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Exam 23: State and Local Taxes

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Question 21

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

A) Tangible personal property sales are sourced to the destination state.
B) If the business does not have income tax nexus in the destination state, the sales are thrown back to the state where the goods were shipped from.
C) Services are sourced to the destination state.
D) Government sales are sourced to the state where they were shipped from.

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

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Question 22

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Which of the following isn't a typical federal/state adjustment?

A) Dividends received deduction.
B) Depreciation.
C) Meals.
D) U.S. obligation interest income.

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

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Question 23

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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?

Most states have shifted away from an equally weighted three-factor to a heavily-weighted sales apportionment formula.

Tennis Pro, a Virginia Corporation domiciled in Virginia, has the following items of income: $5,000 of dividend income, $15,000 of interest income, $10,000 of rental income from Georgia property, $30,000 of royalty income for an intangible used in Maryland (where income tax nexus exists). Determine how much income is allocated to Virginia.

All of the following are false regarding apportionment except?

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 a 4 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 retail store?

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

The primary purpose of state and local taxes is to raise revenue to finance state and local government.

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

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 sales tax nexus in Connecticut, New Jersey, New York, Pennsylvania, Rhode Island, and South Carolina. Mighty Manny has sales as follows: Assume the following sales tax rates: Connecticut (6.75 percent), New Jersey (7.5 percent), New York (8.5 percent), Pennsylvania (6.5 percent), Rhode Island (7.25 percent), and South Carolina (5.5 percent). Assume that Connecticut also taxes Mighty Manny's services. What is Mighty Manny's total sales and use tax liability?

All 50 states impose a sales and use tax system.

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

A gross receipts tax is subject to Public Law 86-272.

The annual value of rented property is not included in the property factor.

Many states are either starting to or are in the process of expanding the types of services subject to sales tax.

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

The payroll factor includes payments to independent contractors.

Super Sadie, Incorporated manufactures sandals and distributes them across the southwestern United States. Assume that Super Sadie has sales tax nexus in Arizona, California, Colorado, New Mexico, and Texas. Super Sadie has sales as follows: Assume the following sales tax rates: Arizona (6 percent), California (8 percent), Colorado (7 percent), New Mexico (6.5 percent), Oregon (7.25 percent), Texas (8 percent), and Utah (5 percent). What is Super Sadie's total sales and use tax liability? (Round your interim calculations to the nearest whole number.)

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