Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

Which of the following statements regarding income tax commercial domicile is incorrect?

Accepted Answer

A)  The location where a business is headquartered. 
B)  The location where a business is incorporated. 
C)  The location from which a business directs its operations. 
D)  None of the choices are correct. 
A)  The location where a business is headquartered. 
B)  The location where a business is incorporated. 
C)  The location from which a business directs its operations. 
D)  None of the choices are correct.

Question 5

Commercial domicile is the location where a business is headquartered and from whence it directs its operations.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

Handsome Rob provides transportation services in several western states. Rob has payroll as follows:   Rob is a California corporation and the following is true:
Rob hasincome tax nexus in Arizona, California, Nevada, and Washington. The Washington drivers spend 25 percent of their time driving through Oregon. California payroll includes $201,800 of payroll for services provided in Nevada by California-based drivers. What is Rob's California payroll numerator?

Accepted Answer

A)  $932,951. 
B)  $1,134,751. 
C)  $1,215,401. 
D)  $2,657,959. 
A)  $932,951. 
B)  $1,134,751. 
C)  $1,215,401. 
D)  $2,657,959.

Question 8

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 only Connecticut taxes Mighty Manny's services. What is Mighty Manny's total sales and use tax liability?

Accepted Answer

$233,626.
($398,495 × 6.75 per

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

The Wayfair 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 11

Gordon operates the Tennis Pro Shop in Blacksburg, Virginia. The shop sells, manufactures, and customizes tennis racquets for serious amateurs. Virginia has a 5 percent sales tax. Tennessee has a 4 percent sales tax. Determine the sales and use tax liability that the shop must collect and remit if it sells a $500 racquet to a Tennessee resident that purchases the merchandise in the Virginia retail store?

Accepted Answer

The answer of Gordon operates the Tennis Pro Shop in...

Question 12

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

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

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 15

Business income is allocated to the state of commercial domicile.

Accepted Answer

A) True 
 B)False

Question 16

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 17

Tennis Pro is headquartered in Virginia. Assume it has a Kentucky state income tax base of $220,000. Of this amount, $40,000 was nonbusiness income. Assume that Tennis Pro's Kentucky sales, payroll, and property apportionment factor are 12, 5, and 3 percent, respectively. Assume that Kentucky uses a single-factor sales formula apportionment method. The nonbusiness income allocated to Kentucky was $1,000. Assuming Kentucky's corporate tax rate is 6 percent, what is Tennis Pro's Kentucky stateincome tax liability?

Accepted Answer

$1,356.
$220,000 (state tax base) − $40,

Question 18

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, 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 19

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

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A)  It is computed by making adjustments to federal taxable income. 
B)  It is divided into business and nonbusiness income. 
C)  It is a necessary step in the state income tax process. 
D)  It applies only to interstate businesses. 
A)  It is computed by making adjustments to federal taxable income. 
B)  It is divided into business and nonbusiness income. 
C)  It is a necessary step in the state income tax process. 
D)  It applies only to interstate businesses.

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

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

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

Which of the following statements regarding income tax commercial domicile is incorrect?

Commercial domicile is the location where a business is headquartered and from whence it directs its operations.

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

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

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

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

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

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

Business 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?

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

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

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Business Entities Overview

Corporate Operations

Accounting for Income Taxes

Corporate Taxation: Non-Liquidating 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

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

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

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

Which of the following statements regarding income tax commercial domicile is incorrect?

Commercial domicile is the location where a business is headquartered and from whence it directs its operations.

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

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

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

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

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

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

Business 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?

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

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

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Business Entities Overview

Corporate Operations

Accounting for Income Taxes

Corporate Taxation: Non-Liquidating 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