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Exam 16: Multistate Corporate Taxation

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Question 61

True/False

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Most states exempt consumer purchases of groceries from the collection of the local sales tax.

A) True
B) False

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Question 62

Multiple Choice

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General Corporation is taxable in a number of states. This year, General made a $100,000 sale from its A headquarters to a customer in B. This activity is not sufficient for General to create nexus with B. State B applies a throwback rule, but State A does not. In which state(s) will the sale be included in the sales factor numerator?

A) $0 in both A and B.
B) $100,000 in A.
C) $100,000 in B.
D) In both A and B, according to the apportionment formulas of each.

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

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Question 63

Multiple Choice

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General Corporation is taxable in a number of states. This year, General made a $100,000 sale from its A headquarters to a customer in B. This activity is not sufficient for General to create nexus with B. State A applies a throwback rule, but State B does not. In which state(s) will the sale be included in the sales factor numerator?

Match each of the following terms with the appropriate description, in the state income tax formula. Apply the UDITPA rules in your responses -Federal general business credit.

Typically exempt from the sales/use tax base is the purchase of prescription medicines by an individual.

Match each of the following terms with the appropriate description, in the state income tax formula. Apply the UDITPA rules in your responses -State income tax expense.

A taxpayer has nexus with a state for sales and use tax purposes if it has a physical presence in the state.

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

A city might assess a recording tax when a business takes out a mortgage on its real estate.

Ramirez Corporation is subject to tax only in State A. Ramirez generated the following income and deductions. ​ Federal taxable income is the starting point in computing A taxable income. State income taxes are not deductible for A tax purposes. Ramirez's A taxable income is:

Match each of the following items with the appropriate description, in determining whether sales/use tax typically must be collected a.Taxable b.Not taxable -Earthmoving equipment used by the purchaser in construction business.

Parent Corporation owns all of the stock of Junior Corporation, a Delaware passive investment company. Parent operates strictly in nonunitary State B, which levies a 9% income tax. This year, Junior earned $200,000 of portfolio interest income and paid a $150,000 dividend to Parent. In which state(s) will the interest income create an income tax liability?

All of the U.S. states use an apportionment formula based on the sales, property, and payroll factors.

A state can levy an income tax on a business only if the business was incorporated in the state.

Under P.L. 86-272, the taxpayer is exempt from state taxes on income resulting from the mere solicitation of orders for the sale of stocks and bonds.

General Corporation is taxable in a number of states. This year, General made a $100,000 sale from its A headquarters to an agency of the U.S. government. State A applies a throwback rule. In which state(s) will the sale be included in the sales factor numerator?

Match each of the following items with the appropriate description, in determining whether sales/use tax typically must be collected a.Taxable b.Not taxable -A textbook purchased by a State University student.

Trayne Corporation's sales office and manufacturing plant are located in State X. Trayne also maintains a manufacturing plant and sales office in State W. For purposes of apportionment, X defines payroll as all compensation paid to employees, including elective contributions to § 401(k) deferred compensation plans. Under the statutes of W, neither compensation paid to officers nor contributions to § 401(k) plans are included in the payroll factor. Trayne incurred the following personnel costs. Trayne's payroll factor for State X is:

A typical state taxable income subtraction modification is the interest income earned from another state's bonds.

If a state follows Federal income tax rules, the state's tax compliance and enforcement become easier to accomplish.