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Exam 23: State and Local Taxes

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Question 51

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Tennis Pro is headquartered in Virginia. Assume it has a Kentucky state income tax base of $220,000. Of this amount, $40,000 was non-business income. Assume that Tennis Pro's Kentucky sales, payroll and property apportionment factor are 12, 5, and 3 percent, respectively. Assume that Kentucky uses a single-factor sales formula apportionment method. The non-business income allocated to Kentucky was $1,000. Assuming Kentucky's corporate tax rate of 6 percent, what is Tennis Pro's Kentucky state tax liability?

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Question 52

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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 $500 racquet to a Tennessee customer that purchases the merchandise in the retail store?

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Question 53

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Businesses must collect sales tax only in states where it has sales and use tax nexus.

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: $\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\text { Mahre Sales }$ $\begin{array}{lrrr}\text { State } & \text { Goods } & {\text { Services }} & {\text { Total }} \\\hline\text { Alaska } & \$ 23,194 & \$ 0 & \$ 23,194 \\\text { Colorado } & 10,612 & 0 & 10,612 \\\text { Maine } & 35,913 & 156,084 & 191,997 \\\text { New Hampshire } & 26,721 & 325,327 & 352,048 \\\text { New York } & 65,431 & 0 & 65,431 \\\text { Vermont } & \underline{41,982} & \underline{277,441} & \underline{319,423} \\\text { Totals } & \$ 203,853 & \$ 758,852 & \$ 962,705\end{array}$ Assume the following 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?

Assume Tennis Pro attends a sports equipment expo in Washington State. Assume this activity creates nexus of the Business and Occupation (B&O) tax. Assume the tax is .5% of gross receipts for retailers and 1.5% of gross receipts on services. If Tennis Pro has $20,000 of Washington retail sales and $2,000 of services performed, calculate Tennis Pro's B&O tax.

Rental income is allocated to the state of commercial domicile.

The property factor is the average of beginning and ending property values.

Federal/state adjustments correct for differences between two states tax laws.

Which of the following is not a nonincome based tax?

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

Wyoming imposes an income tax on corporations.

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.

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?

The payroll factor includes payments to independent contractors.

Failure to collect and remit sales taxes often results in a larger tax liability than failure to pay income taxes.

Gordon operates the Tennis Pro Shop in Blacksburg, Virginia. Tennis Pro has sales as follows: $\begin{array}{l}\text { Tennis Pro's Sales: }\\\begin{array} { l r } \underline { \text { State } } & \underline { \text { Sales } } \\\text { GC } & \$ 184,031 \\\text { Georgia } & 420,421 \\\text { Virginia } & 903,293 \\\text { Tother } & \underline { 734,035 } \\\text { Totals } & \$ 2,241,780\end{array}\end{array}$ 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?

Many states are expanding the types of services subject to sales tax.

Sales personnel investigating a potential customer's credit worthiness exceed boundaries of solicitation.

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