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Exam 23: State and Local Taxes

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Question 1

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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 as national tennis magazines sent into PA. Salesmen give away promotional materials and occasionally sell demonstration models to local shop employees to build goodwill for Tennis Pro. It 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 who needed merchandise immediately. Each sales person is allowed an allowance for a car and office equipment to be maintained in an in-home office. Do any of Tennis Pro activities have the potential to create income tax nexus?

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The sale of demonstration models, repair...

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Question 2

Multiple Choice

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

A) Architecture plans delivered through the mail.
B) Sales of woolen goods to a state without nexus delivered through common carrier.
C) Accounting services provided in Alaska.
D) Meal purchased at McDonald's.

E) B) and D)
F) All of the above

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D

Question 3

Multiple Choice

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

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

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

Discuss the steps necessary to determine whether a sales or use tax applies and how the tax is collected.

Which of the following businesses is likely to have taxable sales for purposes of sales and use tax?

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. Calculate PWD's Illinois state tax base.

Federal/state adjustments correct for differences between two states tax laws.

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

Which of the following sales is always subject to sales and use tax?

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)

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

The payroll factor includes payments to independent contractors.

Tennis Pro has the following sales, payroll and property factors: What is Tennis Pro's Virginia and Maryland apportionment factors if both states use an equally-weighted three-factor formula?

Separate return states require each member of a consolidated group with nexus to file their own state tax return.

Which of the following is incorrect regarding nondomiciliary businesses?

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.

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

Gordon operates the Tennis Pro Shop in Blacksburg, Virginia. Tennis Pro has payroll as follows: The other total includes $10,000 of salary of a Virginia employee that works part time in another state. What is Tennis Pro's Virginia payroll numerator and payroll factor?