Question 1

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
-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 2

Dott Corporation generated $300,000 of state taxable income from selling its mapping software in States A and B.
For the taxable year, the corporation's activities within the two states were as follows.
  
Dott has determined that it is subject to tax in both A and B. Both states utilize a three-factor apportionment formula which equally weights sales, property, and payroll. The rates of corporate income tax imposed in A and B are 7% and 10%, respectively. Determine Dott's state income tax liability.

Accepted Answer

The answer of Dott Corporation generated $300,000 of state taxable...

Question 3

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 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 4

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
-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 5

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.

Accepted Answer

The answer of Flip Corporation operates in two states, as...

Question 6

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 textbook purchased by a State University student.

Accepted Answer

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

Question 7

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
-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. Taxable
b. Not taxable
-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 9

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
-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 10

Provide the required information for Orange Corporation, whose Federal taxable income totals $100 million. Orange apportions 70% of its business income to State C. Orange generates $10 million of nonbusiness income each year. Forty percent of that income is attributable to rentals of buildings located in C. Orange's business income this year totals $90 million.
a. State C taxes how much of Orange's business income?
b. State C taxes how much of Orange's nonbusiness income?
c. Explain your results.

Accepted Answer

The answer of Provide the required information for Orange Corporation,...

Question 11

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
-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 12

Compute Still Corporation's State Q taxable income and tax liability for the year.

Accepted Answer

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

Question 13

Hill Corporation is subject to tax only in State X. Hill generated the following income and deductions. State income taxes are not deductible for X income tax purposes.
  
a. The starting point in computing the State X income tax base is Federal taxable income. Derive this amount.
b. Determine Hill's State X taxable income, assuming that interest on X obligations is exempt from State X income tax.
c. Determine Hill's taxable income, assuming that interest on X obligations is subject to State X income tax.

Accepted Answer

The answer of Hill Corporation is subject to tax only...

Question 14

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
-Earthmoving equipment used by the purchaser in construction business.

Accepted Answer

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

Question 15

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 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 16

Milt Corporation owns and operates two facilities that manufacture paper products. One of the facilities is located in State D, and the other is located in State E. Milt generated $1,200,000 of taxable income, comprised of $1,000,000 of income from its manufacturing facilities and a $200,000 gain from the sale of nonbusiness property located in E. E does not distinguish between business and nonbusiness property. D apportions business income. Milt's activities within the two states are outlined below.
  
Both D and E utilize a three-factor apportionment formula, under which sales, property, and payroll are equally weighted. Determine the amount of Milt's income that is subject to income tax by each state.

Accepted Answer

The answer of Milt Corporation owns and operates two facilities...

Question 17

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 new auto purchased in Europe and shipped by the driver to her home state in the U.S.

Accepted Answer

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

Question 18

Condor Corporation generated $450,000 of state taxable income from selling its product in States A and B. For the taxable year, the corporation's activities within the two states were as follows.
  
Condor has determined that it is subject to tax in both A and B. Both states utilize a three-factor apportionment formula that equally weights sales, property, and payroll. The rates of corporate income tax imposed in A and B are 5% and 3%, respectively. Determine Condor's state income tax liability.

Accepted Answer

The answer of Condor Corporation generated $450,000 of state taxable...

Question 19

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.

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 20

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.
a. No change in apportionment factors 
b. Q apportionment factor increases
c. Q apportionment factor decreases 
d. R apportionment factor increases 
e. R apportionment factor decreases 
f. S apportionment factor increases 
g. S apportionment factor decreases
-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.

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. a. Taxable b. Not taxable -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. Taxable b. Not taxable -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. Taxable b. Not taxable -Groceries purchased by an individual and taken home for meal preparation there.

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 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. Taxable b. Not taxable -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. Taxable b. Not taxable -A garment purchased for resale.

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 -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. a. Taxable b. Not taxable -Computer equipment purchased by a charity.

Compute Still Corporation's State Q taxable income and tax liability for the year.

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 -Earthmoving equipment used by the purchaser in construction business.

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 an employee for wear at an office job.

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 new auto purchased in Europe and shipped by the driver to her home state in the U.S.

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.