Exam 16: Multi-State Corporate Taxations

Pail Corporation is a merchandiser. It purchases overstock garments from various suppliers and sells the goods in its State L retail store. Determine the total sales that are subject to the L sales tax. Sales to L residents \6 00,000 Sales to homeless shel ter operated by a local church 80,000 Sales to residents who cross the border from nearby State M 100,000 Sales to a similar merchandiser, located in another L town 20,000

Several states allow the S corporation to file a(n) ____________________ income tax return, usually in the form of a state-by-state spreadsheet, on behalf of its out-of-state shareholders.

Match each of the following terms with the appropriate description, in the state income tax formula. Apply the UDITPA rules in your responses. -Dividend income from P & G stock held.

General Corporation is taxable in a number of states. This year, General made a $100,000 sale from its A headquarters to a customer in B. This activity is not sufficient for General to create nexus with B. State B applies a throwback rule, but State A does not. In which state(s) will the sale be included in the sales factor numerator?

Typical indicators of income-tax nexus include the presence of customers in the state.

If a state follows Federal income tax rules, the state's tax compliance and enforcement become easier to accomplish.

Match each of the following terms with the appropriate description, in the state income tax formula. Apply the UDITPA rules in your responses. -Treasury Bond interest income.

Net Corporation's sales office and manufacturing plant are located in State X. Net also maintains a manufacturing plant and sales office in State W. For purposes of apportionment, X defines payroll as all compensation paid to employees, including contributions to § 401(k) deferred compensation plans. Under the statutes of W, neither compensation paid to officers nor contributions to § 401(k) plans are included in the payroll factor. Net incurred the following personnel costs. State State Totals Wages and salaryes for employees other \ 500,000 \ 300,000 \ 800,000 hhan officers Salaries for officers 300,000 150,000 450,000 Contributions to \S401() plans 200,000 50,000 250,000 Totals Net's payroll factor for State W is:

The property factor includes land and buildings used for business purposes.

All of the U.S. states have adopted a tax based on the net taxable income of corporations.

Most of the U.S. states have adopted an alternative minimum tax, similar to the Federal system, in taxing the income of corporations.

In most states, a taxpayer's income is apportioned on the basis of a formula measuring the extent of business contact, and allocated according to the location of property owned or used.

Match each of the following events, considered independently, to its likely effect on WillCo's various apportionment factors. WillCo is based in Q and has customers in Q, R, and S. To this point, WillCo has not established nexus with S. More than one choice may be correct. -Q adopts a throwback rule.

A taxpayer has nexus with a state for sales and use tax purposes if it has a physical presence in the state.

Parent Corporation owns all of the stock of Junior Corporation, a Delaware passive investment company. Parent operates strictly in nonunitary State B, which levies a 9% income tax. This year, Junior earned $200,000 of portfolio interest income and paid a $150,000 dividend to Parent. In which state(s) will the interest income create an income tax liability?

José Corporation realized $900,000 taxable income from the sales of its products in States X and Z. José's activities in both states establish nexus for income tax purposes. José's sales, payroll, and property among the states include the following. StateX State Z Totals Sales \ 1,500,000 \ 1,000,000 \ 2,500,000 Property 500,000 -0- 500,000 Payroll 2,000,000 -0- 2,000,000 ? X utilizes an equally weighted three-factor apportionment formula. How much of José's taxable income is apportioned to X?

Typically exempt from the sales/use tax base is the purchase by a symphony orchestra of printed music for its players.

Marquardt Corporation realized $900,000 taxable income from the sales of its products in States X and Z. Marquardt's activities establish nexus for income tax purposes in both states. Marquardt's sales, payroll, and property among the states include the following. StateX State Z Totals Sales \ 1,000,000 \ 3,000,000 \ 4,000,000 Property 2,000,000 -0- 2,000,000 Payroll 1,000,000 -0- 1,000,000 Z utilizes an equally weighted three-factor apportionment formula. Marquardt is incorporated in X. How much of Marquardt's taxable income is apportioned to Z?

In determining taxable income for state income tax purposes, interest income from Federal bonds typically constitutes a(n) ____________________ modification.

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