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Exam 23: State and Local Taxes

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Question 61

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Della Corporation is headquartered in Carlisle, Pennsylvania. Della has a Pennsylvania state income tax base of $425,000. Of this amount, $75,000 was nonbusiness income. Della's Pennsylvania apportionment factor is 28.52 percent. The nonbusiness income allocated to Pennsylvania was $61,000. Assuming a Pennsylvania corporate tax rate of 7.75 percent, what is Della's Pennsylvania state tax liability?

A) $8,821
B) $9,084
C) $12,464
D) $13,549

E) C) and D)
F) All of the above

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Question 62

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Gordon operates the Tennis Pro Shop in Blacksburg, Virginia. Tennis pro decides to expand into Pennsylvania during the current year and try some new sales techniques. Tennis pro advertises on local radio and television as well as national tennis magazines sent into PA. Salesmen give away promotional materials and occasionally sell demonstration models to local shop employees to build goodwill for Tennis Pro. It holds sales meetings at rented space in local hotels. Personnel occasionally fix minor problems such as tape and strings without charge. One employee performed a credit check for a major account who needed merchandise immediately. Each sales person is allowed an allowance for a car and office equipment to be maintained in an in-home office. Do any of Tennis Pro activities have the potential to create income tax nexus?

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Question 63

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Historically, most states used an equally weighted three-factor apportionment formula.

Tennis Pro has the following sales, payroll and property factors: $\begin{array} { l r r } & \text { Virginia } & \text { Maryland } \\\text { Sales } & 40 \% & 20 \% \\\text { Payroll } & 70 \% & 5 \% \\\text { Property } & 90 \% & 5 \%\end{array}$ What is Tennis Pro's Virginia and Maryland apportionment factors if both states use an equally-weighted three-factor formula?

Roxy operates a dress shop in Arlington, Virginia. Roxy also ships dresses nationwide upon request. Roxy's Virginia sales are $1,000,000 and out of state sales are $200,000. Assuming that Virginia's sales tax rate is 5 percent, what is Roxy's Virginia sales and use tax liability?

What was the Supreme Court's holding in Complete Auto Transit?

What was the Supreme Court's holding in National Bellas Hess?

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

Which of the following isn't a typical federal/state adjustment?

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

Commercial domicile is the location where a business is headquartered and directs its operations from.

Gordon operates the Tennis Pro Shop in Blacksburg, Virginia. Tennis Pro has sales as follows: $\begin{array}{l}\text { Tennis Pro's Sales: }\\\begin{array} { l r } \underline { \text { State } } & \underline { \text { Sales } } \\\text { DC } & \$ 184,031 \\\text { Georgia } & 420,421 \\\text { Virginia } & 903,293 \\\text { other } & \underline { 734,035 } \\\text { Totals } & \$ 2,241,780\end{array}\end{array}$ Assume that Tennis Pro's other sales include $150,000 of sales to a federal government entity that was shipped from Virginia to Maryland. What is Tennis Pro's Virginia sales numerator and sales factor?

Hoosier Incorporated is an Indiana corporation. It properly included, deducted, or excluded the following items on its federal tax return in the current year: $\begin{array}{lrl}\underline{\text { Item }} & \underline{\text { Amount }} & \underline{\text { Federal Treatment }} \\\text { Illinois Income Taxes } & \$ 33,333 & \text { Deducted on federal return } \\\text { Indiana Income Taxes } & \$ 18,500 & \text { Deducted on federal return } \\\text { Ohio Commercial Activity Tax } & \$ 4,000 & \text { Deducted on federal return } \\\text { Depreciation } & \$ 40,000 & \text { Deducted on federal return } \\\text { Illinois Bond Interest } & \$ 10,000 & \text { Excluded from federal return } \\\text { Indiana Bond Interest } & \$ 15,000 & \text { Excluded from federal return } \\\text { Federal T-Note Interest } & \$ 2,500 & \text { Included on federal return }\end{array}$ State depreciation expense was $50,000. Hoosier's Federal Taxable Income was $150,300. Calculate Hoosier's Illinois state tax base.

Sales personnel investigating a potential customer's credit worthiness exceed boundaries of solicitation.

A gross receipts tax is subject to Public Law 86-272.

Many states are expanding the types of services subject to sales tax.

Public Law 86-272 protects only companies selling tangible personal property.