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Exam 23: State and Local Taxes

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Question 41

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Which of the following regarding the state tax base is incorrect?

A) It is a necessary step in the state income tax process.
B) It is computed by making adjustments to federal taxable income.
C) It applies only to interstate businesses.
D) It is divided into business and nonbusiness income.

E) A) and D)
F) A) and C)

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Question 42

Multiple Choice

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Which of the following is an income based tax?

A) Wisconsin Corporate Tax.
B) Texas Margin Tax.
C) Ohio Commercial Activity Tax.
D) Washington Business & Occupation Tax.

E) None of the above
F) A) and B)

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Question 43

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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.

Lefty provides demolition services in several southern states. Lefty has property as follows: 87) 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)

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

Wyoming imposes an income tax on corporations.

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

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. Tennessee has a4 percent sales tax. Determine the sales and use tax liability that the Shop must collect and remit if it sells a $500 racquet to a Tennessee resident that purchases the merchandise in the Virginia retailstore?

Business income includes all income earned in the ordinary course of business.

Public Law 86-272 protects certain business activities from creating income tax nexus.

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?

Roxy operates a dress shop in Arlington, Virginia. Lisa, a Maryland resident, comes in for a measurement and purchases a $1,500 dress. Lisa returns to Virginia a few weeks later to pick up the dress and drive it back to her Maryland residence where she will use the property. Assuming that Virginia's sales tax rate is 5 percent and that Maryland'ssales tax rate is 6 percent, what is Roxy's sales and use tax liability?

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?

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?

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

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

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

The state tax base is computed by making adjustments to federal taxable income.

Assume Tennis Pro discovered that one salesman has gone into Arkansas once each year of the past4 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'sArkansas sales and use tax and income tax liability be ignoring any possible penalties and interest?

Several states are now moving from a strict physical presence test towards an economic presence test.