Question 1

The states that impose a general sales tax also have a use tax.

Accepted Answer

Use tax is essentially the same as sales tax, but it applies to purchases made out of state or online. States that have a sales tax generally also have a use tax to ensure they receive revenue from these types of purchases.

Question 2

A Federal excise tax is still imposed on admission to theaters.

Accepted Answer

False

Question 3

The Federal excise tax on cigarettes is an example of a proportional tax.

Accepted Answer

A proportional tax is one in which the tax rate remains the same regardless of the taxpayer's income or ability to pay. The Federal excise tax on cigarettes is a specific amount per cigarette sold, making it a proportional tax.

Question 4

Because the law is complicated, most individual taxpayers are not able to complete their Federal income tax returns without outside assistance.

Accepted Answer

The law is complex and constantly changing, making it difficult for the average taxpayer to navigate without seeking help from a professional or using tax preparation software.

Question 5

The Federal income tax on individuals generates more revenue than the Federal income tax on corporations.

Accepted Answer

According to data from the Congressional Budget Office, in Fiscal year 2020, individual income taxes generated $1.6 trillion in revenue, while corporate income taxes generated $230 billion in revenue. Therefore, the Federal income tax on individuals generates more revenue than the Federal income tax on corporations.

Question 6

The ad valorem tax on personal use personalty is more often avoided by taxpayers than the ad valorem tax on business use personalty.

Accepted Answer

Taxpayers are more likely to use strategies to avoid or minimize the ad valorem tax on personal use personalty, such as undervaluing the assets or transferring them to a different state with lower tax rates. In contrast, the ad valorem tax on business use personalty is usually easier to track and enforce, as it applies to assets used for income-producing activities.

Question 7

Sales made by mail order are not exempt from the application of a general sales (or use) tax.

Accepted Answer

Sales made by mail order are subject to the same sales tax laws as in-person transactions. Therefore, they are not exempt from a general sales (or use) tax.

Question 8

Unlike the Federal counterpart, the amount of the state excise taxes on gasoline varies from state to state.

Accepted Answer

This statement is true. Each state has its own excise tax rate on gasoline, which can vary widely. As of 2021, state gas taxes range from 14.65 cents per gallon in Alaska to 58.7 cents per gallon in Pennsylvania.

Question 9

A fixture will be subject to the ad valorem tax on realty rather than the ad valorem tax on personalty.

Accepted Answer

Fixtures, which are items that are attached to real property such as light fixtures or built-in cabinets, are considered a part of the realty rather than personal property. As a result, they are subject to the ad valorem tax on realty.

Question 10

There is no Federal excise tax on hotel occupancy.

Accepted Answer

The answer of There is no Federal excise tax on...

Question 11

Mona inherits her mother's personal residence, which she converts to a furnished rent house.These changes should not affect the amount of ad valorem property taxes levied on the properties.

Accepted Answer

Converting the personal residence to a rent house may result in a change in the property's classification for tax purposes, which could affect the amount of ad valorem property taxes levied.

Question 12

If property tax rates are not changed, the amount of ad valorem taxes imposed on realty will remain the same.

Accepted Answer

The answer of If property tax rates are not changed,...

Question 13

The ratification of the Sixteenth Amendment to the U.S.Constitution was necessary to validate the Federal income tax on corporations.

Accepted Answer

The ratification of the Sixteenth Amendment to the U.S. Constitution was necessary to validate the Federal income tax on individuals, not just corporations.

Question 14

The first income tax on individuals (after the ratification of the Sixteenth Amendment to the Constitution) levied tax rates from a low of 2% to a high of 6%.

Accepted Answer

The first income tax on individuals, after the ratification of the Sixteenth Amendment to the Constitution, was levied with tax rates ranging from 1% to 7%, with a maximum of 7% on incomes above $500,000.

Question 15

Before the Sixteenth Amendment to the Constitution was ratified, there was no valid Federal income tax on individuals.

Accepted Answer

Before the Sixteenth Amendment, the Federal government did levy income taxes, notably during the Civil War period. However, the legality of a permanent income tax was challenged and led to the Supreme Court ruling in Pollock v. Farmers' Loan & Trust Co. (1895) that such taxes were unconstitutional if not apportioned according to state populations. The Sixteenth Amendment, ratified in 1913, explicitly allowed the Federal government to levy an income tax without apportionment among the states.

Question 16

The FICA tax (Medicare component) on wages is progressive since the tax due increases as wages increase.

Accepted Answer

The Medicare component of the FICA tax is a flat rate tax, not progressive; it applies the same percentage rate to wages regardless of income level.

Question 17

The Federal estate and gift taxes are examples of progressive taxes.

Accepted Answer

The Federal estate and gift taxes are progressive taxes because the tax rate increases as the value of the estate or gift increases.

Question 18

Currently, the Federal income tax is more progressive than it ever has been in the past.

Accepted Answer

The answer of Currently, the Federal income tax is more...

Question 19

The pay-as-you-go feature of the Federal income tax on individuals conforms to Adam Smith's canon of certainty.

Accepted Answer

The answer of The pay-as-you-go feature of the Federal income...

Question 20

The Federal gas-guzzler tax applies only to automobiles manufactured overseas and imported into the U.S.

Accepted Answer

The Federal gas-guzzler tax applies to all vehicles sold in the U.S., regardless of where they are manufactured. However, the tax rate may be higher for imported vehicles that do not meet certain fuel efficiency standards.

Quiz 1: An Introduction to Taxation and Understanding the Federal Tax Law