Exam 16: Multistate Corporate Taxation

In________ states, an)_________ election permits a multinational corporation to elect to limit the reach of the state's taxing jurisdiction to activities occurring within the boundaries of the United States.

In applying the typical apportionment formula:

Match each of the following items with the appropriate description in determining whether sales/use tax typically must be collected. -A garment purchased for resale.

In determining taxable income for state income tax purposes, interest income from another state's bonds typically constitutes an)_________ modification.

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

In the broadest application of the unitary theory, the U.S. unitary business files a combined tax return using factors and income amounts for all affiliates:

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.

In some states, an S corporation must withhold Federal income tax for the proportionate flow-through income of its shareholders who ____________are/are not) state residents.

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 States 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 States A and B are 5% and 3%, respectively. Determine Condor's state income tax liability.

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

When the taxpayer operates in one or more unitary states:

An LLC apportions and allocates its annual taxable income in the same manner used by any other business operating in the state.

Match each of the following terms with the appropriate description in the state income tax formula. Apply the UDITPA rules in your responses. -State income tax expense.

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, State X defines payroll as all compensation paid to employees, including contributions to § 401k) deferred compensation plans. Under State W's statutes, neither compensation paid to officers nor contributions to § 401k) plans are included in the payroll factor. Net incurred the following personnel costs:

Compute Still Corporation's State Q taxable income and tax liability for the year. Addition modifications \ 70,000 Allocated income - total \ 80,000 Allocated income - State Q \ 60,000 Allocated income - State P \ 20,000 Apportionment percentage - State Q 40\% Federal taxable income \ 500,000 State tax credits \ 11,000 Subtraction modifications \ 30,000 Tax rate 5\%

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.

Flint Corporation is subject to a corporate income tax only in State X. The starting point in computing X taxable income is Federal taxable income which is $750,000. This amount includes a $50,000 deduction for state income taxes. During the year, Flint received $10,000 interest on Federal obligations. X tax law does not allow a deduction for state income tax payments. Flint's taxable income for X purposes is:

Property taxes generally are collected by local taxing jurisdictions, not the state or Federal governments.

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.

A ________tax is designed to complement the local sales tax structure, to prevent the consumer from making no- or low-tax purchases in another state, outside the United States, or online and then bringing the asset into the state.