Exam 24: Multistate Corporate Taxation

Provide the required information for Orange Corporation,whose Federal taxable income totals $100 million.Orange apportions 70% of its business income to State C.Orange generates $10 million of nonbusiness income each year.Forty percent of that income is attributable to rentals of buildings located in C.Orange's business income this year totals $90 million. a.State C taxes how much of Orange's business income? b.State C taxes how much of Orange's nonbusiness income? c.Explain your results.

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

Typically exempt from the sales/use tax base is the purchase of lumber by a do-it-yourself homeowner,when she builds a deck onto her patio.This exemption is known as the "homestead rule."

Match each of the following items with the appropriate description, in applying the P. l. 86-272 definition of solicitation. a.More than solicitation, creates nexus b.Solicitation only, no nexus created -Owning a tablet computer that is used on sales trips to the state.

The use tax is designed to complement the sales tax.A use tax typically covers purchases made out of state and brought into the jurisdiction.

In international taxation,we discuss income sourcing rules and the permanent establishment doctrine.In multistate taxation,an analogous term might be the "ultimate destination concept." Define this term,and identify at least two of the most important exceptions to the general rule.

Under P.L.86-272,which of the following transactions by itself would create nexus with a state?

Flint Corporation is subject to a corporate income tax only in State X.The starting point in computing X taxable income is Federal taxable income.Flint's Federal taxable income is $750,000,which includes a $50,000 deduction for state income taxes.During the year,Flint received $10,000 interest on Federal obligations.X tax law does not allow a deduction for state income tax payments. ​ Flint's taxable income for X purposes is:

Allocation is a method under which a corporation's _________________________ income is directly assigned to the specific states where the income is derived.

Helene 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. Helene'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. ​ Helene's apportionable income assigned to A is:

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

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. 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.

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 -Earthmoving equipment used by the purchaser in construction business.

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.

Boot Corporation is subject to income tax in States A and B.Boot's operations generated $200,000 of apportionable income,and its sales and payroll activity and average property owned in each of the states is as follows. ​ How much more (less) of Boot's income is subject to A income tax if,instead of using an equally-weighted three-factor apportionment formula,A uses a formula with a double-weighted sales factor?

​With respect to typical sales/use tax laws:

General Corporation is taxable in a number of states.This year,General made a $100,000 sale from its A headquarters to the State B office of the FBI.In which state(s) will the sale be included in the sales factor numerator?

Compost Corporation has finished its computation of Federal taxable income.In State Q,the derivation of state corporate taxable income starts with the Federal amount and makes a number of modifications.List at least five such modifications that Compost is likely to encounter.In this regard,follow the general UDITPA rules,and list both addition and subtraction modifications.

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 meal eaten at a restaurant while conducting business.

The typical local property tax falls on both an investor's principal residence and her stock portfolio.