Exam 16: Multistate Corporate Taxation

Cruz Corporation owns manufacturing facilities in States A, B, andC. 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. Cruz'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. Cruz's apportionable income assigned to C is:

Which of the following is not immune from state income taxation, even if P.L. 86-272 is in effect?

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

You are completing the State A income tax return for Quaint Company. Quaint is a limited liability company, and it operates in various states, showing the following results. In A, all interest is treated as business income. A uses a sales-only apportionment factor. Compute Quaint's A taxable income.

P.L. 86-272 ____________________ (does/does not) create nexus when the seller conducts its sales solicitations from a calling center building that it owns.

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

General Corporation is taxable in a number of states. This year, General made a $100,000 sale from its A headquarters to a customer in B. This activity is not sufficient for General to create nexus with B. State B applies a throwback rule, but State A does not. In which state(s) will the sale be included in the sales factor numerator?

Summarize the principles of multistate tax planning.

José Corporation realized $600,000 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. Z utilizes a double-weighted sales factor in its three-factor apportionment formula. How much of José's taxable income is apportioned to Z?

Use tax would be due if an individual purchased an auto in State A and used it at his home in State B.

You attend a tax webinar in which the presenter mentions the "ultimate destination concept." Define this term, and identify at least two of the most important exceptions to the general rule.

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:

_________________________ is a means by which a corporation's business income is divided among the states in which it conducts business.

A state cannot levy a tax on a business unless the business was incorporated in the state.

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

A state sales tax usually falls upon:

In computing the property factor, property owned by the corporation typically is valued at its ____________________, plus the cost of additions and improvements, but without adjusting for ____________________. or

Your supervisor has shifted your responsibilities from the Federal corporate income tax to a multistate corporate income tax practice. On which issues, if any, are the tax bases and procedures likely to overlap?

A use tax applies when a State A resident purchases:

A ____________________ tax is designed to complement the local sales tax structure, to prevent the consumer from making purchases in another, lower-tax state.