Question 1

On which of the following transactions should sales tax be collected?

Accepted Answer

A) Architecture plans delivered through the mail. 
B) Sales of woolen goods to a state without nexus delivered through common carrier. 
C) Accounting services provided in Alaska. 
D) Meal purchased at McDonald's. 
A) Architecture plans delivered through the mail. 
B) Sales of woolen goods to a state without nexus delivered through common carrier. 
C) Accounting services provided in Alaska. 
D) Meal purchased at McDonald's. D

Question 2

Discuss the steps necessary to determine whether a sales or use tax applies and how the tax is collected.

Accepted Answer

Determine whether the seller has sales tax nexus. If so, then sales tax will be collected and remitted by the seller. If not, then the buyer must pay the use tax on his or her individual income tax return or the business' sales tax return.
Explanation: See Figure 23-2.

Question 3

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

Accepted Answer

A) True 
 B)False  False

Question 4

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. 
C) A local accounting firm. 
D) Mail order clothing company. 
A) Campus bookstore selling textbooks and university apparel. 
B) An online retailer of textbooks. 
C) A local accounting firm. 
D) Mail order clothing company.

Question 5

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 6

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 7

Which of the following sales is always subject to sales and use tax?

Accepted Answer

A) Tax preparation services. 
B) Automobiles. 
C) Inventory. 
D) FooD.Automobiles are tangible personal property included in the sales tax base of every state which chooses to tax sales. 
A) Tax preparation services. 
B) Automobiles. 
C) Inventory. 
D) FooD.Automobiles are tangible personal property included in the sales tax base of every state which chooses to tax sales.

Question 8

Separate return states require each member of a consolidated group with nexus to file their own state tax return.

Accepted Answer

A) True 
 B)False

Question 9

The payroll factor includes payments to independent contractors.

Accepted Answer

A) True 
 B)False

Question 10

Assume Tennis Pro attends a sports equipment expo in Washington State. Assume this activity creates nexus of the Business and Occupation (B&O) tax. Assume the tax is .5% of gross receipts for retailers and 1.5% of gross receipts on services. If Tennis Pro has $20,000 of Washington retail sales and $2,000 of services performed, calculate Tennis Pro's B&O tax.

Accepted Answer

$130.
Explanation: (

Question 11

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.

Accepted Answer

A) True 
 B)False

Question 12

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 13

Which of the following is incorrect regarding nondomiciliary businesses?

Accepted Answer

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

Question 14

Gordon operates the Tennis Pro Shop in Blacksburg, Virginia. Tennis Pro has payroll as follows:   
The other total includes $10,000 of salary of a Virginia employee that works part time in another state. What is Tennis Pro's Virginia payroll numerator and payroll factor?

Accepted Answer

$260,000 and 55.85 percent.
Ex

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

Federal/state adjustments correct for differences between two states tax laws.

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

A) Uses the average property values for the year. 
B) Values property at historical cost. 
C) Excludes property in transit from the calculation. 
D) Includes rented property at eight times the annual rent. 
A) Uses the average property values for the year. 
B) Values property at historical cost. 
C) Excludes property in transit from the calculation. 
D) Includes rented property at eight times the annual rent.

Question 19

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 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.

Exam 23: State and Local Taxes

On which of the following transactions should sales tax be collected?

Discuss the steps necessary to determine whether a sales or use tax applies and how the tax is collected.

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

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

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.

Which of the following sales is always subject to sales and use tax?

Separate return states require each member of a consolidated group with nexus to file their own state tax return.

The payroll factor includes payments to independent contractors.

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.

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?

Which of the following is incorrect regarding nondomiciliary businesses?

Gordon operates the Tennis Pro Shop in Blacksburg, Virginia. Tennis Pro has payroll as follows: The other total includes $10,000 of salary of a Virginia employee that works part time in another state. What is Tennis Pro's Virginia payroll numerator and payroll factor?

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

Federal/state adjustments correct for differences between two states tax laws.

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

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

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

An Introduction to Tax

Tax Compliance, the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Exemptions, 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 Us Taxation of Multinational Transactions

Transfer Taxes and Wealth Planning

Filters