Question 1

Federal/state adjustments correct for differences between two states' tax laws.

Accepted Answer

A) True 
 B)False  False

Question 2

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

Accepted Answer

A) True 
 B)False  True

Question 3

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

Accepted Answer

A) True 
 B)False  True

Question 4

Business income includes all income earned in the ordinary course of business.

Accepted Answer

A) True 
 B)False

Question 5

Public Law 86-272 protects only companies selling tangible personal property.

Accepted Answer

A) True 
 B)False

Question 6

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 in national tennis magazines sent into Pennsylvania. Salespeople give away promotional materials and occasionally sell demonstration models to local shop employees to build goodwill for Tennis Pro. Tennis Pro 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 that needed merchandise immediately. Each salesperson is allowed an allowance for a car and office equipment to be maintained in an in-home office. Do any of Tennis Pro's activities have the potential to create income tax nexus?

Accepted Answer

The sale of demonstration models, the re

Question 7

Gordon operates the Tennis Pro Shop in Blacksburg, Virginia. Tennis Pro sells, manufactures, and customizes tennis racquets for serious amateurs. Tennis Pro's business has expanded significantly over the last few years. Currently, it has sales personnel in 9 states (Virginia, North Carolina, South Carolina, Georgia, Tennessee, Kentucky, Ohio, Maryland, and New Jersey) and the District of Columbia. All sales activity in all of these states is limited to solicitation. Orders are received by the sales team and forwarded to Blacksburg for approval. All orders are sent by common carrier to customers. Tennis Pro owns retail and warehouse space in Virginia and has another warehouse in Kentucky. Is Tennis Pro subject to Ohio's Commercial Activity Tax (a nonincome-based tax)?

Accepted Answer

Yes.
Public Law 86-272 doesn't

Question 8

On which of the following transactions should sales tax generally be collected?

Accepted Answer

A)  Architecture plans delivered through the mail. 
B)  Sales of woolen goods to a state without economic sales tax nexus delivered through common carrier. 
C)  Accounting services provided in Alaska. 
D)  Meal purchased at McDonald's. 
A)  Architecture plans delivered through the mail. 
B)  Sales of woolen goods to a state without economic sales tax nexus delivered through common carrier. 
C)  Accounting services provided in Alaska. 
D)  Meal purchased at McDonald's.

Question 9

Failure by a seller to collect and remit sales taxes often results in a larger tax liability than failure to pay income taxes.

Accepted Answer

A) True 
 B)False

Question 10

Immaterial violations of the solicitation rules automatically create income tax nexus.

Accepted Answer

A) True 
 B)False

Question 11

In Complete Auto Transit the U.S. Supreme Court determined eight criteria for determining whether a state can tax a nondomiciliary company.

Accepted Answer

A) True 
 B)False

Question 12

The Wayfair decision reversed the Quill decision, which had affirmed 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.

Accepted Answer

A) True 
 B)False

Question 13

Separate-return states require each member of a consolidated group with income tax nexus to file their own state income tax return.

Accepted Answer

A) True 
 B)False

Question 14

All states employ some combination of sales and use tax, income or franchise tax, or property tax to fund their government operations.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following isn't a criterion used to determine whether a unitary relationship exists?

Accepted Answer

A)  Functional integration. 
B)  Centralized management. 
C)  Economies of scale. 
D)  Consolidated return status. 
A)  Functional integration. 
B)  Centralized management. 
C)  Economies of scale. 
D)  Consolidated return status.

Question 16

Most state tax laws adopt the federal tax law as of a specific date in time.

Accepted Answer

A) True 
 B)False

Question 17

Carolina's Hats has the following sales, payroll, and property factors:   What is Carolina's Hats North and South Carolina apportionment factors if North Carolina uses an equally weighted three-factor formula and South Carolina uses a double-weighted sales factor formula? (Round your answers to two decimal places.)

Accepted Answer

A)  North Carolina 74.03 percent, and South Carolina 19.45 percent. 
B)  North Carolina 74.03 percent, and South Carolina 20.22 percent. 
C)  North Carolina 74.28 percent, and South Carolina 19.45 percent. 
D)  North Carolina 74.28 percent, and South Carolina 22.51 percent. 
A)  North Carolina 74.03 percent, and South Carolina 19.45 percent. 
B)  North Carolina 74.03 percent, and South Carolina 20.22 percent. 
C)  North Carolina 74.28 percent, and South Carolina 19.45 percent. 
D)  North Carolina 74.28 percent, and South Carolina 22.51 percent.

Question 18

Gordon operates the Tennis Pro Shop in Blacksburg, Virginia. Tennis Pro has property as follows:
   Tennis Pro also rents Virginia property at an annual rent of $24,000. What is Tennis Pro's Virginia property numerator and property factor? (Round interim calculations to the nearest whole number and the property factor to two decimal places.)

Accepted Answer

$1,577,179 and 88.83 percent.
The annual

Question 19

Mahre, Incorporated, a New York corporation, runs ski tours in several states. Mahre also has a New York retail store and an Internet store, which ships to out-of-state customers. The ski tours operate in Maine, New Hampshire, and Vermont, where Mahre has employees and owns and uses tangible personal property. Mahre has real property only in New York. Mahre has the following sales:   Assume the following sales tax rates: Alaska (0 percent), Colorado (7.75 percent), Maine (8.5 percent), New Hampshire (6.75 percent), New York (8 percent), and Vermont (5 percent). How much sales and use tax must Mahre collect and remit in Maine?

Accepted Answer

A)  $0 
B)  $3,053 
C)  $13,267 
D)  $16,319 
A)  $0 
B)  $3,053 
C)  $13,267 
D)  $16,319

Question 20

PWD Incorporated is an Illinois corporation. It properly included, deducted, or excluded the following items on its federal tax return in the current year:   PWD's federal taxable income was $100,000. Calculate PWD's Illinois state tax base.

Accepted Answer

A)  $116,000 
B)  $130,833 
C)  $131,000 
D)  $164,333 
A)  $116,000 
B)  $130,833 
C)  $131,000 
D)  $164,333

Federal/state adjustments correct for differences between two states' tax laws.

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

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

Business income includes all income earned in the ordinary course of business.

Public Law 86-272 protects only companies selling tangible personal property.

On which of the following transactions should sales tax generally be collected?

Failure by a seller to collect and remit sales taxes often results in a larger tax liability than failure to pay income taxes.

Immaterial violations of the solicitation rules automatically create income tax nexus.

In Complete Auto Transit the U.S. Supreme Court determined eight criteria for determining whether a state can tax a nondomiciliary company.

The Wayfair decision reversed the Quill decision, which had affirmed 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.

Separate-return states require each member of a consolidated group with income tax nexus to file their own state income tax return.

All states employ some combination of sales and use tax, income or franchise tax, or property tax to fund their government operations.

Which of the following isn't a criterion used to determine whether a unitary relationship exists?

Most state tax laws adopt the federal tax law as of a specific date in time.

PWD Incorporated is an Illinois corporation. It properly included, deducted, or excluded the following items on its federal tax return in the current year: PWD's federal taxable income was $100,000. Calculate PWD's Illinois state tax base.

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

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

Exam 12: State and Local Taxes

Federal/state adjustments correct for differences between two states' tax laws.

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

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

Business income includes all income earned in the ordinary course of business.

Public Law 86-272 protects only companies selling tangible personal property.

On which of the following transactions should sales tax generally be collected?

Failure by a seller to collect and remit sales taxes often results in a larger tax liability than failure to pay income taxes.

Immaterial violations of the solicitation rules automatically create income tax nexus.

In Complete Auto Transit the U.S. Supreme Court determined eight criteria for determining whether a state can tax a nondomiciliary company.

The Wayfair decision reversed the Quill decision, which had affirmed 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.

Separate-return states require each member of a consolidated group with income tax nexus to file their own state income tax return.

All states employ some combination of sales and use tax, income or franchise tax, or property tax to fund their government operations.

Which of the following isn't a criterion used to determine whether a unitary relationship exists?

Most state tax laws adopt the federal tax law as of a specific date in time.

PWD Incorporated is an Illinois corporation. It properly included, deducted, or excluded the following items on its federal tax return in the current year: PWD's federal taxable income was $100,000. Calculate PWD's Illinois state tax base.

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

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