State and Local Taxes True / False Questions 1. The primary purpose of state and local taxes is to raise revenue to finance state and local government. True False 2. All states employ some combination of sales and use tax, income or franchise tax, or property tax. True False 3. State tax law is comprised solely of legislative authority. True False 4. Commercial domicile is the location where a business is headquartered and directs its operations from. True False 5. Nondomiciliary businesses are subject to tax everywhere they do business. True False
Chapter 23
State and Local Taxes
True / False Questions
1. The
primary purpose of state and local taxes is to raise revenue to finance state
and local government.
True False
2. All
states employ some combination of sales and use tax, income or franchise tax,
or property tax.
True False
3. State tax
law is comprised solely of legislative authority.
True False
4. Commercial
domicile is the location where a business is headquartered and directs its
operations from.
True False
5. Nondomiciliary
businesses are subject to tax everywhere they do business.
True False
6. Use tax
liability accrues in the state where purchased property will be used when the
seller is not required to collect sales tax.
True False
7. Businesses
engaged in interstate commerce are subject to tax in every state where they
operate.
True False
8. The state
tax base is computed by making adjustments to federal taxable income.
True False
9. Businesses
subject to income tax in more than one jurisdiction have the right to
apportionment.
True False
10. Business
income is allocated to the state of commercial domicile.
True False
11. All 50
states impose a sales and use tax system.
True False
12. Purchases
of inventory for resale are typically exempt from sales and use taxes.
True False
13. The sales
and use tax base varies from state to state.
True False
14. Many
states are expanding the types of services subject to sales tax.
True False
15. Businesses
must collect sales tax only in states where it has sales and use tax nexus.
True False
16. Failure to
collect and remit sales taxes often results in a larger tax liability than
failure to pay income taxes.
True False
17. Physical
presence does not always create sales and use tax nexus.
True False
18. 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.
True False
19. The Quill
decision reaffirmed that out-of-state businesses must have physical presence
within a state before the state may require the collection of sales taxes from
in-state customers.
True False
20. Wyoming
imposes an income tax on corporations.
True False
21. Businesses
must pay income tax in their state of commercial domicile.
True False
22. In
Complete Auto Transit the court determined eight criteria for determining
whether a state can tax a nondomiciliary company.
True False
23. Public Law
86-272 protects certain business activities from creating nexus.
True False
24. Public Law
86-272 was a congressional response to Northwestern States Portland Cement.
True False
25. Public Law
86-272 protects only companies selling tangible personal property.
True False
26. Delivery
of tangible personal property through common carrier is a protected activity.
True False
27. The
Wrigley case held that the sale of intangibles is protected by Public Law
86-272.
True False
28. Giving
samples and promotional materials without charge is a protected solicitation
activity.
True False
29. The
trade-show rule allows businesses to maintain a sample room for up to four
weeks per year.
True False
30. Sales
personnel investigating a potential customer’s credit worthiness exceed boundaries
of solicitation.
True False
31. Immaterial
violations of the solicitation rules automatically create income tax nexus.
True False
32. Several
states are now asserting economic nexus.
True False
33. Separate
return states require each member of a consolidated group with nexus to file
their own state tax return.
True False
34. A unitary
return includes only companies included on a federal consolidated tax return.
True False
35. The Mobil
decision identified three factors to determine whether a group of companies are
unitary.
True False
36. Federal/state
adjustments correct for differences between two states tax laws.
True False
37. Most state
tax laws adopt the federal tax law as of a specific date in time.
True False
38. Business
income includes all income earned in the ordinary course of business.
True False
39. A state’s
apportionment formula divides nonbusiness income among the states where nexus
exists.
True False
40. A state’s
apportionment formula usually relies on some variation of sales, payroll, and
property factors.
True False
41. The throwback
rule includes inventory in transit in the numerator of the state where it was
shipped from.
True False
42. Most
services are sourced to the state where the services were performed.
True False
43. The
payroll factor includes payments to independent contractors.
True False
44. The
property factor is the average of beginning and ending property values.
True False
45. The annual
value of rented property is included in the property factor.
True False
46. Historically,
most states used an equally weighted three-factor apportionment formula.
True False
47. In recent
years, states are weighting the sales factor because it is easier to calculate.
True False
48. Interest
and dividends are allocated to the state of commercial domicile.
True False
49. Rental
income is allocated to the state of commercial domicile.
True False
50. A gross
receipts tax is subject to Public Law 86-272.
True False
Multiple Choice Questions
51. Which of
the following is true regarding state and local taxes?
A. All
states impose a state income tax.
B. Every
jurisdiction imposes a sales or use tax.
C. The
primary purpose is to raise revenue.
D. Property
taxes are primarily used to finance a State’s general revenue fund.
52. Which of
the following is not a primary revenue source for most states?
A. Income or
franchise taxes
B. Sales or
use taxes
C. Severance
taxes
D. Property
taxes
53. Which of
the following law types is not a primary source type?
A. Legislative
B. Administrative
C. Judicial
D. Treatises
54. Which of
the following statements regarding income tax commercial domicile is incorrect?
A. The
location where a business is headquartered
B. The
location where a business is incorporated
C. The
location from which a business directs its operations
D. None of
these
55. Which of
the following is incorrect regarding nondomiciliary businesses?
A. Subject
to tax only where nexus exists.
B. A
business cannot be nondomiciliary where headquartered.
C. A
business can be nondomiciliary in only one jurisdiction.
D. Subject
to tax only where a sufficient connection exists.
56. Which of
the items is correct regarding a use tax?
A. Use taxes
are imposed by every state.
B. Use taxes
only apply when the seller is not required to collect the sales tax.
C. Amazon
collects use taxes for all of its customers.
D. States choose
to implement either a sales tax or a use tax.
57. All of the
following are false regarding apportionment except?
A. Applies
to only business income.
B. Applies
to only nonbusiness income.
C. Applies
to both business and nonbusiness income.
D. Investment
income is subject to apportionment.
58. Which of
the following regarding the state tax base is incorrect?
A. It is
computed by making adjustments to federal taxable income.
B. It is
divided into business and nonbusiness income.
C. It is a
necessary step in the state income tax process.
D. It
applies only to interstate businesses.
59. Which of
the following sales is always subject to sales and use tax?
A. Tax
preparation services.
B. Automobiles.
C. Inventory.
D. Food.
60. Which of
the following businesses is likely to have taxable sales for purposes of sales
and use tax?
A. Campus
bookstore selling textbooks and university apparel.
B. An online
retailer of textbooks.
C. A local
accounting firm.
D. Mail
order clothing company.
61. Which of
the following activities will create sales tax nexus?
A. Advertising
using television commercials.
B. Salesmen
who only take orders.
C. Delivery
of sales by UPS.
D. Electronic
delivery of software.
62. 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:
A. Mighty
Manny is incorporated and headquartered in Michigan. It also has property,
employees, sales personnel, and intangibles in Michigan.
B. Mighty
Manny has a warehouse in Illinois.
C. Mighty
Manny has independent sales representatives in Minnesota. The representatives
distribute ice scraper-related items for over a dozen companies.
D. Mighty
Manny has two customers in Wisconsin. Mighty Manny receives orders over the
phone and ships goods to its customers using FedEx.
63. 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:
A. Mighty
Manny has sales personnel that visit Minnesota. These sales employees follow
procedures that comply with Public Law 86-272. The orders are received and sent
to Michigan for acceptance. The goods are shipped by FedEx into Minnesota.
B. Mighty Manny’s
trucks drive through Nebraska to deliver goods to Mighty Manny’s products to
customers in other states.
C. Mighty
Manny provides design services to another manufacturer located in Wisconsin.
While the services are performed in Michigan, Mighty Manny’s designers visit
Wisconsin at least quarterly to deliver the new designs and receive feedback.
D. Mighty
Manny receives online orders from its Illinois client. Because the orders are
so large, the goods are delivered weekly on Mighty Manny’s trucks.
64. Which of
the following is not one of the Complete Auto Transit’s criteria for whether a
state can tax nondomiciliary companies?
A. Protected
activities are exempt.
B. A
sufficient connection exists.
C. Only a
fair portion of income can be taxed.
D. Tax
cannot discriminate against nondomiciliary businesses.
65. On which
of the following transactions should sales tax be collected?
A. Architecture
plans delivered through the mail.
B. Sales of
woolen goods to a state without nexus delivered through common carrier.
C. Accounting
services provided in Alaska.
D. Meal
purchased at McDonald’s.
66. 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?
A. $0.
B. $10,000.
C. $50,000.
D. $60,000.
67. Roxy
operates a dress shop in Arlington, Virginia. Lisa, a Maryland resident, comes
in for a measurement and purchases a $1,500 dress that is shipped to her
Maryland residence using a common carrier. Assuming that Virginia’s sales tax
rate is 5 percent and that Maryland’s sales tax rate is 7 percent, what is
Roxy’s sales and use tax liability?
A. $0.
B. $75 to
Virginia.
C. $75 sales
tax to Virginia and $15 use tax to Maryland.
D. $90 to
Maryland.
68. Roxy
operates a dress shop in Arlington, Virginia. Lisa, a Maryland resident, comes
in for a measurement and purchases a $1,500 dress. Lisa returns to Virginia a
few weeks later to pick up the dress and drive it back to her Maryland
residence where she will use the property. Assuming that Virginia’s sales tax
rate is 5 percent and that Maryland’s sales tax rate is 6 percent, what is
Roxy’s sales and use tax liability?
A. $0.
B. $75 to
Virginia.
C. $75 sales
tax to Virginia and $15 use tax to Maryland.
D. $90 to
Maryland.
69. What was
the Supreme Court’s holding in National Bellas Hess?
A. An
out-of-state mail-order company did not have a sales tax collection
responsibility because it lacked physical presence.
B. Reaffirmed
that an out-of-state business must have physical presence in the state before
the state may require the business to collect sales tax from in-state
customers.
C. Spelled
out four criteria for determining whether states may subject nondomiciliary
companies to an income tax.
D. Defined
solicitation for purposes of Public Law 86-272.
70. What was
the Supreme Court’s holding in Quill?
A. An
out-of-state mail-order company did not have a sales tax collection
responsibility because it lacked physical presence.
B. Reaffirmed
that an out-of-state business must have physical presence in the state before
the state may require the business to collect sales tax from in-state
customers.
C. Spelled
out four criteria for determining whether states may subject nondomiciliary
companies to an income tax.
D. Defined
solicitation for purposes of Public Law 86-272.
71. 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 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?
A. $0
B. $3,053
C. $13,267
D. $16,319
72. 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 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?
A. $10,386
B. $14,543
C. $26,733
D. $61,289
73. 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.
74. Bethesda
Corporation is unprotected from income tax by Public Law 86-272. Which of the
following characteristics creates a problem for Bethesda in states other than
Maryland?
A. Bethesda
does business in Maryland and five other states.
B. Bethesda
sells copier equipment and copy center services.
C. All
orders are approved in Maryland.
D. All
in-state services are limited to solicitation in states other than Maryland.
75. Public Law
86-272 protects solicitation from income
activities exceeds the solicitation threshold?
A. Any form
of advertising.
B. Distribution
of samples without charge.
C. Accepting
a down payment.
D. Checking
a customer’s inventory.
76. Public Law
86-272 protects a taxpayer from which of the following taxes?
A. Texas
Margin Tax (a tax with net income, gross receipts, and capital worth
components).
B. Washington
Business and Occupation Tax (a gross receipts tax).
C. Ohio
Commercial Activity Tax (an excise tax with a gross receipts base).
D. California
Franchise Tax (a net income tax).
77. Which of
the following states is not asserting economic nexus?
A. New York
with the Amazon rule.
B. South
Carolina in the Geoffrey case.
C. West
Virginia in the MBNA case.
D. Wisconsin
in Wrigley.
78. Which of
the following isn’t a criteria used to determine whether a unitary relationship
exists?
A. Functional
integration.
B. Centralized
management.
C. Economies
of scale.
D. Consolidated
return status.
79. Which of
the following isn’t a typical federal/state adjustment?
A. Dividends
received deduction.
B. Depreciation.
C. Meals and
entertainment.
D. U.S.
obligation interest income.
80. 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.
A. $116,000
B. $130,833
C. $131,000
D. $140,833
81. Hoosier
Incorporated is an Indiana corporation. It properly included, deducted, or
excluded the following items on its federal tax return in the current year:
State depreciation expense was $50,000. Hoosier’s Federal
Taxable Income was $150,300. Calculate Hoosier’s Illinois state tax base.
A. $171,300
B. $173,800
C. $204,633
D. $207,133
82. 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 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.
83. 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?
A. $1,223,032
B. $1,323,032
C. $1,357,621
D. $1,457,621
84. Which of
the following is not a general rule for calculating the payroll factor?
A. Includes
salaries, commissions, and bonuses.
B. Excludes
compensation to independent contractors.
C. Allocates
compensation for employees working in more than one state.
D. Assigns
the payroll of each employee to a single state.
85. Handsome
Rob provides transportation services in several western states. Rob has sales
as follows:
Rob is a California Corporation and has the following facts.
Rob has nexus in Arizona, California, Nevada, and
Washington. The Washington drivers spend 25 percent of their time driving
through Oregon. California payroll includes $200,000 of payroll for services
provided in Nevada by California based drivers. What is Rob’s California sale
numerator?
A. $934,589
B. $1,134,589
C. $1,215,347
D. $2,657,275
86. 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.
87. Lefty
provides demolition services in several southern states. Lefty has property as
follows:
Lefty is a Mississippi Corporation. Lefty also rents
property in Mississippi and Tennessee with annual rents of $50,000 and $15,000,
respectively. What is Lefty’s Mississippi property numerator?
A. $942,153
B. $1,002,384
C. $1,052,384
D. $1,342,153
88. What was
the Supreme Court’s holding in Complete Auto Transit?
A. An
out-of-state mail-order company did not have a sales tax collection
responsibility because it lacked physical presence.
B. Reaffirmed
that an out-of-state business must have physical presence in the state before
the state may require the business to collect sales tax from in-state
customers.
C. Spelled
out four criteria for determining whether states may subject nondomiciliary
companies to an income tax.
D. Defined
solicitation for purposes of Public Law 86-272.
89. 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?
A. North
Carolina 74.03 percent, and South Carolina 19.45 percent.
B. North
Carolina 74.03 percent, and South Carolina 20.22 percent.
C. North
Carolina 74.28 percent, and South Carolina 19.45 percent.
D. North
Carolina 74.28 percent, and South Carolina 22.51 percent.
90. 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.
gains
91. Della
Corporation is headquartered in Carlisle, Pennsylvania. Della has a
Pennsylvania state income tax base of $425,000. Of this amount, $75,000 was
nonbusiness income. Della’s Pennsylvania apportionment factor is 28.52 percent.
The nonbusiness income allocated to Pennsylvania was $61,000. Assuming a Pennsylvania
corporate tax rate of 7.75 percent, what is Della’s Pennsylvania state tax
liability?
A. $8,821
B. $9,084
C. $12,464
D. $13,549
92. Which of
the following is not a nonincome based tax?
A. Ohio
Commercial Activity Tax.
B. Texas
Margin Tax.
C. Washington
Business & Occupation Tax.
D. Wisconsin
Separate Corporate Tax.
Essay Questions
93. Discuss
the steps necessary to determine whether a sales or use tax applies and how the
tax is collected.
94. List the
steps necessary to determine an interstate businesses’ state income tax
liability.
95. Super
Sadie, Incorporated manufactures sandals and distributes them across the
southwestern United States. Super Sadie is incorporated and headquartered in
Arizona. It has product sales to customers in Arizona, California, Colorado,
New Mexico, Oregon, Texas, and Utah. It has sales personnel in California,
Colorado, and New Mexico. It also owns an office building in Arizona and a
Warehouse in Texas. Determine the states in which Super Sadie has sales and use
tax nexus.
96. Super
Sadie, Incorporated manufactures sandals and distributes them across the
southwestern United States. Assume that Super Sadie has sales and use 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?
97. 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.
98. 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 and use 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?
99. 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?
100. 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?
101. 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. Assume that a District of Columbia customer picks up
a $2,000 racquet order in the Blacksburg store and drives it back to the
District of Columbia (where the sales tax rate is 8.5 percent). Determine the
sales and use tax liability (assume the Shop has no sales personnel or property
in District of Columbia) of the customer?
102. Moss
Incorporated is a Washington corporation. It properly included, deducted, or
excluded the following items on its federal tax return in the current year:
Moss’ Oregon depreciation was $145,500. Moss’ Federal
Taxable Income was $549,743. Calculate Moss’ Oregon state tax base.
103. 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?
104. Gordon
operates the Tennis Pro Shop in Blacksburg, Virginia. Tennis pro decides to
expand into Pennsylvania during the current year and try some new sales
techniques. Tennis pro advertises on local radio and television as well as
national tennis magazines sent into PA. Salesmen give away promotional
materials and occasionally sell demonstration models to local shop employees to
build
hotels. Personnel occasionally fix minor problems such as tape and strings
without charge. One employee performed a credit check for a major account who
needed merchandise immediately. Each sales person is allowed an allowance for a
car and office equipment to be maintained in an in-home office. Do any of
Tennis Pro activities have the potential to create income tax nexus?
105. 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?
106. 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?
107. Gordon
operates the Tennis Pro Shop in Blacksburg, Virginia. Tennis Pro has sales as
follows:
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?
108. Gordon
operates the Tennis Pro Shop in Blacksburg, Virginia. Tennis Pro has payroll as
follows:
The other total includes $10,000 of salary of a Virginia
employee that works part time in another state. What is Tennis Pro’s Virginia
payroll numerator and payroll factor?
109. Gordon
operates the Tennis Pro Shop in Blacksburg, Virginia. Tennis Pro has property
as follows:
What is Tennis Pro’s Virginia property numerator and
property factor?
110. Gordon
operates the Tennis Pro Shop in Blacksburg, Virginia. Tennis Pro has property
as follows:
Tennis Pro also rents Virginia property at an annual rent of
$24,000. What is Tennis Pro’s Virginia property numerator and property factor?
111. Tennis Pro
has the following sales, payroll and property factors:
What is Tennis Pro’s Virginia and Maryland apportionment
factors if both states use an equally-weighted three-factor formula?
112. Tennis Pro
has the following sales, payroll and property factors:
What would Tennis Pro’s Virginia and Maryland apportionment
factors be if Virginia used a double-weighted sales four factor method and
Maryland used a single-factor sales formula?
113. Tennis Pro,
a Virginia Corporation, 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
nexus exists). Determine how much income is allocated to Virginia.
114. 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?
115. 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?
116. 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.
117. Assume
Tennis Pro discovered that one salesman has gone into Arkansas once each year
of the past 4 years and performed activities creating both sales and use tax
nexus and income tax nexus. Assume that Arkansas sales were $25,000 each year.
Assume that Arkansas business income would be 200,000 each year and that Tennis
Pro’s Arkansas apportionment percentage would be 1 percent. Assume there would
be no Arkansas nonbusiness income. Assume that Arkansas sales and use tax rate
was 6.5 percent and corporate income tax rate was 5 percent. What would Tennis
Pro’s Arkansas sales and use tax and income tax liability be ignoring any
possible penalties and interest?
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