Exam 12: State and Local Taxes

Most state tax laws adopt the federal tax law as of a specific date in time.

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

State tax law is comprised solely of legislative authority.

Which of the following law types is not a primary authority source?

Physical presence does not always create sales and use tax nexus.

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

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

Gordon operates the Tennis Pro Shop in Blacksburg,Virginia.Tennis Pro sells,manufacturers,and customizes tennis racquets for serious amateurs.Tennis Pro's business has expanded significantly over the last few years.Currently,it has sales personnel in 10 states (Virginia,North Carolina,South Carolina,Georgia,Tennessee,Kentucky,Ohio,Maryland,District of Columbia,New Jersey).All sales activity in all of these states is limited to solicitation.Orders are taken by the sales team and forwarded to Blacksburg for approval.All orders are sent by common carrier to customers.Tennis Pro owns retail and warehouse space in Virginia and has another warehouse in Kentucky.Where does Tennis Pro have income tax nexus?

Nondomiciliary businesses are subject to tax everywhere they do business.

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

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 and use tax nexus.

Which of the following is true regarding state and local taxes?

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

Several states are now moving from a strict physical presence test towards an economic presence test.

Assume Tennis Pro discovered that one salesman has gone into Arkansas once each year of the past 4 years and performed activities creating both sales and use tax nexus and income tax nexus.Assume that Arkansas sales were $25,000 each year.Assume that Arkansas business income would be 200,000 each year and that Tennis Pro's Arkansas apportionment percentage would be 1 percent.Assume there would be no Arkansas nonbusiness income.Assume that Arkansas sales and use tax rate was 6.5 percent and corporate income tax rate was 5 percent.What would Tennis Pro's Arkansas sales and use tax and income tax liability be ignoring any possible penalties and interest?

Rental income is allocated to the state of commercial domicile.

Use tax liability accrues in the state where purchased property will be used when the seller of the property is not required to collect sales tax.

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.

All of the following are false regarding apportionment except:

Super Sadie,Incorporated manufactures sandals and distributes them across the southwestern United States.Super Sadie is incorporated and headquartered in Arizona.It has product sales to customers in Arizona,California,Colorado,New Mexico,Oregon,Texas,and Utah.It has sales personnel in California,Colorado,and New Mexico.It also owns an office building in Arizona and a Warehouse in Texas.Determine the states in which Super Sadie has sales and use tax nexus.