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Exam 23: State and Local Taxes

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Question 31

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

A) Uses the average property values for the year.
B) Values property at historical cost.
C) Excludes property in transit from the calculation.
D) Includes rented property at eight times the annual rent.

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

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Question 32

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

A) True
B) False

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Question 33

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Most services are sourced to the state where the services were performed.

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?

Which of the following is true regarding state and local taxes?

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:

Gordon operates the Tennis Pro Shop in Blacksburg, Virginia. Tennis Pro has property as follows: $\begin{array}{l}\text { Tennis Pro's Property: }\\\begin{array} { l r r r } \underline{\text { State }} & \underline{\text { Beginning }} & & \underline{\text { Ending }} \\\text { DC } & \$ 43,021 & & \$ 41,983 \\\text { Georgia } & \$ 92,385 & & \$ 83,024 \\\text { Virginia } & \$ 1,331,919 & & \$ 1,438,439 \\\text { Other } & \underline { \$ 68,203 } & & \underline{\$ 68,203} \\\text { Totals } & \$ 1,535,528 & & \$ 1,631,649\end{array}\end{array}$ Tennis Pro also rents Virginia property at an annual rent of $24,000. What is Tennis Pro's Virginia property numerator and property factor?

Tennis Pro is headquartered in Virginia. Assume it has a state income tax base of $200,000. Of this amount, $60,000 was non-business income. Assume that Tennis Pro's Virginia apportionment factor is 73.28 percent. The non-business income allocated to Virginia was $23,000. Assuming a Virginia corporate tax rate of 5.5 percent, what is Tennis Pro's Virginia state tax liability?

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

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.

A state's apportionment formula divides nonbusiness income among the states where nexus exists.

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?

All of the following are false regarding apportionment except?

Which of the following is not a primary revenue source for most states?

Which of the items is correct regarding a use tax?

Use tax liability accrues in the state where purchased property will be used when the seller is not required to collect sales tax.

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. Is Tennis Pro subject to Ohio's Commercial Activity Tax?

Which of the following law types is not a primary source type?

Wyoming imposes an income tax on corporations.

Which of the following activities will create sales tax nexus?