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Exam 23: State and Local Taxes

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Question 41

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

A) True
B) False

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Question 42

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Which of the following is not a general rule for allocating nonbusiness income?

A) Interest and dividends to the state of commercial domicile.
B) Rental income for investment property to state of commercial domicile.
C) Rental income for business property to state where property is located.
D) Capital gains from rental property to state where property is locateD.Rents are generally allocated to state where the property is located.

E) B) and D)
F) All of the above

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Question 43

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

In Complete Auto Transit the court determined eight criteria for determining whether a state can tax a nondomiciliary company.

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

Historically, most states used an equally weighted three-factor apportionment formula.

Business income is allocated to the state of commercial domicile.

Carolina's Hats has the following sales, payroll and property factors: 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? (Round your answers to two decimal places)

Which of the following is an income based tax?

Roxy operates a dress shop in Arlington, Virginia. Roxy also ships dresses nationwide upon request. Roxy's Virginia sales are $1,000,000 and out of state sales are $200,000. Assuming that Virginia's sales tax rate is 5 percent, what is Roxy's Virginia sales and use tax liability?

Wacky Wendy produces gourmet cheese in Wisconsin. Wendy has sales as follows: Wendy is a Wisconsin Corporation and has the following operations. Wendy has nexus in Iowa, Minnesota, and Wisconsin. The Michigan sales are shipped from Wisconsin (a throwback state) . $100,000 of the Wisconsin sales were to the federal government. What is Wendy's Wisconsin sale numerator?

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.

Public Law 86-272 protects certain business activities from creating income 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?

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 in state activity is limited to solicitation. Orders are taken 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. Where does Tennis Pro have income tax nexus?

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

Mighty Manny, Incorporated manufactures ice scrapers and distributes them across the midwestern United States. Mighty Manny is incorporated and headquartered in Michigan. It has product sales to customers in Illinois, Indiana, Iowa, Michigan, Minnesota, and Wisconsin. It has sales personnel only where discussed. Determine the state in which Mighty Manny does not have sales and use tax nexus given the following scenarios:

Mahre, Incorporated, a New York corporation, runs ski tours in a several states. Mahre also has a New York retail store and an Internet store which ships to out of state customers. The ski tours operate in Maine, New Hampshire, and Vermont where Mahre has employees and owns and uses tangible personal property. Mahre has real property only in New York. Mahre has the following sales: Assume the following sales tax rates: Alaska (6.6 percent) , Colorado (7.75 percent) , Maine (8.5 percent) , New Hampshire (6.75 percent) , New York (8 percent) , and Vermont (5 percent) . How much sales and use tax must Mahre collect and remit in Maine?

The National Bellas Hess decision held that an out-of-state mail-order company did not have sales tax collection responsibility because it lacked physical presence.

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