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Exam 16: Multistate Corporate Taxation

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Question 81

True/False

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Politicians frequently use tax credits and exemptions to create economic development incentives.

A) True
B) False

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Question 82

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Match each of the following items with the appropriate description in applying the P.L. 86-272 definition of solicitation. -Training administrative personnel to use an update to ordering software.

A) More than solicitation, creates nexus
B) Solicitation only, no nexus created

C) A) and B)
D) undefined

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Question 83

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

Typically exempt from the sales/use tax base is the purchase of tools by a manufacturer to make the widgets that it sells.

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.

Apportionment is a means by which a corporation's _________taxable income is divided among the states in which it conducts business.

In determining state taxable income, all of the following are adjustments to Federal income except:

Mercy Corporation, headquartered in State F, sells wireless computer devices, including keyboards and bar code readers. Mercy's degree of operations is sufficient to establish income tax nexus only in States E and F. Determine its sales factor in those states. State E applies a throwback rule to sales, but State F does not. State G has not adopted an income tax to date. Mercy reported the following sales for the year. All of the goods were shipped from Mercy's F manufacturing facilities.

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.

Typically included in the sales/use tax base is the purchase of tablet computers and cell phone equipment by a large manufacturing firm whose sales force uses the items.

Under common terminology, a unitary group files a _________combined/consolidated) state income tax return.

When included in the property factor, leased property usually is valued at ______times its annual rental even though the taxpayer does not own the asset.

Match each of the following items with the appropriate description in determining whether sales/use tax typically must be collected. -Fees paid to an accounting firm for the conduct of a financial audit.

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

Boot Corporation is subject to income tax in States A and B. Boot's operations generated $200,000 of apportionable income, and its sales and payroll activity and average property owned in each of the states is as follows: $\begin{array}{lll}&\text { State A } & \text { State B } & \text { T otals } \\\text { Sales }&\$ 200,000 & \$ 600,000 & \$ 800,000\end{array}$ $\begin{array} { l l l l } \text { Payroll } & 100,000 & 50,000 & 150,000 \\\text { Property } & 200,000 & 50,000 & 250,000\end{array}$ How much more less) of Boot's income is subject to State A income tax if, instead of using an equally weighted three-factor apportionment formula, State A uses a formula with a double-weighted sales factor?

Allocation is a method under which a corporation's _____________taxable income is directly assigned to the specific states where the income is derived.

Match each of the following events considered independently to its likely effect on WillCo's various apportionment factors. WillCo is based in Q and has customers in Q, R, and S. To this point, WillCo has not established nexus with S. More than one choice may be correct. -Q adopts a sales-only apportionment formula.

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, State X defines payroll as all compensation paid to employees, including elective contributions to § 401k) deferred compensation plans. Under the statutes of State W, neither compensation paid to officers nor contributions to § 401k) plans are included in the payroll factor. Trayne incurred the following personnel costs.

The__________ tax usually is applied at the city or county level as its main source of revenue.

In the apportionment formula, most states assign more than a one-third weight to the___________factor.