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Exam 23: State and Local Taxes

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Question 41

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

A) True
B) False

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Question 42

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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?

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.

E) B) and D)
F) A) and B)

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Question 43

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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.

Businesses subject to income tax in more than one jurisdiction have the right to apportionment.

Which of the following states is not asserting economic nexus?

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?

Carolina's Hats has the following sales, payroll and property factors: $\begin{array} { l c c } & \begin{array} { c } \text { North } \\\text { Carolina }\end{array} & \begin{array} { c } \text { South } \\\text { Carolina }\end{array} \\\text { Sales }& 75.03 \% & 22.51 \% \\\text { Payroll } & 68.62 \% & 21.28 \% \\\text { Property} & 78.45 \% & 14.56 \%\end{array}$ What is Carolina's Hats North and South Carolina apportionment factors if North Carolina uses an equally-weighted three-factor formula and South Carolina uses a double-weighted sales factor formula?

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?

Nondomiciliary businesses are subject to tax everywhere they do business.

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

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

PWD Incorporated is an Illinois corporation. It properly included, deducted, or excluded the following items on its federal tax return in the current year: $\begin{array} { l r l } \text { Item } & { \text { Amount } } { } & \text { Federal Treatment } \\\hline\text { Illinois Income Taxes } & \$ 33,333 & \text { Deducted on federal return } \\\text { Indiana Income Taxes } & \$ 18,500 & \text { Deducted on federal return } \\\text { Ohio Commercial Activity Tax } & \$ 4,000 & \text { Deducted on federal return } \\\text { Illinois Bond Interest } & \$ 10,000 & \text { Excluded from federal return } \\\text { Indiana Bond Interest } & \$ 15,000 & \text { Excluded from federal return } \\\text { Federal T-Note Interest } & \$ 2,500 & \text { Included on federal return }\end{array}$ PWD's Federal Taxable Income was $100,000. Calculate PWD's Illinois state tax base.

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

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

The Wrigley case held that the sale of intangibles is protected by Public Law 86-272.

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?

Which of the following is incorrect regarding nondomiciliary businesses?

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

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

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