Exam 12: State and Local Taxes

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?

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), Pennsylvania (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.)

Della Corporation is headquartered in Carlisle, Pennsylvania. Della has a Pennsylvania state income tax base of $425,000. Of this amount, $75,000 was nonbusiness income. Della's Pennsylvania apportionment factor is 28.52 percent. The nonbusiness income allocated to Pennsylvania was $61,000. Assuming a Pennsylvania corporate tax rate of 7.75 percent, what is Della's Pennsylvania state tax liability? (Round your answer to the nearest whole number.)

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

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

What was the Supreme Court's holding in Wayfair?

Sales personnel investigating a potential customer's creditworthiness generally are deemed to exceed protected boundaries of solicitation.

Purchases of inventory for resale are typically exempt from sales and use taxes.

Which of the following regarding the state tax base is incorrect?

Public Law 86-272 protects solicitation from income taxation. Which of the following activities exceeds the solicitation threshold?

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 collection obligation?

Which of the following isn't a typical federal/state adjustment?

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

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

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.)

Which of the following is incorrect regarding nondomiciliary businesses?

Most states have shifted away from an equally weighted three-factor to a heavily weighted sales apportionment formula.

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

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 asin 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?

Roxy operates a dress shop in Arlington, Virginia. Roxy also ships dresses nationwide upon request. Roxy's Virginia sales are $1,900,000 and out-of-state sales are $218,000. Assuming that Virginia's sales tax rate is 5 percent, what is Roxy's Virginia sales and use tax collection obligation?