wisconsin sale numerator? $\begin{array} { | l r | } \hline \text { Wenoy's Sales: } \\\hline \text { State } & \text { Sales } \\\hline \text { lowa } & \$ 350,512 \\\hline \text { Michigan } & \$ 134,589 \\\text { Minnesota } & \$ 849,142 \\\hline \text { Wisconsin } & \$ 1,323,032 \\\hline \text { Total } & \$ 2,657,275 \\\hline\end{array}$

Gordon operates the Tennis Pro Shop in Blacksburg, Virginia. Tennis Pro has property as follows: Tennis Pro also rents Virginia property at an annual rent of $24,000. What is Tennis Pro's Virginia property numerator and property factor?

Failure to collect and remit sales taxes often results in a larger tax liability than failure to pay income taxes.

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

Which of the following states is not asserting economic nexus?

Several states are now moving towards economic nexus.

Gordon operates the Tennis Pro Shop in Blacksburg, Virginia. The Shop sells, manufacturers, and customizes tennis racquets for serious amateurs. Virginia has a 5 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 customer that purchases the merchandise in the retail store?

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. 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 (6.6 percent) , Colorado (7.75 percent) , Maine (8.5 percent) , New Hampshire (6.75 percent) , New York (8 percent) , and Vermont (5 percent) . How much sales and use tax must Mahre collect and remit in Maine? $\begin{array} { | l | r | r | r | } \hline &{ \text { Mahre Sales } } \\\hline \text { State } & \text { Goods } & \text { Senrices } & \text { Total } \\\hline \text { Alaska } & \$ 23,194 & \$ 0 & \$ 23,194 \\\hline \text { Colorado } & 10,612 & 0 & 10,612 \\\hline \text { Maine } & 35,913 & 156,084 & 191,997 \\\hline \text { New Hampshire } & 26,721 & 325,327 & 352,048 \\\hline \text { New York } & 65,431 & 0 & 65,431 \\\hline \text { Vermont } & 41,982 & \underline { 277,441 } & \mathbf { 3 1 9 , 4 2 3 } \\\hline \text { Total } & \$ 203,853 & \$ 758,852 & \$ 962,706\end{array}$