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Exam 12: State and Local Taxes

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Question 51

Multiple Choice

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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:

A) Mighty Manny has sales personnel that visit Minnesota. These sales employees follow procedures that comply with Public Law 86-272. The orders are received and sent to Michigan for acceptance. The goods are shipped by FedEx into Minnesota.
B) Mighty Manny's trucks drive through Nebraska to deliver goods to Mighty Manny's customers in other states.
C) Mighty Manny provides design services to another manufacturer located in Wisconsin. While the services are performed in Michigan, Mighty Manny's designers visit Wisconsin at least quarterly to deliver the new designs and receive feedback.
D) Mighty Manny receives online orders from its Illinois client. Because the orders are so large, the goods are delivered weekly on Mighty Manny's trucks.

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

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Question 52

Multiple Choice

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Wacky Wendy produces gourmet cheese in Wisconsin.Wendy has sales as follows: Wendy is a Wisconsin Corporation and has the following operations. Wendy has nexus in Iowa,Minnesota,and Wisconsin.The Michigan sales are shipped from Wisconsin (a throwback state) .$100,000 of the Wisconsin sales were to the federal government.What is Wendy's Wisconsin sale numerator?

A) $1,223,032.
B) $1,323,032.
C) $1,357,621.
D) $1,457,621.

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

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Question 53

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

Gordon operates the Tennis Pro Shop in Blacksburg,Virginia.Tennis Pro has property as follows: What is Tennis Pro's Virginia property numerator and property factor?

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

Immaterial violations of the solicitation rules automatically create income tax nexus.

Business income is allocated to the state of commercial domicile.

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

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

Big Company and Little Company are both owned by Mrs.Smith.Big and Little file a consolidated federal tax return.Big manufactures office paper and other paper supplies and is based in Washington.Little operates a logging operation in Montana.Sixty percent of Little's sales are made to Big.Ten percent of Big's raw materials come from Little.There are no common officers or board members.There are no common service providers.What are the factors for and against filing a unitary tax return?

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?

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.

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

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

Business income includes all income earned in the ordinary course of business.

Discuss the steps necessary to determine whether a sales or use tax applies and how the tax is collected.

Gordon operates the Tennis Pro Shop in Blacksburg,Virginia.Tennis Pro has payroll as follows: The other total includes $10,000 of salary of a Virginia employee that works part time in another state.What is Tennis Pro's Virginia payroll numerator and payroll factor?

Assume Tennis Pro attends a sports equipment expo in Washington State.Assume this activity creates nexus of the Business and Occupation (B&O)tax.Assume the tax is 0.5% of gross receipts for retailers and 1.5% of gross receipts on services.If Tennis Pro has $20,000 of Washington retail sales and $2,000 of services performed,calculate Tennis Pro's B&O tax.

The Wrigley case held that the sale of intangibles is protected by Public Law 86-272.

Gordon operates the Tennis Pro Shop in Blacksburg,Virginia.The Shop sells,manufacturers,and customizes tennis racquets for serious amateurs.Virginia has a 5 percent sales tax.Tennessee has a 4 percent sales tax.Determine the sales and use tax liability that the Shop must collect and remit if it sells a $500 racquet to a Tennessee resident that purchases the merchandise in the Virginia retail store?