Question 1

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 2

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 typically not taxable.

Question 3

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

A garment purchased for resale is typically not taxable, as the sales/use tax will be collected when the final customer purchases the item.

Question 4

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

DAn increase in R's statutory corporate income tax rates does not directly affect WillCo's apportionment factors in terms of sales, payroll, or property since it is a tax rate change, not a change in WillCo's business operations or where it conducts business. Therefore, there's no change in apportionment factors (A). However, considering the context of how apportionment might be influenced by tax strategies, companies might shift more income to jurisdictions with lower tax rates if possible, theoretically increasing R's apportionment factor due to increased tax liabilities there (D), but this is speculative and depends on WillCo's specific tax planning strategies.

Question 5

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

Fees paid to an accounting firm for the conduct of a financial audit are not taxable.

Question 6

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

This will result in a decrease in WillCo's apportionment factors in Q since the sales-only formula will assign more weight to where the sales occur rather than where the company is located. However, there will be no effect on R or S factors as they have not adopted any change in apportionment formula.

Question 7

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 8

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

Generally, tangible personal property bought by a self-employed individual is subject to sales/use tax.

Question 9

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

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

Question 10

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 WillCo's Q apportionment factor. This rule typically applies to sales of tangible personal property that are shipped from a state but not taxed in the destination state, either because the selling company does not have nexus there or for other reasons. These sales are "thrown back" and included in the sales factor of the origin state (Q, in this case), thus increasing its apportionment factor.

Question 11

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 by employees for wear at an office job are generally considered taxable because they are personal items and not exempt from sales/use tax.

Question 12

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 jurisdictions do not require sales/use tax to be collected on services unless specifically enumerated as taxable.

Question 13

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

Generally, when a consumer makes a purchase out of state and brings it back into their home state, they are required to pay sales or use tax on the item in their home state. Therefore, the purchase of a new auto in Europe and shipping it to the owner's home state in the US would typically be subject to sales or use tax.

Question 14

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 inventory to determine whether a reorder is needed falls under the definition of solicitation under P.L. 86-272, but does not create nexus as long as the salesperson does not engage in any other activities that go beyond mere solicitation.

Question 15

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 eaten at a restaurant are generally taxable, even if conducted while conducting business.

Question 16

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 17

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

In most states, purchases made by charities are exempt from sales/use tax as long as they are used for charitable purposes. Therefore, computer equipment purchased by a charity is not taxable.

Question 18

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 19

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

In most states, groceries purchased for home consumption and not meant for immediate consumption are generally exempt from sales/use tax.

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, according to P.L. 86-272, and does not by itself create nexus for state tax purposes. This is because it is a form of advertising aimed at promoting sales, which falls under the protection of P.L. 86-272, preventing the creation of nexus solely based on such activities.

Quiz 16: Multistate Corporate Taxation

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. -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 garment purchased for resale.

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 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 garment purchased by a self-employed actress.

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 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 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 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 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 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. -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. -Purchasing ads that appear on search-result screens of internet browsers.