Question 1

Which of the following is not a general rule for calculating the payroll factor?

Accepted Answer

A)  Includes salaries, commissions, and bonuses. 
B)  Excludes compensation to independent contractors. 
C)  Allocates compensation for employees working in more than one state. 
D)  Assigns the payroll of each employee to a single state. 
A)  Includes salaries, commissions, and bonuses. 
B)  Excludes compensation to independent contractors. 
C)  Allocates compensation for employees working in more than one state. 
D)  Assigns the payroll of each employee to a single state.

Question 2

Roxy operates a dress shop in Arlington, Virginia. Lisa, a Maryland resident, comes in for a measurement and purchases a $1,500 dress that is shipped to her Maryland residence using a common carrier. Roxy's total Maryland sales are $20,000 on 15 transactions. Assuming that Virginia's sales tax rate is 5 percent and that Maryland's sales tax rate is 7 percent, what is Roxy's sales and use tax liability?

Accepted Answer

A)  $0. 
B)  $75 to Virginia. 
C)  $75 sales tax to Virginia and $15 use tax to Maryland. 
D)  $90 to Maryland. 
A)  $0. 
B)  $75 to Virginia. 
C)  $75 sales tax to Virginia and $15 use tax to Maryland. 
D)  $90 to Maryland.

Question 3

Which of the following is not a general rule for calculating the sales factor?

Accepted Answer

A)  Tangible personal property sales are sourced to the destination state. 
B)  If the business does not have income tax nexus in the destination state, the sales are thrown back to the state where the goods were shipped from. 
C)  Services are sourced to the destination state. 
D)  Government sales are sourced to the state where they were shipped from. 
A)  Tangible personal property sales are sourced to the destination state. 
B)  If the business does not have income tax nexus in the destination state, the sales are thrown back to the state where the goods were shipped from. 
C)  Services are sourced to the destination state. 
D)  Government sales are sourced to the state where they were shipped from.

Question 4

Mighty Manny, Incorporated, manufactures ice scrapers and distributes them across the midwestern United States. Mighty Manny is incorporated and headquartered in Michigan. It has product sales to customers in Illinois, Indiana, Iowa, Michigan, Minnesota, Wisconsin, and Wyoming. It has sales personnel only in the states discussed and all these states have adopted Wayfair legislation. Determine the state in which Mighty Manny does not have sales tax nexus given the following scenarios:

Accepted Answer

A)  Mighty Manny has sales personnel that visit Minnesota. These sales employees follow procedures that comply with Public Law 86-272. The orders are received and sent to Michigan for acceptance. The goods are shipped by FedEx into Minnesota. 
B)  Mighty Manny's trucks drive through Nebraska to deliver goods to Mighty Manny's customers in other states, but the company has no Nebraska sales. 
C)  Mighty Manny provides design services to another manufacturer located in Wisconsin. While the services are performed in Michigan, Mighty Manny's designers visit Wisconsin at least quarterly to deliver the new designs and receive feedback. 
D)  Mighty Manny receives online orders from its Illinois client. Because the orders are so large, the goods are delivered weekly on Mighty Manny's trucks. 
A)  Mighty Manny has sales personnel that visit Minnesota. These sales employees follow procedures that comply with Public Law 86-272. The orders are received and sent to Michigan for acceptance. The goods are shipped by FedEx into Minnesota. 
B)  Mighty Manny's trucks drive through Nebraska to deliver goods to Mighty Manny's customers in other states, but the company has no Nebraska sales. 
C)  Mighty Manny provides design services to another manufacturer located in Wisconsin. While the services are performed in Michigan, Mighty Manny's designers visit Wisconsin at least quarterly to deliver the new designs and receive feedback. 
D)  Mighty Manny receives online orders from its Illinois client. Because the orders are so large, the goods are delivered weekly on Mighty Manny's trucks.

Question 5

Bethesda Corporation is unprotected from income tax by Public Law 86-272. Which of the following characteristics creates a problem for Bethesda in states other than Maryland?

Accepted Answer

A)  Bethesda does business in Maryland and five other states. 
B)  Bethesda sells copier equipment and copy center services. 
C)  All orders are approved in Maryland. 
D)  All in-state services are limited to solicitation in states other than Maryland. 
A)  Bethesda does business in Maryland and five other states. 
B)  Bethesda sells copier equipment and copy center services. 
C)  All orders are approved in Maryland. 
D)  All in-state services are limited to solicitation in states other than Maryland.

Question 6

The state tax base is computed by making adjustments to federal taxable income.

Accepted Answer

A) True 
 B)False

Question 7

Mighty Manny, Incorporated, manufactures ice scrapers and distributes them across the midwestern United States. Mighty Manny is incorporated and headquartered in Michigan. It has product sales to customers in Illinois, Indiana, Iowa, Michigan, Minnesota, and Wisconsin. It has sales personnel only in the states discussed and all these states have adopted Wayfair legislation. Determine the state in which Mighty Manny does not have sales and nexus given the following scenarios:

Accepted Answer

A)  Mighty Manny is incorporated and headquartered in Michigan. It also has property, employees, sales personnel, and intangibles in Michigan. 
B)  Mighty Manny has a warehouse in Illinois. 
C)  Mighty Manny has independent sales representatives in Minnesota that make $150,000 of sales on 100 transactions. The representatives distribute ice scraper-related items for over a dozen companies. 
D)  Mighty Manny has two customers in Wisconsin. Mighty Manny receives $50,000 on 20 orders over the phone and ships goods to its customers using FedEx. 
A)  Mighty Manny is incorporated and headquartered in Michigan. It also has property, employees, sales personnel, and intangibles in Michigan. 
B)  Mighty Manny has a warehouse in Illinois. 
C)  Mighty Manny has independent sales representatives in Minnesota that make $150,000 of sales on 100 transactions. The representatives distribute ice scraper-related items for over a dozen companies. 
D)  Mighty Manny has two customers in Wisconsin. Mighty Manny receives $50,000 on 20 orders over the phone and ships goods to its customers using FedEx.

Question 8

A state's apportionment formula divides nonbusiness income among the states where income tax nexus exists.

Accepted Answer

A) True 
 B)False

Question 9

Moss Incorporated is a Washington corporation. It properly included, deducted, or excluded the following items on its federal tax return in the current year:
   Moss's Oregon depreciation was $145,500. Moss's federal taxable income was $549,743. Calculate Moss's Oregon state tax base.

Accepted Answer

$571,743.
$549,743 +

Question 10

Nondomiciliary businesses are subject to tax everywhere they do business.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is an income-based tax?

Accepted Answer

A)  Ohio Commercial Activity Tax. 
B)  Texas Margin Tax. 
C)  Washington Business & Occupation Tax. 
D)  Wisconsin corporate tax. 
A)  Ohio Commercial Activity Tax. 
B)  Texas Margin Tax. 
C)  Washington Business & Occupation Tax. 
D)  Wisconsin corporate tax.

Question 12

State tax law is comprised solely of legislative authority.

Accepted Answer

A) True 
 B)False

Question 13

The Wrigley case held that the sale of intangibles is protected by Public Law 86-272.

Accepted Answer

A) True 
 B)False

Question 14

What was the Supreme Court's holding in Wayfair?

Accepted Answer

A)  An out-of-state mail-order company did not have a sales tax collection responsibility because it lacked physical presence. 
B)  Reversed the Quill decision that an out-of-state business must have physical presence in the state before the state may require the business to collect sales tax from in-state customers. 
C)  Spelled out four criteria for determining whether states may subject nondomiciliary companies to an income tax. 
D)  Defined solicitation for purposes of Public Law 86-272. 
A)  An out-of-state mail-order company did not have a sales tax collection responsibility because it lacked physical presence. 
B)  Reversed the Quill decision that an out-of-state business must have physical presence in the state before the state may require the business to collect sales tax from in-state customers. 
C)  Spelled out four criteria for determining whether states may subject nondomiciliary companies to an income tax. 
D)  Defined solicitation for purposes of Public Law 86-272.

Question 15

Big Company and Little Company are both owned by Mrs. Smith. Big and Little file a consolidated federal tax return. Big manufactures office paper and other paper supplies and is based in Washington. Little operates a logging operation in Montana. Sixty percent of Little's sales are made to Big. Ten percent of Big's raw materials come from Little. There are no common officers or board members. There are no common service providers. What are the factors for and against filing a unitary tax return?

Accepted Answer

For a unitary tax return: functional int

Question 16

Which of the items is correct regarding a use tax?

Accepted Answer

A)  Use taxes are imposed by every state. 
B)  Use taxes only apply when the seller is not required to collect the sales tax. 
C)  Amazon collects use taxes on behalf of all its resellers. 
D)  States choose to implement either a sales tax or a use tax but not both. 
A)  Use taxes are imposed by every state. 
B)  Use taxes only apply when the seller is not required to collect the sales tax. 
C)  Amazon collects use taxes on behalf of all its resellers. 
D)  States choose to implement either a sales tax or a use tax but not both.

Question 17

The Mobil decision identified three factors to determine whether a group of companies are unitary.

Accepted Answer

A) True 
 B)False

Question 18

Gordon operates the Tennis Pro Shop in Blacksburg, Virginia. Tennis Pro has sales as follows:
   Assume that Tennis Pro's other sales include $150,000 of sales to a federal government entity that were shipped from Virginia to Maryland. What is Tennis Pro's Virginia sales numerator and sales factor? (Round the sales factor to two decimal places.)

Accepted Answer

$1,053,293 and 46.98 percent.

Question 19

The throwback rule requires a company, for apportionment purposes, to include all sales of inventory sold into a state without income tax nexus rather than from the state from where the inventory was shipped.

Accepted Answer

A) True 
 B)False

Question 20

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 taken 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. Where does Tennis Pro have income tax nexus?

Accepted Answer

Virginia and Kentuck

Which of the following is not a general rule for calculating the payroll factor?

Which of the following is not a general rule for calculating the sales factor?

Bethesda Corporation is unprotected from income tax by Public Law 86-272. Which of the following characteristics creates a problem for Bethesda in states other than Maryland?

The state tax base is computed by making adjustments to federal taxable income.

A state's apportionment formula divides nonbusiness income among the states where income tax nexus exists.

Moss Incorporated is a Washington corporation. It properly included, deducted, or excluded the following items on its federal tax return in the current year: Moss's Oregon depreciation was $145,500. Moss's federal taxable income was $549,743. Calculate Moss's Oregon state tax base.

Nondomiciliary businesses are subject to tax everywhere they do business.

Which of the following is an income-based tax?

State tax law is comprised solely of legislative authority.

The Wrigley case held that the sale of intangibles is protected by Public Law 86-272.

What was the Supreme Court's holding in Wayfair?

Which of the items is correct regarding a use tax?

The Mobil decision identified three factors to determine whether a group of companies are unitary.

The throwback rule requires a company, for apportionment purposes, to include all sales of inventory sold into a state without income tax nexus rather than from the state from where the inventory was shipped.

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

Which of the following is not a general rule for calculating the payroll factor?

Which of the following is not a general rule for calculating the sales factor?

Bethesda Corporation is unprotected from income tax by Public Law 86-272. Which of the following characteristics creates a problem for Bethesda in states other than Maryland?

The state tax base is computed by making adjustments to federal taxable income.

A state's apportionment formula divides nonbusiness income among the states where income tax nexus exists.

Moss Incorporated is a Washington corporation. It properly included, deducted, or excluded the following items on its federal tax return in the current year: Moss's Oregon depreciation was $145,500. Moss's federal taxable income was $549,743. Calculate Moss's Oregon state tax base.

Nondomiciliary businesses are subject to tax everywhere they do business.

Which of the following is an income-based tax?

State tax law is comprised solely of legislative authority.

The Wrigley case held that the sale of intangibles is protected by Public Law 86-272.

What was the Supreme Court's holding in Wayfair?

Which of the items is correct regarding a use tax?

The Mobil decision identified three factors to determine whether a group of companies are unitary.

The throwback rule requires a company, for apportionment purposes, to include all sales of inventory sold into a state without income tax nexus rather than from the state from where the inventory was shipped.

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