Exam 24: Multistate Corporate Taxation

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

All of the U.S.states use an apportionment formula based on the sales,property,and payroll factors.

All of the U.S.states have adopted a tax based on the net taxable income of corporations.

Match each of the following items with the appropriate description, in determining whether sales/use tax typically must be collected. a.Taxable b.Not taxable -A textbook purchased by a State University student.

Your supervisor has shifted your responsibilities from the Federal corporate income tax to a multistate corporate income tax practice.In what areas might your Federal income tax knowledge also be applicable in your new assignment?

Almost all of the states allow ____________________ treatment to an LLC for income tax purposes.

José Corporation realized $900,000 taxable income from the sales of its products in States X and Z.José's activities in both states establish nexus for income tax purposes.José's sales,payroll,and property among the states include the following. State X State Z Totals Sales $1,500,000 $1,000,000 $2,500,000 Property 500,000 -0- 500,000 Payroll 2,000,000 -0- 2,000,000 ​ Z utilizes a double-weighted sales factor in its three-factor apportionment formula.How much of José's taxable income is apportioned to Z?

The ____________________ tax usually is applied at the city or county level,as its main source of revenue.

Franz Corporation is based in State A (corporate income tax rate 10%).It sells its goods to customers in both A and State B (corporate income tax rate 4%).Franz's state taxable income for the year is $1 million,45% of which relates to B customers.Franz's level of activities in B is insufficient to create nexus there,but A has adopted a throwback rule as to multistate sales.Would Franz reduce its total state income tax liability by creating nexus with B,say by allowing its sales force to make credit decisions? Elaborate.

Match each of the following items with the appropriate description, in determining whether sales/use tax typically must be collected. a.Taxable b.Not taxable -Computer software,in the form of a disk purchased by an individual at a rummage sale.

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:

A state sales/use tax is designed to be collected by the ____________________ (seller/purchaser) of the product and then remitted to the state.

Match each of the following events, considered independently, to its likely effect on WillCo's various apportionment factors. WillCo is based in Q and has customers in Q, R, and S. To this point, WillCo has not established nexus with S. More than one choice may be correct. a.No change in apportionment factors b.Q apportionment factor increases c.Q apportionment factor decreases d.R apportionment factor increases e.R apportionment factor decreases f.S apportionment factor increases g.S apportionment factor decreases -Q adopts a throwback rule.

In ____________________ states,a(n) ____________________ 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.

Leased property,when included in the property factor,usually is valued at ____________________ times its annual rental,even though the taxpayer does not own the asset.

Determine Drieser's sales factors for States K,M,and N. Drieser Corporation's manufacturing facility,distribution center,and retail store are located in State K.Drieser sells its products to residents located in States K,M,and N. Sales to residents of K are conducted through a retail store.Sales to residents of M are obtained by Drieser's sales representative,who has the authority to solicit,accept,and approve sales orders in State M.Residents of N can purchase Drieser's product only if they place an order online and arrange to take delivery of the product at Drieser's shipping dock. Drieser's sales this year were reported as follows. Sales to residents of State K $1,000,000 Sales to residents of State M 600,000 Sales to residents of State N 900,000 Total $2,500,000 Drieser's activities within the three states are limited to those described above.All of the states have adopted a throwback provision and utilize a three-factor apportionment formula under which sales,property,and payroll are equally weighted.State K sources dock sales to the destination state.

Britta Corporation's entire operations are located in State A.Eighty percent ($800,000) of Britta's sales are made in A and the remaining sales ($200,000) are made in State B.B has not adopted a corporate income tax.If A has adopted a throwback rule,the numerator of Britta's A sales factor is:

In some states,an S corporation must withhold Federal income tax for the proportionate flowthrough income of its shareholders who ____________________ (are/are not) state residents.

The typical state sales/use tax falls on sales of both real and personal property.

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%