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Exam 12: State and Local Taxes

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Question 61

Multiple Choice

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Which of the following activities will create sales tax nexus?

A) Advertising using television commercials.
B) Salespeople physically located in a state from which they only take orders.
C) Delivery of sales by UPS.
D) $90,000 of sales on 190 online sales transactions.

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

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Question 62

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Wyoming imposes an income tax on corporations.

A) True
B) False

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Question 63

Multiple Choice

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Public Law 86-272 protects a taxpayer from which of the following taxes?

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.

Which of the following statements regarding income tax commercial domicile is incorrect?

Interest and dividends are allocated to the state of commercial domicile.

All of the following are false regarding apportionment except?

Handsome Rob provides transportation services in several western states. Rob has payroll as follows: Rob is a California corporation and the following is true: Rob has income tax 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 payroll numerator?

Public Law 86-272 was a congressional response to Northwestern States Portland Cement.

Several states are now moving from a strict physical presence test toward an economic presence test for income taxes.

Giving samples and promotional materials without charge is a protected solicitation activity.

Discuss the steps necessary to determine whether a sales tax applies and how the tax is collected.

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.)

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.

The payroll factor includes payments to independent contractors.

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