Question 1

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 2

Roxy operates a dress shop in Arlington,Virginia.Roxy also ships dresses nationwide upon request.Roxy's Virginia sales are $1,000,000 and out-of-state sales are $200,000.Assuming that Virginia's sales tax rate is 5 percent,what is Roxy's Virginia sales and use tax liability?

Accepted Answer

A) $0. 
B) $10,000. 
C) $50,000. 
D) $60,000. 
A) $0. 
B) $10,000. 
C) $50,000. 
D) $60,000.

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

Mighty Manny,Incorporated,manufactures and services deli machinery and distributes it across the United States.Mighty Manny is incorporated and headquartered in New Jersey.It has sales tax nexus in Connecticut,New Jersey,New York,Pennsylvania,Rhode Island,and South Carolina.Mighty Manny has sales as follows:
   Assume the following sales tax rates: Connecticut (6.75 percent),New Jersey (7.5 percent),New York (8.5 percent),Pennsylvania (6.5 percent),Rhode Island (7.25 percent),and South Carolina (5.5 percent).Assume that Connecticut also taxes Mighty Manny's services.What is Mighty Manny's total sales and use tax liability?

Accepted Answer

$233,626.($398,495 × 6.75 perc

Question 6

In recent years,states are weighting the sales factor because it is easier to calculate.

Accepted Answer

A) True 
 B)False

Question 7

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 8

Super Sadie,Incorporated,manufactures sandals and distributes them across the southwestern United States.Assume that Super Sadie has sales tax nexus in Arizona,California,Colorado,New Mexico,and Texas.Super Sadie has sales as follows:
   Assume the following sales tax rates: Arizona (6 percent),California (8 percent),Colorado (7 percent),New Mexico (6.5 percent),Oregon (7.25 percent),Texas (8 percent),and Utah (5 percent).What is Super Sadie's total sales and use tax liability? (Round your interim calculations to the nearest whole number.)

Accepted Answer

$233,900.($583,194 × 6 percent

Question 9

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 10

Businesses must pay income tax in their state of commercial domicile.

Accepted Answer

A) True 
 B)False

Question 11

In which of the following state cases did the state not assert economic income tax nexus?

Accepted Answer

A) South Dakota with the Wayfair rule. 
B) South Carolina in the Geoffrey case. 
C) West Virginia in the MBNA case. 
D) Wisconsin in Wrigley. 
A) South Dakota with the Wayfair rule. 
B) South Carolina in the Geoffrey case. 
C) West Virginia in the MBNA case. 
D) Wisconsin in Wrigley.

Question 12

Wacky Wendy produces gourmet cheese in Wisconsin.Wendy has sales as follows:   Wendy is a Wisconsin corporation and has the following operations:
Wendy has income tax nexus in Iowa,Minnesota,and Wisconsin.The Michigan sales are shipped from Wisconsin (a throwback state).$100,000 of the Wisconsin sales were to the federal government.What is Wendy's Wisconsin sale numerator?

Accepted Answer

A) $1,223,032 
B) $1,323,032 
C) $1,357,621 
D) $1,457,621 
A) $1,223,032 
B) $1,323,032 
C) $1,357,621 
D) $1,457,621

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

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 15

Which of the following sales is always subject to sales and use tax in a state that assesses a sales and use tax?

Accepted Answer

A) Tax preparation services. 
B) Automobiles. 
C) Inventory. 
D) Food. 
A) Tax preparation services. 
B) Automobiles. 
C) Inventory. 
D) Food.

Question 16

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 17

Rental income is allocated to the state of commercial domicile.

Accepted Answer

A) True 
 B)False

Question 18

Businesses engaged in interstate commerce are subject to income tax in every state in which they operate.

Accepted Answer

A) True 
 B)False

Question 19

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 20

Tennis Pro has the following sales,payroll,and property factors:
   What are Tennis Pro's Virginia and Maryland apportionment factors if both states use an equally weighted three-factor formula?

Accepted Answer

66.67 and 10 percent

Exam 23: State and Local Taxes

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

Roxy operates a dress shop in Arlington,Virginia.Roxy also ships dresses nationwide upon request.Roxy's Virginia sales are $1,000,000 and out-of-state sales are $200,000.Assuming that Virginia's sales tax rate is 5 percent,what is Roxy's Virginia sales and use tax liability?

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

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

In recent years,states are weighting the sales factor because it is easier to calculate.

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

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

Businesses must pay income tax in their state of commercial domicile.

In which of the following state cases did the state not assert economic income tax nexus?

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

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.

Which of the following sales is always subject to sales and use tax in a state that assesses a sales and use tax?

What was the Supreme Court's holding in Wayfair?

Rental income is allocated to the state of commercial domicile.

Businesses engaged in interstate commerce are subject to income tax in every state in which they operate.

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

Tennis Pro has the following sales,payroll,and property factors: What are Tennis Pro's Virginia and Maryland apportionment factors if both states use an equally weighted three-factor formula?

An Introduction to Tax

Tax Compliance,the Irs,and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview,dependents,and Filing Status

Gross Income and Exclusions

Individual Deductions

Investments

Individual Income Tax Computation and Tax Credits

Business Income,deductions,and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Compensation

Retirement Savings and Deferred Compensation

Tax Consequences of Home Ownership

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 Ustaxation of Multinational Transactions

Transfer Taxes and Wealth Planning

Filters