Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

The sale of demonstration models, repair

Question 3

The National Bellas Hess decision held that an out-of-state mail-order company did not have sales tax collection responsibility because it lacked physical presence.

Accepted Answer

A) True 
 B)False

Question 4

What was the Supreme Court's holding in National Bellas Hess?

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)  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)  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)  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 5

Public Law 86-272 protects a taxpayer from which of the following taxes?

Accepted Answer

A)  Texas Margin Tax (a tax with net income, gross receipts, and capital worth components). 
B)  Washington Business and Occupation Tax (a gross receipts tax). 
C)  Ohio Commercial Activity Tax (an excise tax with a gross receipts base). 
D)  California Franchise Tax (a net income tax). 
A)  Texas Margin Tax (a tax with net income, gross receipts, and capital worth components). 
B)  Washington Business and Occupation Tax (a gross receipts tax). 
C)  Ohio Commercial Activity Tax (an excise tax with a gross receipts base). 
D)  California Franchise Tax (a net income tax).

Question 6

The property factor is generally calculated as being the average of the beginning and ending property values.

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

Tennis Pro has the following sales, payroll and property factors:
   
What is 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

Question 9

Mighty Manny, Incorporated manufactures and services deli machinery and distributes them across the United States. Mighty Manny is incorporated and headquartered in New Jersey. It has product sales in all 50 states. Mighty Manny service employees work in Connecticut, New Jersey, New York, Pennsylvania, and Rhode Island. Mighty Manny also has an executive training seminar each year in South Carolina. Determine the states in which Mighty Manny has sales tax nexus.

Accepted Answer

Connecticut, New Jersey, New York, Penns

Question 10

Businesses must collect sales tax only in states where it has sales tax nexus.

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

Rental income is allocated to the state of commercial domicile.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is not one of the Complete Auto Transit's criteria for whether a state can tax nondomiciliary companies?

Accepted Answer

A)  Protected activities are exempt. 
B)  A sufficient connection exists. 
C)  Only a fair portion of income can be taxed. 
D)  Tax cannot discriminate against nondomiciliary businesses. 
A)  Protected activities are exempt. 
B)  A sufficient connection exists. 
C)  Only a fair portion of income can be taxed. 
D)  Tax cannot discriminate against nondomiciliary businesses.

Question 14

The annual value of rented property is not included in the property factor.

Accepted Answer

A) True 
 B)False

Question 15

A gross receipts tax is subject to Public Law 86-272.

Accepted Answer

A) True 
 B)False

Question 16

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 where discussed. 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. 
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. 
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 17

Gordon operates the Tennis Pro Shop in Blacksburg, Virginia. The Shop sells, manufacturers, and customizes tennis racquets for serious amateurs. Virginia has a 5 percent sales tax. Arizona has a 6 percent sales tax. Determine the sales tax liability that the Shop must collect and remit if it sells a $1,000 racquet order to an Arizona customer (assume the Shop has no sales personnel or property in Arizona) that purchases the merchandise from the Virginia store over the internet?

Accepted Answer

$0.
The Shop has no physical p

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

Lefty provides demolition services in several southern states. Lefty has property as follows:  
Lefty is a Mississippi Corporation. Lefty also rents property in Mississippi and Tennessee with annual rents of $50,000 and $15,000, respectively. What is Lefty's Mississippi property numerator? (Round your answer to the nearest whole number.)

Accepted Answer

A)  $942,153 
B)  $1,002,384 
C)  $1,052,384 
D)  $1,342,153 
A)  $942,153 
B)  $1,002,384 
C)  $1,052,384 
D)  $1,342,153

Question 20

Mahre, Incorporated, a New York corporation, runs ski tours in a 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 (0 percent), New York (8 percent), and Vermont (5 percent). How much sales and use tax must Mahre collect and remit?

Accepted Answer

A)  $10,386 
B)  $14,543 
C)  $26,733 
D)  $61,289 
A)  $10,386 
B)  $14,543 
C)  $26,733 
D)  $61,289

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

The National Bellas Hess decision held that an out-of-state mail-order company did not have sales tax collection responsibility because it lacked physical presence.

What was the Supreme Court's holding in National Bellas Hess?

Public Law 86-272 protects a taxpayer from which of the following taxes?

The property factor is generally calculated as being the average of the beginning and ending property values.

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

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

Businesses must collect sales tax only in states where it has sales tax nexus.

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

Rental income is allocated to the state of commercial domicile.

Which of the following is not one of the Complete Auto Transit's criteria for whether a state can tax nondomiciliary companies?

The annual value of rented property is not included in the property factor.

A gross receipts tax is subject to Public Law 86-272.

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

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 U.S. Taxation of Multinational Transactions

Transfer Taxes and Wealth Planning

Filters

Exam 12: State and Local Taxes

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

The National Bellas Hess decision held that an out-of-state mail-order company did not have sales tax collection responsibility because it lacked physical presence.

What was the Supreme Court's holding in National Bellas Hess?

Public Law 86-272 protects a taxpayer from which of the following taxes?

The property factor is generally calculated as being the average of the beginning and ending property values.

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

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

Businesses must collect sales tax only in states where it has sales tax nexus.

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

Rental income is allocated to the state of commercial domicile.

Which of the following is not one of the Complete Auto Transit's criteria for whether a state can tax nondomiciliary companies?

The annual value of rented property is not included in the property factor.

A gross receipts tax is subject to Public Law 86-272.

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

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 U.S. Taxation of Multinational Transactions

Transfer Taxes and Wealth Planning

Filters