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Exam 12: State and Local Taxes

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Question 1

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Tennis Pro has the following sales, payroll and property factors: What would Tennis Pro's Virginia and Maryland apportionment factors be if Virginia used a double-weighted sales four factor method and Maryland used a single-factor sales formula?

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\[\begin{array} { | l | r | r | } \hline & \text { Virginia } & \text { Maryland } \\ \hline \text { Sales } & 40 \% & 20 \% \\ \hline \text { Payroll } & 70 \% & 5 \% \\ \hline \text { Property } & 90 \% & 5 \% \\ \hline \end{array}\] 60 percent and 20 percent, respectively Explanation: [(40 + 40 + 70 + 90)/4] and 20.

Question 2

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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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The sale of demonstration models, repair...

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Question 3

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Public Law 86-272 was a congressional response to Northwestern States Portland Cement.

A unitary return includes only companies included in the federal consolidated tax return filing.

Assume Tennis Pro discovered that one salesman has gone into Arkansas once each year of the past 4 years and performed activities creating both sales and use tax nexus and income tax nexus. Assume that Arkansas sales were $25,000 each year. Assume that Arkansas business income would be 200,000 each year and that Tennis Pro's Arkansas apportionment percentage would be 1 percent. Assume there would be no Arkansas nonbusiness income. Assume that Arkansas sales and use tax rate was 6.5 percent and corporate income tax rate was 5 percent. What would Tennis Pro's Arkansas sales and use tax and income tax liability be ignoring any possible penalties and interest?

Handsome Rob provides transportation services in several western states. Rob has sales as follows: Rob is a California Corporation and has the following facts. Rob has nexus in Arizona, California, Nevada, and Washington. The Washington drivers spend 25 percent of their time driving through Oregon. California payroll includes $200,000 of payroll for services provided in Nevada by California based drivers. What is Rob's California sale numerator? $\begin{array} { | l | r | } \hline \text { Rob's Payrol: } & \\\hline \text { State } & \text { Sales } \\\hline \text { Arizona } & \$ 350,512 \\\hline \text { California } & \$ 1,134,589 \\\text { Nevada } & \$ 849,142 \\\hline \text { Washington } & \$ 323,032 \\\hline \text { Total } & \$ 2,657,275 \\\hline\end{array}$

Which of the following is true regarding state and local taxes?

Which of the following is not one of the Complete Auto Transit's criteria for whether a state can tax nondomiciliary companies?

Which of the following is not a general rule for allocating nonbusiness income?

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

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?

Mighty Manny, Incorporated manufactures ice scrapers and distributes them across the midwestern United States. Mighty Manny is incorporated and headquartered in Michigan. It has product sales to customers in Illinois, Indiana, Iowa, Michigan, Minnesota, Wisconsin, and Wyoming. It has sales personnel only where discussed. Determine the state in which Mighty Manny does not have sales and use tax nexus given the following scenarios:

Use tax liability accrues in the state where purchased property will be used when the seller of the property is not required to collect sales tax.

Mahre, Incorporated, a New York corporation, runs ski tours in a several states. Mahre also has a New York retail store and an Internet store which ships to out of state customers. The ski tours operate in Maine, New Hampshire, and Vermont where Mahre has employees and owns and uses tangible personal property. Mahre has real property only in New York. Mahre has the following sales: Assume the following sales tax rates: Alaska (6.6 percent) , Colorado (7.75 percent) , Maine (8.5 percent) , New Hampshire (6.75 percent) , New York (8 percent) , and Vermont (5 percent) . How much sales and use tax must Mahre collect and remit? $\begin{array} { | l | r | r | r | } \hline &{ \text { Mahre Sales } } \\\hline \text { State } & \text { Goods } & \text { Senrices } & \text { Total } \\\hline \text { Alaska } & \$ 23,194 & \$ 0 & \$ 23,194 \\\hline \text { Colorado } & 10,612 & 0 & 10,612 \\\hline \text { Maine } & 35,913 & 156,084 & 191,997 \\\hline \text { New Hampshire } & 26,721 & 325,327 & 352,048 \\\hline \text { New York } & 65,431 & 0 & 65,431 \\\hline \text { Vermont } & 41,982 & \underline { 277,441 } & \mathbf { 3 1 9 , 4 2 3 } \\\hline \text { Total } & \$ 203,853 & \$ 758,852 & \$ 962,706\end{array}$

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

Tennis Pro has the following sales, payroll and property factors: What is Tennis Pro's Virginia and Maryland apportionment factors if both states use an equally-weighted three-factor formula?

Businesses must collect sales tax only in states where it has sales and use tax nexus.

Giving samples and promotional materials without charge is a protected solicitation activity.

What was the Supreme Court's holding in Quill?

Tennis Pro is headquartered in Virginia. Assume it has a state income tax base of $200,000. Of this amount, $60,000 was non-business income. Assume that Tennis Pro's Virginia apportionment factor is 73.28 percent. The non-business income allocated to Virginia was $23,000. Assuming a Virginia corporate tax rate of 5.5 percent, what is Tennis Pro's Virginia state tax liability? (Round your answer to the nearest whole number)