Question 1

Businesses must pay income tax in their state of commercial domicile.

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

Nondomiciliary businesses are subject to tax everywhere they do business.

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

In recent years, states are weighting the sales factor because it is easier to calculate.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following sales is likely subject to sales and use tax in a state that assesses a sales and use tax?

Accepted Answer

A) Tax preparation services 
B) Automobiles 
C) Inventory 
D) Food 
A) Tax preparation services 
B) Automobiles 
C) Inventory 
D) Food

Question 7

Hoosier Incorporated is an Indiana corporation. It properly included, deducted, or excluded the following items on its federal tax return in the current year:   State depreciation expense was $50,000. Hoosier's federal taxable income was $150,300. Calculate Hoosier's Indiana state tax base.

Accepted Answer

A) $171,300 
B) $173,800 
C) $199,633 
D) $207,133 
A) $171,300 
B) $173,800 
C) $199,633 
D) $207,133

Question 8

Purchases of inventory for resale are typically exempt from sales and use taxes.

Accepted Answer

A) True 
 B)False

Question 9

Gordon operates the Tennis Pro Shop in Blacksburg, Virginia. Tennis Pro has payroll as follows:
   The other total includes $10,000 of salary of a Virginia employee that works part time in another state. What is Tennis Pro's Virginia payroll numerator and payroll factor? (Round the payroll factor to two places.)

Accepted Answer

$260,000 and 55.85 percent. $2

Question 10

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 product sales in all 50 states. New Jersey is the only state in which Mighty Manny exceeds the Wayfair sales thresholds. Mighty Manny's service employees work in Connecticut, New Jersey, New York, Pennsylvania, and Rhode Island. Mighty Manny also has an executive training seminar each year in South Carolina. Determine the states in which Mighty Manny has sales tax nexus.

Accepted Answer

Connecticut, New Jersey, New York, Penns

Question 11

Most services are sourced to the state where the services were performed.

Accepted Answer

A) True 
 B)False

Question 12

Handsome Rob provides transportation services in several western states. Rob has payroll as follows:   Rob is a California corporation and the following is true:
Rob has income tax nexus in Arizona, California, Nevada, and Washington. The Washington drivers spend 25 percent of their time driving through Oregon. California payroll includes $200,000 of payroll for services provided in Nevada by California-based drivers. What is Rob's California payroll numerator?

Accepted Answer

A) $934,589 
B) $1,134,589 
C) $1,215,347 
D) $2,657,275 
A) $934,589 
B) $1,134,589 
C) $1,215,347 
D) $2,657,275

Question 13

Roxy operates a dress shop in Arlington, Virginia. Lisa, a Maryland resident, comes in for a measurement and purchases a $2,400 dress that is shipped to her Maryland residence using a common carrier. Roxy's total Maryland sales are $31,200 on 15 transactions. Assuming that Virginia's sales tax rate is 5 percent and that Maryland's sales tax rate is 7 percent, what is Roxy's sales and use tax collection obligation?

Accepted Answer

A) $0 
B) $120 to Virginia 
C) $120 sales tax to Virginia and $48 use tax to Maryland 
D) $168 to Maryland 
A) $0 
B) $120 to Virginia 
C) $120 sales tax to Virginia and $48 use tax to Maryland 
D) $168 to Maryland

Question 14

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

Accepted Answer

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

Question 15

Businesses subject to income tax in more than one jurisdiction have the right to apportionment.

Accepted Answer

A) True 
 B)False

Question 16

The annual value of rented property is not included in the property factor.

Accepted Answer

A) True 
 B)False

Question 17

The Wrigley case held that the sale of intangibles is protected by Public Law 86-272.

Accepted Answer

A) True 
 B)False

Question 18

Giving samples and promotional materials without charge is a protected solicitation activity.

Accepted Answer

A) True 
 B)False

Question 19

A state's apportionment formula usually is applied using some variation of sales, payroll, and property factors.

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 23: State and Local Taxes

Businesses must pay income tax in their state of commercial domicile.

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

Nondomiciliary businesses are subject to tax everywhere they do business.

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

In recent years, states are weighting the sales factor because it is easier to calculate.

Which of the following sales is likely subject to sales and use tax in a state that assesses a sales and use tax?

Hoosier Incorporated is an Indiana corporation. It properly included, deducted, or excluded the following items on its federal tax return in the current year: State depreciation expense was $50,000. Hoosier's federal taxable income was $150,300. Calculate Hoosier's Indiana state tax base.

Purchases of inventory for resale are typically exempt from sales and use taxes.

Most services are sourced to the state where the services were performed.

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

Businesses subject to income tax in more than one jurisdiction have the right to apportionment.

The annual value of rented property is not included in the property factor.

The Wrigley case held that the sale of intangibles is protected by Public Law 86-272.

Giving samples and promotional materials without charge is a protected solicitation activity.

A state's apportionment formula usually is applied using some variation of sales, payroll, and property factors.

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

An Introduction to Tax

Tax Compliance, the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Dependents, 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