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Exam 24: Multistate Corporate Taxation

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Question 41

True/False

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In most states,a taxpayer's income is apportioned on the basis of a formula measuring the extent of business contact,and allocated according to the location of property owned or used.

A) True
B) False

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Question 42

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A use tax:

A) Applies when a State A resident purchases a new automobile from a State A dealership.
B) Applies when a State A resident purchases a new automobile from a State B dealership,then driving the car home.
C) Applies when a State A resident purchases groceries from a neighborhood store.
D) Applies when a State A resident purchases hardware from sears.com rather than at the Best Buy store at the local mall.

E) None of the above
F) A) and B)

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Question 43

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The sale of a used auto probably is exempt from sales/use tax under the _________________________ rule.

Indicate for each transaction whether a sales (S)or use (U)applies,or whether the transaction is nontaxable (N).Where the laws vary among various states,assume that the most common rules apply.All taxpayers are individuals.

Wailes Corporation is subject to a corporate income tax only in State X.The starting point in computing X taxable income is Federal taxable income.Wailes' Federal taxable income is $750,000,which includes a $75,000 deduction for state income taxes.During the year,Wailes received $20,000 interest on Federal obligations.X tax law does not allow a deduction for state income tax payments. Wailes' taxable income for X purposes is:

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

List some of the most commonly encountered state income tax modifications,used in computing state taxable income.

In determining a corporation's taxable income for state income tax purposes,which of the following does not constitute a subtraction from Federal income?

____________________ is a method under which specific components of a corporation's income are directly assigned to a specific state.

A state or local tax on a corporation's income might be called a franchise tax or a business privilege tax.

Usually a business chooses a location where it will build a new plant based chiefly on tax considerations.

Hermann Corporation is based in State A (corporate income tax rate 10%.It sells its goods to customers in both A and State B (corporate income tax rate 4%).Hermann's state taxable income for the year is $1 million,30% of which relates to B customers.Hermann's level of activities in B is insufficient to create nexus there,but A has adopted a throwback rule as to multistate sales.Would Hermann reduce its total state income tax liability by creating nexus with B,say by allowing its sales force to make credit decisions? Elaborate.

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

The typical state sales/use tax falls on sales of both products and services.

Identify some state/local income tax issues facing pass-through entities such as S corporations,partnerships,and LLCs.

Judy,a regional sales manager,has her office in State X.Her region includes several states,as indicated in the sales report below.Determine how much of Judy's $200,000 compensation is assigned to the payroll factor of State X.

State A applies a throwback rule.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.In which state(s) will the sale be included in the sales factor?

State and local politicians tend to apply new and increased taxes to taxpayers who are visitors to the jurisdiction and cannot vote to reelect the lawmaker.

In most states,a limited liability company (LLC) is subject to the state income tax:

Typical indicators of nexus include the presence of employees based in the state,and the ownership or lease of realty there.