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Exam 24: Multistate Corporate Taxation

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Question 81

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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 82

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Most states' consumer sales taxes are to be paid by the final purchaser of the taxable asset.

A) True
B) False

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Question 83

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State Q has adopted sales-factor-only apportionment for its corporate income tax.As a result,a ____________________ (larger/smaller) percentage of an out-of-state corporation's income is assigned to tax in the state.

Simpkin Corporation owns manufacturing facilities in States A,B,and C.A uses a three-factor apportionment formula under which the sales,property and payroll factors are equally weighted.B uses a three-factor apportionment formula under which sales are double-weighted.C employs a single-factor apportionment factor,based solely on sales. Simpkin's operations generated $1,000,000 of apportionable income,and its sales and payroll activity and average property owned in each of the three states is as follows. ​ Simpkin's apportionable income assigned to B is:

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 nexus only in States 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.

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

Match each of the following items with the appropriate description, in determining whether sales/use tax typically must be collected. a.Taxable b.Not taxable -A garment purchased by a self-employed actress.

Anders,a local business,wants your help in making a decision about a large capital investment.To assist your client,list several tax and non-tax implications of the decision.

What is the significance of the term nexus when discussing state income taxation?

​Multistate income tax planning can be effective for the taxpayer because:

All of the U.S.states use an apportionment formula based on the sales,property,and payroll factors.

Match each of the following items with the appropriate description, in determining whether sales/use tax typically must be collected. a.Taxable b.Not taxable -A garment purchased for resale.

State and local politicians tend to apply new and increased taxes to taxpayers who are non resident visitors to the jurisdiction,such as a tax on auto rentals,because the taxpayer cannot vote to reelect (or oust) the lawmaker.

Match each of the following items with the appropriate description, in applying the P. l. 86-272 definition of solicitation. a.More than solicitation, creates nexus b.Solicitation only, no nexus created -Training administrative personnel to use an update to ordering software.

Match each of the following items with the appropriate description, in applying the P. l. 86-272 definition of solicitation. a.More than solicitation, creates nexus b.Solicitation only, no nexus created -Checking the customer's inventory to determine whether a reorder is needed.

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

Hopper Corporation's property holdings in State E are as follows. Compute the numerator of Hopper's E property factor.

Zhao Company sold an asset on the first day of the tax year for $500,000.Zhao's Federal tax basis for the asset was $300,000.Because of differences in cost recovery schedules,the state regular-tax basis in the asset was $350,000.What adjustment,if any,should be made to Zhao's Federal taxable income in determining the correct taxable income for the typical state?

In the context of Federal and state corporate income taxation:

Flip 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 Flip's sales factor for the year.Both states follow the UDITPA and the MTC regulations in this regard. ​ * Excess warehouse space,seasonal rental to a competitor. ** Land held for speculation.