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Exam 12: State and Local Taxes

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Question 51

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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? (Round your answers to two decimal places) $\begin{array} { | l | c | c | } \hline & \text { North Carolina } & \text { South Carolna } \\\hline \text { Sales } & 75.03 \% & 22.51 \% \\\hline \text { Payroll } & 68.62 \% & 21.28 \% \\\hline \text { Property } & 78.45 \% & 14.56 \% \\\hline\end{array}$

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.

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

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Question 52

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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?

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$260,000 and 55.85 percent.
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Question 53

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

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?

Federal/state adjustments correct for differences between two states tax laws. Federal/state adjustments reconcile between federal taxable income and state taxable income.

Sales personnel investigating a potential customer's credit worthiness generally are deemed to exceed protected boundaries of solicitation.

List the steps necessary to determine an interstate businesses' state income tax liability.

Which of the following sales is always subject to sales and use tax?

A state's apportionment formula divides nonbusiness income among the states where nexus exists. Business income is apportioned among the states; whereas, nonbusiness income is allocated to a specific state (usually the state of commercial domicile).

Nondomiciliary businesses are subject to tax everywhere they do business. Nondomiciliary businesses are only subject to tax where they have nexus.

In recent years, states are weighting the sales factor because it is easier to calculate. Weighting the sales factor tends to decrease taxes on in-state businesses and increase taxes on out-of-state businesses.

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

Most state tax laws adopt the federal tax law as of a specific date in time.

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

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

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.

Which of the following businesses is likely to have taxable sales for purposes of sales and use tax?

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?

Physical presence does not always create sales and use tax nexus.