Question 1

A state's apportionment formula usually relies on some variation of sales, payroll, and property factors.

Accepted Answer

A) True 
 B)False

Question 2

Moss Incorporated is a Washington corporation. It properly included, deducted, or excluded the following items on its federal tax return in the current year:   
Moss' Oregon depreciation was $145,500. Moss' Federal Taxable Income was $549,743. Calculate Moss' Oregon state tax base.

Accepted Answer

$571,743.
Explanatio

Question 3

Tennis Pro is headquartered in Virginia. Assume it has a Kentucky state income tax base of $220,000. Of this amount, $40,000 was non-business 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 non-business income allocated to Kentucky was $1,000. Assuming Kentucky's corporate tax rate of 6 percent, what is Tennis Pro's Kentucky state tax liability?

Accepted Answer

$1,356.
Explanation: $220,000 (state tax

Question 4

Several states are now moving towards economic nexus.

Accepted Answer

A) True 
 B)False

Question 5

The primary purpose of state and local taxes is to raise revenue to finance state and local government.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

$233,626.
Explanation: ($398,4

Question 7

Nondomiciliary businesses are subject to tax everywhere they do business.

Accepted Answer

A) True 
 B)False

Question 8

Purchases of inventory for resale are typically exempt from sales and use taxes.

Accepted Answer

A) True 
 B)False

Question 9

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 10

Interest and dividends are allocated to the state of commercial domicile.

Accepted Answer

A) True 
 B)False

Question 11

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.

Accepted Answer

Arizona, California, Colorado, New Mexic

Question 12

Hoosier Incorporated is an Indiana corporation. It properly included, deducted, or excluded the following items on its federal tax return in the current year:  
State depreciation expense was $50,000. Hoosier's Federal Taxable Income was $150,300. Calculate Hoosier's Illinois state tax base.

Accepted Answer

A) $171,300 
B) $173,800 
C) $204,633 
D) $207,133 
A) $171,300 
B) $173,800 
C) $204,633 
D) $207,133

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

What was the Supreme Court's holding in Quill?

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

Roxy operates a dress shop in Arlington, Virginia. Lisa, a Maryland resident, comes in for a measurement and purchases a $1,500 dress that is shipped to her Maryland residence using a common carrier. Assuming that Virginia's sales tax rate is 5 percent and that Maryland's sales tax rate is 7 percent, what is Roxy's sales and use tax liability?

Accepted Answer

A) $0. 
B) $75 to Virginia. 
C) $75 sales tax to Virginia and $15 use tax to Maryland. 
D) $90 to MarylanD.Since the dress is shipped to Maryland, Roxy owes no tax.Lisa will owe Maryland use tax. 
A) $0. 
B) $75 to Virginia. 
C) $75 sales tax to Virginia and $15 use tax to Maryland. 
D) $90 to MarylanD.Since the dress is shipped to Maryland, Roxy owes no tax.Lisa will owe Maryland use tax.

Question 16

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 17

Which of the items is correct regarding a use tax?

Accepted Answer

A) Use taxes are imposed by every state. 
B) Use taxes only apply when the seller is not required to collect the sales tax. 
C) Amazon collects use taxes on behalf of all its resellers. 
D) States choose to implement either a sales tax or a use tax. 
A) Use taxes are imposed by every state. 
B) Use taxes only apply when the seller is not required to collect the sales tax. 
C) Amazon collects use taxes on behalf of all its resellers. 
D) States choose to implement either a sales tax or a use tax.

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

State tax law is comprised solely of legislative authority.

Accepted Answer

A) True 
 B)False

Question 20

All of the following are false regarding apportionment except:

Accepted Answer

A) Applies to only business income. 
B) Applies to only nonbusiness income. 
C) Applies to both business and nonbusiness income. 
D) Investment income is subject to apportionment. 
A) Applies to only business income. 
B) Applies to only nonbusiness income. 
C) Applies to both business and nonbusiness income. 
D) Investment income is subject to apportionment.

Exam 23: State and Local Taxes

A state's apportionment formula usually relies on some variation of sales, payroll, and property factors.

Moss Incorporated is a Washington corporation. It properly included, deducted, or excluded the following items on its federal tax return in the current year: Moss' Oregon depreciation was $145,500. Moss' Federal Taxable Income was $549,743. Calculate Moss' Oregon state tax base.

Several states are now moving towards economic nexus.

The primary purpose of state and local taxes is to raise revenue to finance state and local government.

Nondomiciliary businesses are subject to tax everywhere they do business.

Purchases of inventory for resale are typically exempt from sales and use taxes.

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

Interest and dividends are allocated to the state of commercial domicile.

Hoosier Incorporated is an Indiana corporation. It properly included, deducted, or excluded the following items on its federal tax return in the current year: State depreciation expense was $50,000. Hoosier's Federal Taxable Income was $150,300. Calculate Hoosier's Illinois state tax base.

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

What was the Supreme Court's holding in Quill?

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

Which of the items is correct regarding a use tax?

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

State tax law is comprised solely of legislative authority.

All of the following are false regarding apportionment except:

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

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