Exam 23: State and Local Taxes

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

The Mobil decision identified three factors to determine whether a group of companies are unitary.

Tennis Pro is headquartered in Virginia. Assume it has a state income tax base of $216,000. Of this amount, $92,000 was nonbusiness income. Assume that Tennis Pro's Virginia apportionment factor is 73.28 percent. The nonbusiness income allocated to Virginia was $31,000. Assuming a Virginia corporate tax rate of 5.5 percent, what is Tennis Pro's Virginia state income tax liability? (Round your answer to the nearest whole number.)

Big Company and Little Company are both owned by Mrs. Smith. Big and Little file a consolidated federal tax return. Big manufactures office paper and other paper supplies and is based in Washington. Little operates a logging operation in Montana. Sixty percent of Little's sales are made to Big. Ten percent of Big's raw materials come from Little. There are no common officers or board members. There are no common service providers. What are the factors for and against filing a unitary tax return?

Mighty Manny, Incorporated manufactures and services deli machinery and distributes it across the United States. Mighty Manny is incorporated and headquartered in New Jersey. It has sales tax nexus in Connecticut, New Jersey, New York, Pennsylvania, Rhode Island, and South Carolina. Mighty Manny has sales as follows: Assume the following sales tax rates: Connecticut (6.75 percent), New Jersey (7.5 percent), New York (8.5 percent), Pennsylvania (6.5 percent), Rhode Island (7.25 percent), and South Carolina (5.5 percent). Assume that only Connecticut taxes Mighty Manny's services. What is Mighty Manny's total sales and use tax liability?

The Wayfair decision reversed the Quill decision, which had affirmed that out-of-state businesses must have physical presence within a state before the state may require the collection of sales taxes from in-state customers.

What was the Supreme Court's holding in Wayfair?

State tax law is comprised solely of legislative authority.

Commercial domicile is the location where a business is headquartered and from whence it directs its operations.

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 dress. Assuming that Virginia's sales tax rate is 5 percent and that Maryland's sales tax rate is 6 percent, what is Roxy's sales tax collection obligation?

Mighty Manny, Incorporated manufactures ice scrapers and distributes them across the midwestern United States. Mighty Manny is incorporated and headquartered in Michigan. It has product sales to customers in Illinois, Indiana, Michigan, Minnesota, Wisconsin, and Wyoming. It has sales personnel only in the states discussed and all these states have adopted Wayfair legislation. Determine the state in which Mighty Manny does not have sales tax nexus given the following scenarios:

Roxy operates a dress shop in Arlington, Virginia. Lisa, a Maryland resident, comes in for a measurement and purchases a $1,700 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 dress. Assuming that Virginia's sales tax rate is 5 percent and that Maryland's sales tax rate is 6 percent, what is Roxy's sales tax collection obligation?

Assume Tennis Pro discovered that one salesperson has gone into Arkansas once each year for the past four years and performed activities that create both sales tax nexus and income tax nexus. Assume that Arkansas sales were $25,000 each year. Assume that Tennis Pro 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's Arkansas sales and use tax and income tax liability be, ignoring any possible penalties and interest?

List the steps necessary to determine an interstate business's state income tax liability.

Gordon operates the Tennis Pro Shop in Blacksburg, Virginia. Tennis Pro has property as follows: Tennis Pro also rents Virginia property at an annual rent of $24,000. What is Tennis Pro's Virginia property numerator and property factor? (Round interim calculations to the nearest whole number and the property factor to two decimal places.)

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

Public Law 86-272 protects a taxpayer from which of the following taxes?

Which of the following is an income-based tax?

Tennis Pro, a Virginia corporation domiciled in Virginia, has the following items of income: $6,000 of dividend income, $17,000 of interest income, $10,400 of rental income from Georgia property, and $30,600 of royalty income for an intangible used in Maryland (whereincome tax nexus exists). Determine how much income is allocated to Virginia.

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