Question 1

The sales and use tax base varies from state to state.

Accepted Answer

A) True 
 B)False

Question 2

All states employ some combination of sales and use tax, income or franchise tax, or property tax to fund their government operations.

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

A) Legislative 
B) Administrative 
C) Judicial 
D) Treatises 
A) Legislative 
B) Administrative 
C) Judicial 
D) Treatises

Question 4

Tennis Pro, a Virginia Corporation domiciled in Virginia, has the following items of income: $5,000 of dividend income, $15,000 of interest income, $10,000 of rental income from Georgia property, $30,000 of royalty income for an intangible used in Maryland (where nexus exists). Determine how much income is allocated to Virginia.

Accepted Answer

$20,000.
Explanation

Question 5

Gordon operates the Tennis Pro Shop in Blacksburg, Virginia. Tennis Pro has property as follows:   
What is Tennis Pro's Virginia property numerator and property factor?

Accepted Answer

$1,385,179 and 87.47 percent.

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

Bethesda Corporation is unprotected from income tax by Public Law 86-272. Which of the following characteristics creates a problem for Bethesda in states other than Maryland?

Accepted Answer

A) Bethesda does business in Maryland and five other states. 
B) Bethesda sells copier equipment and copy center services. 
C) All orders are approved in Maryland. 
D) All in-state services are limited to solicitation in states other than MarylanD.The sale of services is not a protected activity. 
A) Bethesda does business in Maryland and five other states. 
B) Bethesda sells copier equipment and copy center services. 
C) All orders are approved in Maryland. 
D) All in-state services are limited to solicitation in states other than MarylanD.The sale of services is not a protected activity.

Question 8

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

Accepted Answer

A) Any form of advertising. 
B) Distribution of samples without charge. 
C) Accepting a down payment. 
D) Checking a customer's inventory. 
A) Any form of advertising. 
B) Distribution of samples without charge. 
C) Accepting a down payment. 
D) Checking a customer's inventory.

Question 9

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

Accepted Answer

A) Includes salaries, commissions, and bonuses. 
B) Excludes compensation to independent contractors. 
C) Allocates compensation for employees working in more than one state. 
D) Assigns the payroll of each employee to a single statE.Payroll for employees who work in more than one state is sourced to the state where they perform the majority of services. 
A) Includes salaries, commissions, and bonuses. 
B) Excludes compensation to independent contractors. 
C) Allocates compensation for employees working in more than one state. 
D) Assigns the payroll of each employee to a single statE.Payroll for employees who work in more than one state is sourced to the state where they perform the majority of services.

Question 10

The throwback rule includes inventory in transit in the numerator of the state from where it was shipped.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following isn't a typical federal/state adjustment?

Accepted Answer

A) Dividends received deduction. 
B) Depreciation. 
C) Meals and entertainment. 
D) U.S.obligation interest incomE.Meals and entertainment is a typical book/federal tax adjustment rather than a federal/state adjustment. 
A) Dividends received deduction. 
B) Depreciation. 
C) Meals and entertainment. 
D) U.S.obligation interest incomE.Meals and entertainment is a typical book/federal tax adjustment rather than a federal/state adjustment.

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

Della Corporation is headquartered in Carlisle, Pennsylvania. Della has a Pennsylvania state income tax base of $425,000. Of this amount, $75,000 was nonbusiness income. Della's Pennsylvania apportionment factor is 28.52 percent. The nonbusiness income allocated to Pennsylvania was $61,000. Assuming a Pennsylvania corporate tax rate of 7.75 percent, what is Della's Pennsylvania state tax liability? (Round your answer to the nearest whole number)

Accepted Answer

A) $8,821 
B) $9,084 
C) $12,464 
D) $13,549 
A) $8,821 
B) $9,084 
C) $12,464 
D) $13,549

Question 14

Failure to collect and remit sales taxes often results in a larger tax liability than failure to pay income taxes.

Accepted Answer

A) True 
 B)False

Question 15

Rental income is allocated to the state of commercial domicile.

Accepted Answer

A) True 
 B)False

Question 16

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?

Accepted Answer

$6,500 and $400, respectively.

Question 17

Businesses must collect sales tax only in states where it has sales and use tax nexus.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is not a primary revenue source for most states?

Accepted Answer

A) Income or franchise taxes 
B) Sales or use taxes 
C) Severance taxes 
D) Property taxes 
A) Income or franchise taxes 
B) Sales or use taxes 
C) Severance taxes 
D) Property taxes

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A) All states impose a state income tax. 
B) Every jurisdiction imposes a sales or use tax. 
C) The primary purpose is to raise revenue. 
D) Property taxes are primarily used to finance a State's general revenue fund. 
A) All states impose a state income tax. 
B) Every jurisdiction imposes a sales or use tax. 
C) The primary purpose is to raise revenue. 
D) Property taxes are primarily used to finance a State's general revenue fund.

Exam 23: State and Local Taxes

The sales and use tax base varies from state to state.

All states employ some combination of sales and use tax, income or franchise tax, or property tax to fund their government operations.

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

Gordon operates the Tennis Pro Shop in Blacksburg, Virginia. Tennis Pro has property as follows: What is Tennis Pro's Virginia property numerator and property factor?

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

Bethesda Corporation is unprotected from income tax by Public Law 86-272. Which of the following characteristics creates a problem for Bethesda in states other than Maryland?

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

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

The throwback rule includes inventory in transit in the numerator of the state from where it was shipped.

Which of the following isn't a typical federal/state adjustment?

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

Failure to collect and remit sales taxes often results in a larger tax liability than failure to pay income taxes.

Rental income is allocated to the state of commercial domicile.

Businesses must collect sales tax only in states where it has sales and use tax nexus.

Which of the following is not a primary revenue source for most states?

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

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

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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