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Exam 12: State and Local Taxes

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Question 61

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

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.

E) B) and C)
F) A) and C)

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Question 62

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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 product sales in all 50 states. Mighty Manny service employees work in Connecticut, New Jersey, New York, Pennsylvania, and Rhode Island. Mighty Manny also has an executive training seminar each year in South Carolina. Determine the states in which Mighty Manny has sales and use tax nexus.

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Connecticut, New Jersey, New York, Penns...

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Question 63

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Separate return states require each member of a consolidated group with nexus to file their own state tax return.

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

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

Which of the following isn't a criteria used to determine whether a unitary relationship exists?

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. Determine the sales and use tax liability that the Shop must collect and remit if it sells a $1,000 racquet order to an Alaska customer (assume the Shop has no sales personnel or property in Alaska) that purchases the merchandise over the internet?

Immaterial violations of the solicitation rules automatically create income 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. $\begin{array}{lll}\begin{array} { |l | l |l| }\hline \text { Item } & \text { Amount } & \text { Federal Treatment } \\\hline \text { Illinois Income Taxes } & \$ 33,333 & \text {deducated on federal return }\\\hline \text { Indiana Income Taxes } & \$ 18,500 &\text {deducated on federal return }\\\hline \text { Ohio Commercial Activity Tax} &\$4,000&\text {deducated on federal return }\\\hline\text { Illinois bind interst }&\$10,000&\text {excuded from federal return }\\\hline\text { indiana bind interst }&\$15,000&\text {excuded from federal return }\\\hline\text {ferderal T-note interst }&\$2,500&\text {included from federal return }\\ \hline\end{array}\end{array}$

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

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

Which of the following activities will create sales tax nexus?

Big Company and Little Company are both owned by Mrs. Big. Big and Little file a consolidated federal tax return. Big manufactures office paper and other paper supplies and is based in Washington. Little operates a logging operation in Montana. Sixty percent of Little's sales are made to Big. Ten percent of Big's raw materials come from Little. There are no common officers or board members. There are no common service providers. What are the factors for and against filing a unitary tax return?

Which of the following is incorrect regarding nondomiciliary businesses?

All 50 states impose a sales and use tax system. Alaska, Delaware, Montana, New Hampshire, and Oregon do not.

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

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