Question 1

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 2

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. Determine the sales and use tax liability that the Shop must collect and remit if it sells a $1,000 racquet order to an Alaska customer (assume the Shop has no sales personnel or property in Alaska) that purchases the merchandise over the internet?

Accepted Answer

$0.
Explanation: The Shop has

Question 3

Tennis Pro has the following sales, payroll and property factors:   
What would Tennis Pro's Virginia and Maryland apportionment factors be if Virginia used a double-weighted sales four factor method and Maryland used a single-factor sales formula?

Accepted Answer

60 percent and 20 pe

Question 4

Most services are sourced to the state where the services were performed.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

Tennis Pro is headquartered in Virginia. Assume it has a state income tax base of $200,000. Of this amount, $60,000 was non-business income. Assume that Tennis Pro's Virginia apportionment factor is 73.28 percent. The non-business income allocated to Virginia was $23,000. Assuming a Virginia corporate tax rate of 5.5 percent, what is Tennis Pro's Virginia state tax liability? (Round your answer to the nearest whole number)

Accepted Answer

$6,908.
Explanation: $200,000 (state tax

Question 7

The Quill decision reaffirmed that out-of-state businesses must have physical presence within a state before the state may require the collection of sales taxes from in-state customers.

Accepted Answer

A) True 
 B)False

Question 8

In recent years, states are weighting the sales factor because it is easier to calculate.

Accepted Answer

A) True 
 B)False

Question 9

Public Law 86-272 was a congressional response to Northwestern States Portland Cement.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

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 and use 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 13

Which of the following isn't a criteria used to determine whether a unitary relationship exists?

Accepted Answer

A) Functional integration. 
B) Centralized management. 
C) Economies of scale. 
D) Consolidated return status. 
A) Functional integration. 
B) Centralized management. 
C) Economies of scale. 
D) Consolidated return status.

Question 14

Gordon operates the Tennis Pro Shop in Blacksburg, Virginia. Tennis Pro has sales as follows:   
Assume that Tennis Pro's other sales include $150,000 of sales to a federal government entity that was shipped from Virginia to Maryland. What is Tennis Pro's Virginia sales numerator and sales factor?

Accepted Answer

$1,053,293 and 46.98 percent.

Question 15

Immaterial violations of the solicitation rules automatically create income tax nexus.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

Wyoming imposes an income tax on corporations.

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

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. Assume that a District of Columbia customer picks up a $2,000 racquet order in the Blacksburg store and drives it back to the District of Columbia (where the sales tax rate is 8.5 percent). Determine the sales and use tax liability (assume the Shop has no sales personnel or property in District of Columbia) of the customer?

Accepted Answer

$100 of Virginia sales tax and $70 Distr

Question 20

List the steps necessary to determine an interstate businesses' state income tax liability.

Accepted Answer

Determine the state tax base, divide int

Exam 23: State and Local Taxes

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

Tennis Pro has the following sales, payroll and property factors: What would Tennis Pro's Virginia and Maryland apportionment factors be if Virginia used a double-weighted sales four factor method and Maryland used a single-factor sales formula?

Most services are sourced to the state where the services were performed.

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

The Quill decision reaffirmed that out-of-state businesses must have physical presence within a state before the state may require the collection of sales taxes from in-state customers.

In recent years, states are weighting the sales factor because it is easier to calculate.

Public Law 86-272 was a congressional response to Northwestern States Portland Cement.

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

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

Which of the following isn't a criteria used to determine whether a unitary relationship exists?

Gordon operates the Tennis Pro Shop in Blacksburg, Virginia. Tennis Pro has sales as follows: Assume that Tennis Pro's other sales include $150,000 of sales to a federal government entity that was shipped from Virginia to Maryland. What is Tennis Pro's Virginia sales numerator and sales factor?

Immaterial violations of the solicitation rules automatically create income tax nexus.

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

Wyoming imposes an income tax on corporations.

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

List the steps necessary to determine an interstate businesses' state income tax liability.

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