Question 1

Delivery of tangible personal property through common carrier is a protected activity.

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

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 4

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

Accepted Answer

A) True 
 B)False

Question 5

A unitary return includes only companies included in the federal consolidated tax return filing.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

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 9

Which of the following isn't a requirement of Public Law 86-272?

Accepted Answer

A)  The tax is based on net income. 
B)  The taxpayer sells only tangible personal property. 
C)  The taxpayer is an intrastate business. 
D)  The taxpayer is nondomiciliary. 
A)  The tax is based on net income. 
B)  The taxpayer sells only tangible personal property. 
C)  The taxpayer is an intrastate business. 
D)  The taxpayer is nondomiciliary.

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

Physical presence does not always create sales tax nexus.

Accepted Answer

A) True 
 B)False

Question 12

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 13

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 received 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. Is Tennis Pro subject to Ohio's Commercial Activity Tax (a non-income based tax)?

Accepted Answer

Yes
Public Law 86-272 doesn't

Question 14

Business income is allocated to the state of commercial domicile.

Accepted Answer

A) True 
 B)False

Question 15

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 16

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

Accepted Answer

A) True 
 B)False

Question 17

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 18

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 19

Which of the following activities will create sales tax nexus?

Accepted Answer

A)  Advertising using television commercials. 
B)  Salespeople physically located in a state from which they only take orders. 
C)  Delivery of sales by UPS. 
D)  Electronic delivery of software. 
A)  Advertising using television commercials. 
B)  Salespeople physically located in a state from which they only take orders. 
C)  Delivery of sales by UPS. 
D)  Electronic delivery of software.

Question 20

What was the Supreme Court's holding in Complete Auto Transit?

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)  Provided 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)  Provided four criteria for determining whether states may subject nondomiciliary companies to an income tax. 
D)  Defined solicitation for purposes of Public Law 86-272.

Exam 23: State and Local Taxes

Delivery of tangible personal property through common carrier is a protected activity.

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

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

A unitary return includes only companies included in the federal consolidated tax return filing.

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

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

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.

Which of the following isn't a requirement of Public Law 86-272?

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

Physical presence does not always create sales tax nexus.

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.

Business income is allocated to the state of commercial domicile.

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

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

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?

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?

Which of the following activities will create sales tax nexus?

What was the Supreme Court's holding in Complete Auto Transit?

An Introduction to Tax

Tax Compliance, the IRS, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Dependents, 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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