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Exam 24: Multistate Corporate Taxation

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Question 1

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The use tax is designed to complement the sales tax.A use tax typically covers purchases made out of state and brought into the jurisdiction.

A) True
B) False

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Question 2

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Most states' consumer sales taxes apply directly to the final purchaser of the taxable asset, who then remits the tax to the state treasury.

A) True
B) False

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Question 3

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

Mandy Corporation realized $1,000,000 taxable income from the sales of its products in States X and Z.Mandy's activities establish nexus for income tax purposes only in Z.Mandy's sales, payroll, and property among the states include the following. X utilizes a sales-only factor in its three-factor apportionment formula.How much of Mandy's taxable income is apportioned to X?

Kim Corporation, a calendar year taxpayer, has manufacturing facilities in States A and B.A summary of Kim's property holdings follows. *Unrelated to Kim's regular business and operations. Determine Kim's property factors for the two states. A's statutes provide that the average historical cost of business property is to be included in the property factor.B's statutes provide that the property factor is based on the average depreciated basis of in-state business property.

Shaker Corporation operates in two states, as indicated below.All goods are manufactured in State A.Determine the sales to be assigned to both states to be used in computing Shaker's sales factor for the year.Both states follow the UDITPA and the MTC regulations in this regard. * Excess warehouse space ** Land held for speculation * Excess warehouse space, related to business ** Land held for speculation, nonbusiness income

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?

Typically exempt from the sales/use tax base is the purchase of lumber by a do-it-yourself homeowner, when she builds a deck onto her patio.

A state sales/use tax is designed to be collected by the ____________________ (seller/purchaser) of the product and then remitted to the state.

____________________ describe(s) the degree of business activity that must be present before a taxing jurisdiction has the right to impose a tax on an entity's income.

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

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. How much more (less) of Boot's income is subject to A income tax if, instead of using an equally-weighted three-factor apportionment formula, A uses a formula with a double-weighted sales factor?

Mercy Corporation, headquartered in F, sells wireless computer devices, including keyboards and bar code readers. Mercy's degree of operations is sufficient to establish nexus only in E and F.Determine its sales factor in those states. State E applies a throwback rule to sales, while 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. Because F has not adopted a throwback rule, the sales to customers in G and to the U.S.government are not included in either state's sales factor.Mercy creates $70 million in "nowhere sales." E Sales factor = $60 million/$150 million = 40.00% F Sales factor = $20 million/$150 million = 13.33%

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.

Your supervisor has shifted your responsibilities from the Federal corporate income tax to a multistate corporate income tax practice. In what areas might your Federal income tax knowledge also be applicable in your new assignment?

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

In computing the property factor, property owned by the corporation typically is valued at its ____________________, but without adjusting for depreciation. or

Under Public Law 86-272, a state is prohibited from taxing a business if the only connection with the state is the _____________________ of orders for sales of tangible personal property that are sent outside the state for approval or rejection and, if approved, are filled and shipped by the business from a point outside of the state.

Pail Corporation is a merchandiser.It purchases overstock garments from various suppliers and sells the goods in its State L retail store.Determine the total sales that are subject to the L consumer sales tax.

An ad valorem property tax is based on the asset's current ____________________.