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Exam 24: Multistate Corporate Taxation

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Question 31

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When a is in effect, out-of-state sales that are not subject to tax in the destination state are pulled back into the sales factor numerator of the origination state.

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Question 32

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Discuss how a multistate business divides up its corporate taxable income among the states in which it operates. Hint: use the terms allocation and apportionment in your comments.

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Generally, business income is apportione...

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Question 33

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Leased property, when included in the property factor, usually is valued at times its annual rental, even though the taxpayer does not own the asset.

The typical local property tax falls on both an investor's principal residence and her stock portfolio.

Typically, corporate income taxes constitute about 20 percent of a state's annual tax collections.

Most of the U.S. states have adopted an alternative minimum tax, similar to the Federal system, in taxing the income of corporations.

A number of court cases in the last several decades have involved the application of a state's nexus rules concerning a business taxpayer. What is the significance of the term nexus when discussing state income taxation?

José Corporation realized $900,000 taxable income from the sales of its products in States X and Z. José's activities in both states establish nexus for income tax purposes. José's sales, payroll, and property among the states include the following. $\begin{array}{lrrr} & \text { State X } & \text { State Z } & \text { Totals } \\\text { Sales } & \$ 1,500,000 & \$ 1,000,000 & \$ 2,500,000 \\\text { Property } & 500,000 & -0- & 500,000 \\\text { Payroll } & 2,000,000 & -0- & 2,000,000\end{array}$ X utilizes an equally weighted three­factor apportionment formula. How much of José's taxable income is Apportioned to X?

Match each of the following items with the appropriate description, in determining whether sales/use tax typically must be collected. -Groceries purchased by a consumer and taken home for preparation there.

A use tax applies when a State A resident purchases:

Match each of the following items with the appropriate description, in applying the P.L. 86-272 definition of solicitation. -Operating a warehouse for inventory that is held in the state.

In most states, Federal S corporations must make a separate state-level election of the flow-through status.

A tax is designed to complement the local sales tax structure, to prevent the consumer from making no- or low-tax purchases in another state, outside the U.S., or online, and then bringing the asset into the state.

For most taxpayers, which of the traditional apportionment factors yields the greatest opportunities for tax reduction?

An LLC apportions and allocates its annual taxable income in the same manner used by any other business operating in the state.

Parent and Minor form a non-unitary group of corporations. Parent is located in a state with an effective tax rate of 3%, while Minor's effective tax rate is 9%. Acting in concert to reduce overall tax liabilities, the group should:

Typically, the state's payroll factor (does/does not) include the salaries and bonuses paid to its corporate executives.

Match each of the following items with the appropriate description, in applying the P.L. 86-272 definition of solicitation. -Checking the customer's inventory to determine whether a reorder is needed.

Match each of the following items with the appropriate description, in applying the P.L. 86-272 definition of solicitation. -Owning a tablet computer that is used on sales trips to the state.

Match each of the following items with the appropriate description, in determining whether sales/use tax typically must be collected. -A garment purchased for resale.