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Exam 23: State and Local Taxes

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Question 51

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PWD Incorporated is an Illinois corporation. It properly included, deducted, or excluded the following items on its federal tax return in the current year: PWD's Federal Taxable Income was $100,000. Calculate PWD's Illinois state tax base.

A) $116,000
B) $130,833
C) $131,000
D) $164,333

E) A) and B)
F) C) and D)

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Question 52

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Hoosier Incorporated is an Indiana corporation. It properly included, deducted, or excluded the following items on its federal tax return in the current year: State depreciation expense was $50,000. Hoosier's Federal Taxable Income was $150,300. Calculate Hoosier's Illinois state tax base.

A) $171,300
B) $173,800
C) $204,633
D) $207,133

E) A) and D)
F) A) and B)

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Question 53

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Gordon operates the Tennis Pro Shop in Blacksburg, Virginia. Tennis Pro sells, manufacturers, and customizes tennis racquets for serious amateurs. Tennis Pro's business has expanded significantly over the last few years. Currently, it has sales personnel in 10 states (Virginia, North Carolina, South Carolina, Georgia, Tennessee, Kentucky, Ohio, Maryland, District of Columbia, New Jersey). All sales activity in all of these states is limited to solicitation. Orders are received by the sales team and forwarded to Blacksburg for approval. All orders are sent by common carrier to customers. Tennis Pro owns retail and warehouse space in Virginia and has another warehouse in Kentucky. Is Tennis Pro subject to Ohio's Commercial Activity Tax (a non-income based tax)?

Most state tax laws adopt the federal tax law as of a specific date in time.

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?

Purchases of inventory for resale are typically exempt from sales and use taxes.

Interest and dividends are allocated to the state of commercial domicile.

Which of the following isn't a requirement of Public Law 86-272?

Delivery of tangible personal property through common carrier is a protected activity.

Businesses must pay income tax in their state of commercial domicile.

Which of the following activities will create sales tax nexus?

Gordon operates the Tennis Pro Shop in Blacksburg, Virginia. Tennis Pro has sales as follows: 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?

Business income is allocated to the state of commercial domicile.

Lefty provides demolition services in several southern states. Lefty has property as follows: Lefty is a Mississippi Corporation. Lefty also rents property in Mississippi and Tennessee with annual rents of $50,000 and $15,000, respectively. What is Lefty's Mississippi property numerator? (Round your answer to the nearest whole number.)

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

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

Physical presence does not always create sales tax nexus.

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

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

The property factor is generally calculated as being the average of the beginning and ending property values.