Question 1

Which of the following businesses is likely to have taxable sales for purposes of sales and use tax?

Accepted Answer

A) Campus bookstore selling textbooks and university apparel. 
B) An online retailer of textbooks with less than $100,000 in sales on 150 transactions. 
C) A local accounting firm. 
D) Mail-order clothing company. 
A) Campus bookstore selling textbooks and university apparel. 
B) An online retailer of textbooks with less than $100,000 in sales on 150 transactions. 
C) A local accounting firm. 
D) Mail-order clothing company.

Question 2

Many states are either starting to or are in the process of expanding the types of services subject to sales tax.

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

Businesses must collect sales tax only in states where they have sales tax nexus.

Accepted Answer

A) True 
 B)False

Question 5

Tennis Pro has the following sales,payroll,and property factors:
   What would Tennis Pro's Virginia and Maryland apportionment factors be if Virginia used a double-weighted sales four-factor method and Maryland used a single-factor sales formula?

Accepted Answer

60 percent and 20 pe

Question 6

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 7

Several states are now moving from a strict physical presence test toward an economic presence test for income taxes.

Accepted Answer

A) True 
 B)False

Question 8

The primary purpose of state and local taxes is to raise revenue to finance state and local government.

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

The sales and use tax base varies from state to state.

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

Public Law 86-272 was a congressional response to Northwestern States Portland Cement.

Accepted Answer

A) True 
 B)False

Question 13

The trade show rule allows businesses to maintain a sample room for up to four weeks per year.

Accepted Answer

A) True 
 B)False

Question 14

Hoosier Incorporated is an Indiana corporation.It properly included,deducted,or excluded the following items on its federal tax return in the current year:   State depreciation expense was $50,000.Hoosier's federal taxable income was $150,300.Calculate Hoosier's Illinois state tax base.

Accepted Answer

A) $171,300 
B) $173,800 
C) $199,633 
D) $207,133 
A) $171,300 
B) $173,800 
C) $199,633 
D) $207,133

Question 15

Which of the following is incorrect regarding nondomiciliary businesses?

Accepted Answer

A) Subject to tax only where income tax nexus exists. 
B) A business cannot be nondomiciliary where it is headquartered. 
C) A business can be nondomiciliary in only one jurisdiction. 
D) Subject to tax only where a sufficient connection exists. 
A) Subject to tax only where income tax nexus exists. 
B) A business cannot be nondomiciliary where it is headquartered. 
C) A business can be nondomiciliary in only one jurisdiction. 
D) Subject to tax only where a sufficient connection exists.

Question 16

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 17

Which of the following is not a primary revenue source for most states?

Accepted Answer

A) Income or franchise taxes 
B) Sales or use taxes 
C) Severance taxes 
D) Property taxes 
A) Income or franchise taxes 
B) Sales or use taxes 
C) Severance taxes 
D) Property taxes

Question 18

Tennis Pro,a Virginia corporation domiciled in Virginia,has the following items of income: $5,000 of dividend income,$15,000 of interest income,$10,000 of rental income from Georgia property,and $30,000 of royalty income for an intangible used in Maryland (where income tax nexus exists).Determine how much income is allocated to Virginia.

Accepted Answer

$20,000.$5,000 of di

Question 19

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

Question 20

What was the Supreme Court's holding in Complete Auto Transit?

Accepted Answer

A) An out-of-state mail-order company did not have a sales tax collection responsibility because it lacked physical presence. 
B) Reaffirmed 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) Provided 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) Reaffirmed 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) Provided four criteria for determining whether states may subject nondomiciliary companies to an income tax. 
D) Defined solicitation for purposes of Public Law 86-272.

Exam 23: State and Local Taxes

Which of the following businesses is likely to have taxable sales for purposes of sales and use tax?

Many states are either starting to or are in the process of expanding the types of services subject to sales tax.

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

Businesses must collect sales tax only in states where they have sales tax nexus.

Tennis Pro has the following sales,payroll,and property factors: What would Tennis Pro's Virginia and Maryland apportionment factors be if Virginia used a double-weighted sales four-factor method and Maryland used a single-factor sales formula?

Several states are now moving from a strict physical presence test toward an economic presence test for income taxes.

The primary purpose of state and local taxes is to raise revenue to finance state and local government.

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

The sales and use tax base varies from state to state.

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

Public Law 86-272 was a congressional response to Northwestern States Portland Cement.

The trade show rule allows businesses to maintain a sample room for up to four weeks per year.

Hoosier Incorporated is an Indiana corporation.It properly included,deducted,or excluded the following items on its federal tax return in the current year: State depreciation expense was $50,000.Hoosier's federal taxable income was $150,300.Calculate Hoosier's Illinois state tax base.

Which of the following is incorrect regarding nondomiciliary businesses?

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?

Which of the following is not a primary revenue source for most states?

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.

What was the Supreme Court's holding in Complete Auto Transit?

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

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