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Exam 23: State and Local Taxes

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Question 61

Multiple Choice

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Bethesda Corporation is unprotected from income tax by Public Law 86-272. Which of the following characteristics creates a problem for Bethesda in states other than Maryland?

A) Bethesda does business in Maryland and five other states.
B) Bethesda sells copier equipment and copy center services.
C) All orders are approved in Maryland.
D) All in-state services are limited to solicitation in states other than Maryland.

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

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Question 62

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What was the Supreme Court's holding in Quill?

A) An out-of-state mail-order company did not have a sales tax collection responsibility because it lacked physical presence.
B) Reaffirmed that an out-of-state business must have physical presence in the state before the state may require the business to collect sales tax from in-state customers.
C) Spelled out four criteria for determining whether states may subject nondomiciliary companies to an income tax.
D) Defined solicitation for purposes of Public Law 86-272.

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

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Question 63

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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.

Which of the following is not a general rule for calculating the payroll factor?

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?

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

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.)

Roxy operates a dress shop in Arlington, Virginia. Lisa, a Maryland resident, comes in for a measurement and purchases a $1,500 dress that is shipped to her Maryland residence using a common carrier. Assuming that Virginia's sales tax rate is 5 percent and that Maryland's sales tax rate is 7 percent, what is Roxy's sales and use tax liability?

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

The Mobil decision identified three factors to determine whether a group of companies are unitary.

All states employ some combination of sales and use tax, income or franchise tax, or property tax to fund their government operations.

Which of the following is not a general rule for calculating the property factor?

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?

A state's apportionment formula divides nonbusiness income among the states where income tax nexus exists.

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

In which of the following state cases did the state not assert economic nexus?

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