Question 1

Nondomiciliary businesses are subject to tax everywhere they do business.

Accepted Answer

A) True 
 B)False

Question 2

A unitary return includes only companies included in the federal consolidated tax return filing.

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

A)  The location where a business is incorporated. 
B)  The location where a business is headquartered. 
C)  The location from which a business directs its operations. 
D)  None of the choices are correct. 
A)  The location where a business is incorporated. 
B)  The location where a business is headquartered. 
C)  The location from which a business directs its operations. 
D)  None of the choices are correct.

Question 4

What is Carolina's Hats North and South Carolina apportionment factors if North Carolina uses an equally-weighted three-factor formula and South Carolina uses a double-weighted sales factorformula? (Round your answers to two decimal places).

Accepted Answer

A)  North Carolina 74.03 percent, and South Carolina 20.22 percent. 
B)  North Carolina 74.28 percent, and South Carolina 19.45 percent. 
C)  North Carolina 74.28 percent, and South Carolina 22.51 percent. 
D)  North Carolina 74.03 percent, and South Carolina 19.45 percent. 
A)  North Carolina 74.03 percent, and South Carolina 20.22 percent. 
B)  North Carolina 74.28 percent, and South Carolina 19.45 percent. 
C)  North Carolina 74.28 percent, and South Carolina 22.51 percent. 
D)  North Carolina 74.03 percent, and South Carolina 19.45 percent.

Question 5

Business income is allocated to the state of commercial domicile.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is not a general rule for allocating nonbusiness income?

Accepted Answer

A)  Interest and dividends to the state of commercial domicile. 
B)  Rental income for investment property to state of commercial domicile. 
C)  Capital gains from rental property to state where property is located. 
D)  Rental income for business property to state where property is located. 
A)  Interest and dividends to the state of commercial domicile. 
B)  Rental income for investment property to state of commercial domicile. 
C)  Capital gains from rental property to state where property is located. 
D)  Rental income for business property to state where property is located.

Question 7

Which of the items is correct regarding a use tax?

Accepted Answer

A)  Amazon collects use taxes on behalf of all its resellers. 
B)  States choose to implement either a sales tax or a use tax but not both. 
C)  Use taxes only apply when the seller is not required to collect the sales tax. 
D)  Use taxes are imposed by every state. 
A)  Amazon collects use taxes on behalf of all its resellers. 
B)  States choose to implement either a sales tax or a use tax but not both. 
C)  Use taxes only apply when the seller is not required to collect the sales tax. 
D)  Use taxes are imposed by every state.

Question 8

The payroll factor includes payments to independent contractors.

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A)  Property taxes. 
B)  Severance taxes. 
C)  Sales or use taxes. 
D)  Income or franchise taxes. 
A)  Property taxes. 
B)  Severance taxes. 
C)  Sales or use taxes. 
D)  Income or franchise taxes.

Question 10

Roxy operates a dress shop in Arlington, Virginia. Roxy also ships dresses nationwide upon request. Roxy's Virginia sales are $1,000,000 and out of state sales are $200,000. Assuming that Virginia's sales tax rate is 5 percent, what is Roxy's Virginia sales and use tax liability?

Accepted Answer

A)  $60,000. 
B)  $0. 
C)  $50,000. 
D)  $10,000. 
A)  $60,000. 
B)  $0. 
C)  $50,000. 
D)  $10,000.

Question 11

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 sales activity in all of these states 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. Where does Tennis Pro have income tax nexus?

Accepted Answer

Virginia and Kentuck

Question 12

Sales personnel investigating a potential customer's credit worthiness generally are deemed to exceed protected boundaries of solicitation.

Accepted Answer

A) True 
 B)False

Question 13

The National Bellas Hess decision held that an out-of-state mail-order company did not have sales tax collection responsibility because it lacked physical presence.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A)  Allocates compensation for employees working in more than one state. 
B)  Excludes compensation to independent contractors. 
C)  Assigns the payroll of each employee to a single state. 
D)  Includes salaries, commissions, and bonuses. 
A)  Allocates compensation for employees working in more than one state. 
B)  Excludes compensation to independent contractors. 
C)  Assigns the payroll of each employee to a single state. 
D)  Includes salaries, commissions, and bonuses.

Question 15

Assume Tennis Pro attends a sports equipment expo in Washington State. Assume this activitycreates nexus of the Business and Occupation (B&O) tax. Assume the tax is 0.5% 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.

Accepted Answer

$130.
($20

Question 16

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, andTexas. 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)

Accepted Answer

$233,900.
($583,194 × 6 percen

Question 17

Rental income is allocated to the state of commercial domicile.

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

Which of the following isn't a criteria used to determine whether a unitary relationship exists?

Accepted Answer

A)  Centralized management. 
B)  Consolidated return status. 
C)  Functional integration. 
D)  Economies of scale. 
A)  Centralized management. 
B)  Consolidated return status. 
C)  Functional integration. 
D)  Economies of scale.

Exam 23: State and Local Taxes

Nondomiciliary businesses are subject to tax everywhere they do business.

A unitary return includes only companies included in the federal consolidated tax return filing.

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

What is Carolina's Hats North and South Carolina apportionment factors if North Carolina uses an equally-weighted three-factor formula and South Carolina uses a double-weighted sales factorformula? (Round your answers to two decimal places).

Business income is allocated to the state of commercial domicile.

Which of the following is not a general rule for allocating nonbusiness income?

Which of the items is correct regarding a use tax?

The payroll factor includes payments to independent contractors.

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

Roxy operates a dress shop in Arlington, Virginia. Roxy also ships dresses nationwide upon request. Roxy's Virginia sales are $1,000,000 and out of state sales are $200,000. Assuming that Virginia's sales tax rate is 5 percent, what is Roxy's Virginia sales and use tax liability?

Sales personnel investigating a potential customer's credit worthiness generally are deemed to exceed protected boundaries of solicitation.

The National Bellas Hess decision held that an out-of-state mail-order company did not have sales tax collection responsibility because it lacked physical presence.

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

Rental income is allocated to the state of commercial domicile.

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

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

Which of the following isn't a criteria used to determine whether a unitary relationship exists?

An Introduction to Tax

Tax Compliance, the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Exemptions, and Filing Status

Gross Income and Exclusions

Individual Deductions

Investments

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Compensation

Retirement Savings and Deferred Compensation

Tax Consequences of Home Ownership

Entities Overview

Corporate Operations

Accounting for Income Taxes

Corporate Taxation: Nonliquidating Distributions

Corporate Formation, Reorganization, and Liquidation

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S Corporations

The US Taxation of Multinational Transactions

Transfer Taxes and Wealth Planning

Filters