Exam 16: Multi-State Corporate Taxations

Match each of the following items with the appropriate description, in determining whether sales/use tax typically must be collected. -A meal eaten at a restaurant while conducting business.

Valdez Corporation, a calendar-year taxpayer, owns property in States M and O. Both M and O require that the average value of assets be included in the property factor. M requires that the property be valued at its historical cost, and O requires that the property be included in the property factor at its net depreciated book value. $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$$\text { Account Balances at Beginning of Year }$ State M State O Totals Inventories \ 200,000 \ 300,000 \ 500,000 Buil ding \& machinery (cost) 700,000 300,000 1,000,000 Accumulated depreciation (150,000) (50,000) (200,000) Land 400,000 200,000 600,000 Totals $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\text { Account Balances at Year-End }$ State M State O Totals Inventories \ 400,000 \ 100,000 \ 500,000 Buil ding \& machinery (cost) 800,000 500,000 1,300,000 Accumulated depreciation (300,000) (100,000) (400,000) Land Totals \ 1.300,000 \ 700,000 \ 2,000,000 Valdez's O property factor is:

A city might assess a recording tax when a business takes out a mortgage on its real estate.

Most states' consumer sales taxes are paid by the final purchaser of the taxable asset.

Match each of the following items with the appropriate description, in applying the P.L. 86-272 definition of solicitation. -Operating a warehouse for inventory that is held in the state.

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

General Corporation is taxable in a number of states. This year, General made a $100,000 sale from its A headquarters to the State B office of the FBI. In which state(s) will the sale be included in the sales factor numerator?

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. State A State B State C Totals Sales \ 400,000 \ 800,000 \ 300,000 \ 1,500,000 Payroll 100,000 150,000 50,000 300,000 Property 200,000 200,000 200,000 600,000 ? Helene's apportionable income assigned to A is:

Match each of the following items with the appropriate description, in applying the P.L. 86-272 definition of solicitation. -Carrying a free sample of a product to the customer's premises.

Match each of the following items with the appropriate description, in determining whether sales/use tax typically must be collected. -A textbook purchased by a State University student.

Condor Corporation generated $450,000 of state taxable income from selling its product in States A and B. For the taxable year, the corporation's activities within the two states were as follows. ​ State A State B Total Sales \ 800,000 \ 200,000 \ 1,000,000 Property 300,000 -0- 300,000 Payroll 200,000 800,000 1,000,000 ​ Condor has determined that it is subject to tax in both A and B. Both states utilize a three-factor apportionment formula that equally weights sales, property, and payroll. The rates of corporate income tax imposed in A and B are 5% and 3%, respectively. Determine Condor's state income tax liability.

The ____________________ tax usually is applied at the city or county level, as its main source of revenue.

Match each of the following items with the appropriate description, in determining whether sales/use tax typically must be collected. -Computer equipment purchased by a charity. i

Determine Drieser's sales factors for States K, M, and N. Drieser Corporation's manufacturing facility, distribution center, and retail store are located in State K. Drieser sells its products to residents located in States K, M, and N. Sales to residents of K are conducted through a retail store. Sales to residents of M are obtained by Drieser's sales representative, who has the authority to solicit, accept, and approve sales orders in State M. Residents of N can purchase Drieser's product only if they place an order online and arrange to take delivery of the product at Drieser's shipping dock. Drieser's sales this year were reported as follows. Sales to residents of State K \ 1,000,000 Sales to residents of State M 600,000 Sales to residents of State N 900,000 Total Drieser's activities within the three states are limited to those described above. All of the states have adopted a throwback provision and utilize a three-factor apportionment formula under which sales, property, and payroll are equally weighted. State K sources dock sales to the destination state.

A unitary group of entities files a combined return that includes all of the affiliates' income and apportionment data.

A state sales/use tax is designed to be collected by the ____________________ (seller/purchaser) of the product and then remitted to the state.

A use tax applies when a State A resident purchases:

Under the UDITPA's ____________________ concept, sales are assumed to take place at the point of delivery, as opposed to the location at which the shipment originates.

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.

Chipper Corporation realized $1,000,000 taxable income from the sales of its products in States X and Z. Chipper's activities establish nexus for income tax purposes only in Z, the state of its incorporation. Chipper's sales, payroll, and property among the states include the following. State X State Z Totals Sales \ 1,000,000 \ 2,000,000 \ 3,000,000 Property 200,000 2,300,000 2,500,000 Payroll 100,000 1,900,000 2,000,000 ? X utilizes a sales-only factor in its three-factor apportionment formula. How much of Chipper's taxable income is apportioned to X?