Exam 23: State and Local Taxes

Gordon operates the Tennis Pro Shop in Blacksburg, Virginia. Tennis pro decides to expand into Pennsylvania during the current year and try some new sales techniques. Tennis pro advertises on local radio and television as well as national tennis magazines sent into PA. Salesmen give away promotional materials and occasionally sell demonstration models to local shop employees to build goodwill for Tennis Pro. It holds sales meetings at rented space in local hotels. Personnel occasionally fix minor problems such as tape and strings without charge. One employee performed a credit check for a major account who needed merchandise immediately. Each sales person is allowed an allowance for a car and office equipment to be maintained in an in-home office. Do any of Tennis Pro activities have the potential to create income tax nexus?

Which of the following isn't a typical federal/state adjustment?

Roxy operates a dress shop in Arlington, Virginia. Roxy also ships dresses nationwide upon request. Roxy's Virginia sales are $1,000,000 and out of state sales are $200,000. Assuming that Virginia's sales tax rate is 5 percent, what is Roxy's Virginia sales and use tax liability?

All states employ some combination of sales and use tax, income or franchise tax, or property tax.

All of the following are false regarding apportionment except?

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

Public Law 86-272 was a congressional response to Northwestern States Portland Cement.

Tennis Pro, a Virginia Corporation, has the following items of income: $5,000 of dividend income, $15,000 of interest income, $10,000 of rental income from Georgia property, $30,000 of royalty income for an intangible used in Maryland (where nexus exists). Determine how much income is allocated to Virginia.

A gross receipts tax is subject to Public Law 86-272.

In Complete Auto Transit the court determined eight criteria for determining whether a state can tax a nondomiciliary company.

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

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

Wacky Wendy produces gourmet cheese in Wisconsin. Wendy has sales as follows: $\text { Wendy's Sales: }$ State Sales Iowa \ 350,512 Michigan \ 134,589 Minnesota \ 849,142 Wisconsin Totals \ 2,657,275 Wendy is a Wisconsin Corporation and has the following operations. Wendy has nexus in Iowa, Minnesota, and Wisconsin. The Michigan sales are shipped from Wisconsin (a throwback state). $100,000 of the Wisconsin sales were to the federal government. What is Wendy's Wisconsin sale numerator?

The Quill decision reaffirmed 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.

The annual value of rented property is included in the property factor.

State tax law is comprised solely of legislative authority.

The primary purpose of state and local taxes is to raise revenue to finance state and local government.

Which of the following activities will create sales tax nexus?

Delivery of tangible personal property through common carrier is a protected activity.

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