Exam 16: Multistate Corporate Taxation

You are preparing to make a presentation to a client who has some familiarity with state corporate income tax rules. At a general level, list for the client the principles of multistate tax planning.

In international taxation, we discuss income sourcing rules and the permanent establishment doctrine. In multistate taxation, an analogous term might be the ultimate destination concept. Define this term, and identify at least two of the most important exceptions to the general rule.

A state sales tax usually falls upon:

For most taxpayers, which of the traditional apportionment factors yields the greatest opportunities for tax reduction?

Typically, a sales/use tax is applied to a retail sale of________ property.

The sale of groceries to an individual probably is exempt from sales/use tax under the _________________________ rule.

Cruz Corporation owns manufacturing facilities in States A, B, and C. State A uses a three-factor apportionment formula under which the sales, property, and payroll factors are equally weighted. State B uses a three-factor apportionment formula under which sales are double-weighted. State C employs a single-factor apportionment factor based solely on sales. Cruz'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 Cruz's apportionable income assigned to State C is:

A use tax applies when a State A resident purchases:

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.

The property factor includes business assets that the taxpayer owns and those merely used under a lease agreement.

Typically exempt from the sales/use tax base is the purchase of lumber by a do-it-yourself homeowner when she builds a deck onto her patio. This exemption is known as the homestead rule.

The starting point in computing state taxable income generally is________________ .

Under P.L. 86-272, which of the following transactions by itself would create nexus with a state?

A typical state taxable income subtraction modification is the interest income earned from another state's bonds.

In the income tax apportionment formula, market-sourcing the sales factor means that:

Sales/use tax in most states applies to a restaurant meal.

The individual seller of shares of stock in Facebook is liable for sales tax on the transaction.

An assembly worker earns a $50,000 salary and receives a fringe benefit package worth $15,000. The payroll factor assigns $65,000 for this employee.

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

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