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Exam 12: State and Local Taxes

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Question 21

Multiple Choice

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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

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

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Question 22

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All 50 states impose a sales and use tax system.

A) True
B) False

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Question 23

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Wacky Wendy produces gourmet cheese in Wisconsin. Wendy has sales as follows: Wendy is a Wisconsin corporation and has the following operations: Wendy has income tax 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?

The sales and use tax base varies from state to state.

Gordon operates the Tennis Pro Shop in Blacksburg, Virginia. The shop sells, manufactures, 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 of the customer. (Assume the shop has no sales personnel or property in District of Columbia, and District of Columbia sales don't exceed the Wayfair thresholds.)

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, and $30,000 of royalty income for an intangible used in Maryland (where income tax nexus exists). Determine how much income is allocated to Virginia.

Businesses must pay income tax in their state of commercial domicile.

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

Commercial domicile is the location where a business is headquartered and from whence it directs its operations.

The trade show rule allows businesses to maintain a sample room for up to four weeks per year.

What was the Supreme Court's holding in Complete Auto Transit?

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

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. In each state it has sales of less than $100,000 on under 200 transactions. 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 tax nexus.

Business income is allocated to the state of commercial domicile.

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? (Round your answer to the nearest whole number.)

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

Tennis Pro has the following sales, payroll, and property factors: What are Tennis Pro's Virginia and Maryland apportionment factors if both states use an equally weighted three-factor formula?

Delivery of tangible personal property through common carrier is a protected activity.

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. Assume sales transactions in all states, except New York, are under 200 and that all states have adopted Wayfair legislation. 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 sales tax rates: Alaska (0 percent) , Colorado (7.75 percent) , Maine (8.5 percent) , New Hampshire (0 percent) , New York (8 percent) , and Vermont (5 percent) . How much sales and use tax must Mahre collect and remit?

Assume Tennis Pro discovered that one salesperson has gone into Arkansas once each year for the past four years and performed activities that create both sales 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?