Question 1

What was the Supreme Court's holding in Complete Auto Transit?

Accepted Answer

A)  Reaffirmed that an out-of-state business must have physical presence in the state before the state may require the business to collect sales tax from in-state
Customers. 
B)  Provided four criteria for determining whether states may subject nondomiciliary companies to an income tax. 
C)  Defined solicitation for purposes of Public Law 86-272. 
D)  An out-of-state mail-order company did not have a sales tax collection responsibility because it lacked physical presence. 
A)  Reaffirmed that an out-of-state business must have physical presence in the state before the state may require the business to collect sales tax from in-state
Customers. 
B)  Provided four criteria for determining whether states may subject nondomiciliary companies to an income tax. 
C)  Defined solicitation for purposes of Public Law 86-272. 
D)  An out-of-state mail-order company did not have a sales tax collection responsibility because it lacked physical presence.

Question 2

Which of the following isn't a requirement of Public Law 86-272?

Accepted Answer

A)  The taxpayer is nondomiciliary. 
B)  The taxpayer sells only tangible personal property. 
C)  The taxpayer is an intrastate business. 
D)  The tax is based on net income. 
A)  The taxpayer is nondomiciliary. 
B)  The taxpayer sells only tangible personal property. 
C)  The taxpayer is an intrastate business. 
D)  The tax is based on net income.

Question 3

Roxy operates a dress shop in Arlington, Virginia. Lisa, a Maryland resident, comes in for a measurement and purchases a $1,500 dress. Lisa returns to Virginia a few weeks later to pick up the dress and drive it back to her Maryland residence where she will use the property. Assuming that Virginia's sales tax rate is 5 percent and that Maryland'ssales tax rate is 6 percent, what is Roxy's sales and use tax liability?

Accepted Answer

A)  $75 sales tax to Virginia and $15 use tax to Maryland. 
B)  $90 to Maryland. 
C)  $0. 
D)  $75 to Virginia. 
A)  $75 sales tax to Virginia and $15 use tax to Maryland. 
B)  $90 to Maryland. 
C)  $0. 
D)  $75 to Virginia.

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

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.

Accepted Answer

$571,743.
$549,743 +

Question 6

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

Accepted Answer

A)  It is a necessary step in the state income tax process. 
B)  It is computed by making adjustments to federal taxable income. 
C)  It applies only to interstate businesses. 
D)  It is divided into business and nonbusiness income. 
A)  It is a necessary step in the state income tax process. 
B)  It is computed by making adjustments to federal taxable income. 
C)  It applies only to interstate businesses. 
D)  It is divided into business and nonbusiness income.

Question 7

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. Tennessee has a4 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 resident that purchases the merchandise in the Virginia retailstore?

Accepted Answer

The answer of Gordon operates the Tennis Pro Shop in...

Question 8

Business income includes all income earned in the ordinary course of business.

Accepted Answer

A) True 
 B)False

Question 9

Interest and dividends are allocated to the state of commercial domicile.

Accepted Answer

A) True 
 B)False

Question 10

Public Law 86-272 protects certain business activities from creating income tax nexus.

Accepted Answer

A) True 
 B)False

Question 11

Gordon operates the Tennis Pro Shop in Blacksburg, Virginia. Tennis Pro has sales as follows:   Assume that Tennis Pro's other sales include $150,000 of sales to a federal government entity that was shipped from Virginia to Maryland. What is Tennis Pro's Virginia sales numerator and sales factor?

Accepted Answer

$1,053,293 and 46.98 percent.

Question 12

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

Accepted Answer

A)  Excludes property in transit from the calculation. 
B)  Values property at historical cost. 
C)  Includes rented property at eight times the annual rent. 
D)  Uses the average property values for the year. 
A)  Excludes property in transit from the calculation. 
B)  Values property at historical cost. 
C)  Includes rented property at eight times the annual rent. 
D)  Uses the average property values for the year.

Question 13

Which of the following is an income based tax?

Accepted Answer

A)  Wisconsin Corporate Tax. 
B)  Texas Margin Tax. 
C)  Ohio Commercial Activity Tax. 
D)  Washington Business & Occupation Tax. 
A)  Wisconsin Corporate Tax. 
B)  Texas Margin Tax. 
C)  Ohio Commercial Activity Tax. 
D)  Washington Business & Occupation Tax.

Question 14

Businesses engaged in interstate commerce are subject to income tax in every state inwhich they operate.

Accepted Answer

A) True 
 B)False

Question 15

Gordon operates the Tennis Pro Shop in Blacksburg, Virginia. Tennis Pro has property as follows:   What is Tennis Pro's Virginia property numerator and property factor?

Accepted Answer

$1,385,179 and 87.47 percent.

Question 16

Wyoming imposes an income tax on corporations.

Accepted Answer

A) True 
 B)False

Question 17

Assume Tennis Pro discovered that one salesman has gone into Arkansas once each year of the past4 years and performed activities creating both sales and use tax nexus and income tax nexus.Assume that Arkansas sales were $25,000 each year. Assume that Arkansas business income would be 200,000 each year and that Tennis Pro's Arkansas apportionment percentage would be 1 percent. Assume there would be no Arkansas nonbusiness income. Assume that Arkansas sales and use tax rate was 6.5 percent and corporate income tax rate was 5 percent. What would Tennis Pro'sArkansas sales and use tax and income tax liability be ignoring any possible penalties and interest?

Accepted Answer

$6,500 and $400, respectively.

Question 18

Lefty provides demolition services in several southern states. Lefty has property as follows: 87)   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)

Accepted Answer

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

Question 19

Several states are now moving from a strict physical presence test towards an economic presence test.

Accepted Answer

A) True 
 B)False

Question 20

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?

Accepted Answer

66.67 and 10 percent

Exam 23: State and Local Taxes

What was the Supreme Court's holding in Complete Auto Transit?

Which of the following isn't a requirement of Public Law 86-272?

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

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.

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

Business income includes all income earned in the ordinary course of business.

Interest and dividends are allocated to the state of commercial domicile.

Public Law 86-272 protects certain business activities from creating income tax nexus.

Gordon operates the Tennis Pro Shop in Blacksburg, Virginia. Tennis Pro has sales as follows: Assume that Tennis Pro's other sales include $150,000 of sales to a federal government entity that was shipped from Virginia to Maryland. What is Tennis Pro's Virginia sales numerator and sales factor?

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

Which of the following is an income based tax?

Businesses engaged in interstate commerce are subject to income tax in every state inwhich they operate.

Gordon operates the Tennis Pro Shop in Blacksburg, Virginia. Tennis Pro has property as follows: What is Tennis Pro's Virginia property numerator and property factor?

Wyoming imposes an income tax on corporations.

Several states are now moving from a strict physical presence test towards an economic presence test.

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?

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