Question 1

Match each of the following events considered independently to its likely effect on WillCo's various apportionment factors. WillCo is based in Q and has customers in Q, R, and S. To this point, WillCo has not established nexus with S. More than one choice may be correct.
-WillCo completes the construction of production facilities in S.

Accepted Answer

F  Constructing production facilities in S establishes nexus, increasing S's apportionment factor and decreasing Q's apportionment factor as the business activity is now spread across more states.

Question 2

Match each of the following items with the appropriate description in determining whether sales/use tax typically must be collected.
-Computer equipment purchased by a charity.

Accepted Answer

Purchases made by charities are often exempt from sales/use tax, assuming the charity has a valid exemption certificate and the purchase is for a charitable purpose.

Question 3

Match each of the following events considered independently to its likely effect on WillCo's various apportionment factors. WillCo is based in Q and has customers in Q, R, and S. To this point, WillCo has not established nexus with S. More than one choice may be correct.
-R adopts an increase in its statutory corporate income tax rates.

Accepted Answer

An increase in R's statutory corporate income tax rates does not directly affect WillCo's apportionment factors, which are based on sales, payroll, and property. These factors are not directly influenced by changes in tax rates.

Question 4

Match each of the following items with the appropriate description in determining whether sales/use tax typically must be collected.
-Earthmoving equipment used by the purchaser in a construction business.

Accepted Answer

The answer of Match each of the following items with...

Question 5

Match each of the following items with the appropriate description in determining whether sales/use tax typically must be collected.
-Groceries purchased by an individual and taken home for meal preparation there.

Accepted Answer

Groceries purchased for home preparation and consumption are generally exempt from sales/use tax in many jurisdictions, recognizing the essential nature of food items.

Question 6

Match each of the following items with the appropriate description in applying the P.L. 86-272 definition of solicitation.
-Operating a warehouse for inventory that is held in the state.

Accepted Answer

Operating a warehouse for inventory that is held in the state goes beyond mere solicitation of sales and therefore creates a nexus with the state, making the business subject to state taxes and regulations.

Question 7

Match each of the following items with the appropriate description in determining whether sales/use tax typically must be collected.
-Computing services purchased by a business.

Accepted Answer

Computing services, when purchased by a business, are generally considered a service rather than a tangible good. Most states do not require sales/use tax to be collected on services unless specifically enumerated as taxable.

Question 8

Match each of the following items with the appropriate description in determining whether sales/use tax typically must be collected.
-A meal eaten at a restaurant while conducting business.

Accepted Answer

Meals consumed at a restaurant are generally considered taxable as they are tangible personal property consumed within the state, and most states impose sales tax on such transactions.

Question 9

Match each of the following items with the appropriate description in determining whether sales/use tax typically must be collected.
-A garment purchased by a self-employed actress.

Accepted Answer

Purchases of tangible personal property, such as garments, are generally subject to sales/use tax unless a specific exemption applies. There is no general exemption for purchases made by self-employed individuals for their business, including actors, unless the item is for resale or another specific exemption applies.

Question 10

Match each of the following items with the appropriate description in determining whether sales/use tax typically must be collected.
-A garment purchased by an employee for wear at an office job.

Accepted Answer

Garments purchased for personal use, including those for wear at an office job, are generally considered taxable items in many jurisdictions.

Question 11

Compute Still Corporation's State Q taxable income and tax liability for the year. $$\begin{array} { l r } 
\text { Addition modifications } & \$ 70,000 \
\text { Allocated income - total } & \$ 80,000 \
\text { Allocated income - State Q } & \$ 60,000 \
\text { Allocated income - State P } & \$ 20,000 \
\text { Apportionment percentage - State Q } & 40 \% \
\text { Federal taxable income } & \$ 500,000 \
\text { State tax credits } & \$ 11,000 \
\text { Subtraction modifications } & \$ 30,000 \
\text { Tax rate } & 5 \%
\end{array}$$

Accepted Answer

The answer of Compute Still Corporation's State Q taxable income...

Question 12

Match each of the following items with the appropriate description in applying the P.L. 86-272 definition of solicitation.
-Checking the customer's inventory to determine whether a reorder is needed.

Accepted Answer

Checking the customer's inventory to determine whether a reorder is needed is considered solicitation only, as it does not create a nexus.

Question 13

Match each of the following items with the appropriate description in determining whether sales/use tax typically must be collected.
-A textbook purchased by a State University student.

Accepted Answer

The answer of Match each of the following items with...

Question 14

Match each of the following items with the appropriate description in determining whether sales/use tax typically must be collected.
-A new auto purchased in Europe and shipped by the owner to her home state in the United States.

Accepted Answer

When a new auto is purchased in Europe and then shipped to the owner's home state in the United States, it is typically subject to sales/use tax upon its entry or registration in the home state, making it taxable.

Question 15

Match each of the following items with the appropriate description in determining whether sales/use tax typically must be collected.
-Prescription drugs and medicines purchased by a consumer.

Accepted Answer

Prescription drugs and medicines purchased by a consumer are generally not taxable in many jurisdictions, as they are considered essential items for health and welfare.

Question 16

Match each of the following items with the appropriate description in determining whether sales/use tax typically must be collected.
-Fees paid to an accounting firm for the conduct of a financial audit.

Accepted Answer

Services such as accounting, including financial audits, are generally not subject to sales/use tax as they are considered professional services rather than tangible personal property or specified taxable services.

Question 17

Match each of the following items with the appropriate description in determining whether sales/use tax typically must be collected.
-A garment purchased for resale.

Accepted Answer

Items purchased for resale are generally not subject to sales/use tax because the tax is collected from the end user at the point of final sale.

Question 18

Match each of the following events considered independently to its likely effect on WillCo's various apportionment factors. WillCo is based in Q and has customers in Q, R, and S. To this point, WillCo has not established nexus with S. More than one choice may be correct.
-Q adopts a sales-only apportionment formula.

Accepted Answer

The answer of Match each of the following events considered...

Question 19

Match each of the following events considered independently to its likely effect on WillCo's various apportionment factors. WillCo is based in Q and has customers in Q, R, and S. To this point, WillCo has not established nexus with S. More than one choice may be correct.
-Q adopts a throwback rule.

Accepted Answer

The adoption of a throwback rule by Q would likely increase Q's apportionment factor for WillCo. This rule typically applies to sales shipped to a state where the selling company does not have nexus, and those sales are "thrown back" to the origin state (in this case, Q) for tax purposes, thus increasing the sales factor (and potentially the overall apportionment factor) in the origin state.

Question 20

Match each of the following items with the appropriate description in applying the P.L. 86-272 definition of solicitation.
-Purchasing ads that appear on search-result screens of internet browsers.

Accepted Answer

Purchasing ads that appear on search-result screens of internet browsers is considered as solicitation only, under P.L. 86-272, because it is a form of advertising aimed at promoting sales, and does not by itself create a substantial enough physical presence in a state to establish nexus for state tax purposes.

Quiz 24: Multistate Corporate Taxation

Match each of the following items with the appropriate description in determining whether sales/use tax typically must be collected. -Computer equipment purchased by a charity.

Match each of the following items with the appropriate description in determining whether sales/use tax typically must be collected. -Earthmoving equipment used by the purchaser in a construction business.

Match each of the following items with the appropriate description in determining whether sales/use tax typically must be collected. -Groceries purchased by an individual and taken home for meal preparation there.

Match each of the following items with the appropriate description in applying the P.L. 86-272 definition of solicitation. -Operating a warehouse for inventory that is held in the state.

Match each of the following items with the appropriate description in determining whether sales/use tax typically must be collected. -Computing services purchased by a business.

Match each of the following items with the appropriate description in determining whether sales/use tax typically must be collected. -A meal eaten at a restaurant while conducting business.

Match each of the following items with the appropriate description in determining whether sales/use tax typically must be collected. -A garment purchased by a self-employed actress.

Match each of the following items with the appropriate description in determining whether sales/use tax typically must be collected. -A garment purchased by an employee for wear at an office job.

Match each of the following items with the appropriate description in applying the P.L. 86-272 definition of solicitation. -Checking the customer's inventory to determine whether a reorder is needed.

Match each of the following items with the appropriate description in determining whether sales/use tax typically must be collected. -A textbook purchased by a State University student.

Match each of the following items with the appropriate description in determining whether sales/use tax typically must be collected. -A new auto purchased in Europe and shipped by the owner to her home state in the United States.

Match each of the following items with the appropriate description in determining whether sales/use tax typically must be collected. -Prescription drugs and medicines purchased by a consumer.

Match each of the following items with the appropriate description in determining whether sales/use tax typically must be collected. -Fees paid to an accounting firm for the conduct of a financial audit.

Match each of the following items with the appropriate description in determining whether sales/use tax typically must be collected. -A garment purchased for resale.

Match each of the following events considered independently to its likely effect on WillCo's various apportionment factors. WillCo is based in Q and has customers in Q, R, and S. To this point, WillCo has not established nexus with S. More than one choice may be correct. -Q adopts a throwback rule.

Match each of the following items with the appropriate description in applying the P.L. 86-272 definition of solicitation. -Purchasing ads that appear on search-result screens of internet browsers.