Question 1

Usually a business chooses a location where it will build a new plant based chiefly on tax considerations.

Accepted Answer

While tax considerations may be a factor, there are many other factors that businesses consider when choosing a location for a new plant, such as proximity to raw materials, transportation infrastructure, availability of skilled labor, local regulations, and market demand.

Question 2

All of the U.S.states have adopted a tax based on the net taxable income of corporations.

Accepted Answer

Not all U.S. states impose a tax based on the net taxable income of corporations. Some states, like Wyoming and South Dakota, do not have a corporate income tax.

Question 3

Most of the U.S.states have adopted an alternative minimum tax,similar to the Federal system,in taxing the income of corporations.

Accepted Answer

Most U.S. states do not have an alternative minimum tax for corporations similar to the federal system; only a few states have implemented such a tax.

Question 4

Roughly five percent of all taxes paid by businesses in the U.S.are to state,local,and municipal jurisdictions.

Accepted Answer

The answer of Roughly five percent of all taxes paid...

Question 5

Property taxes generally are collected by local taxing jurisdictions,not the state or Federal governments.

Accepted Answer

Property taxes are typically collected by counties, municipalities, or other local taxing jurisdictions, such as school districts or special districts. State and federal governments may have some involvement in the property tax system, such as setting guidelines or providing funding, but they are not typically responsible for collecting property taxes directly.

Question 6

A state can levy an income tax on a business only if the business was incorporated in the state.

Accepted Answer

A state can levy an income tax on a business if the business has nexus (sufficient physical or economic presence) in the state, regardless of whether it was incorporated there or not.

Question 7

Politicians frequently use tax credits and exemptions to create economic development incentives.

Accepted Answer

This is true, as tax credits and exemptions are often used by politicians to encourage certain industries or businesses to establish themselves in a given area or to create jobs.

Question 8

Nonbusiness income receives tax-exempt treatment under all state corporate income taxes.

Accepted Answer

Nonbusiness income may receive tax-exempt treatment under some state corporate income taxes, but not all. It varies by state.

Question 9

Typical indicators of income-tax nexus include the presence of customers in the state.

Accepted Answer

The answer of Typical indicators of income-tax nexus include the...

Question 10

State and local politicians tend to apply new and increased taxes to taxpayers who are non resident visitors to the jurisdiction,such as a tax on auto rentals,because the taxpayer cannot vote to reelect (or oust) the lawmaker.

Accepted Answer

This statement is true. Non-resident visitors cannot vote in local or state elections, and therefore politicians may feel more comfortable increasing taxes on these individuals, as they do not have to worry about losing their support come election time.

Question 11

Under P.L.86-272,the taxpayer is exempt from state taxes on income resulting from the mere solicitation of orders for the sale of stocks and bonds.

Accepted Answer

P.L. 86-272 provides an exemption from state income taxes for businesses whose activities in the state are limited to the solicitation of orders for sales of tangible personal property, not stocks and bonds, which are considered intangible property.

Question 12

A typical state taxable income subtraction modification is the interest income earned from another state's bonds.

Accepted Answer

State taxable income subtraction modifications typically do not include interest income earned from other states' bonds; instead, most states tax this income. Interest from a state's own bonds may be exempt, but interest from other states' bonds is usually taxable.

Question 13

All of the U.S.states use an apportionment formula based on the sales,property,and payroll factors.

Accepted Answer

While many states do use an apportionment formula based on sales, property, and payroll factors, there is no single formula used by all 50 states. In fact, some states have unique apportionment formulas that are not based on these factors at all.

Question 14

In most states,a taxpayer's income is apportioned on the basis of a formula measuring the extent of business contact,and allocated according to the location of property owned or used.

Accepted Answer

This statement is true. Many states use formulas based on the extent of business activity or property ownership/usage to apportion and allocate a taxpayer's income for tax purposes.

Question 15

A typical state taxable income addition modification is for the state's NOL allowed the taxpayer for the tax year.

Accepted Answer

State taxable income addition modifications typically include items that are tax-exempt at the federal level but not at the state level, rather than adjustments for a state's Net Operating Loss (NOL) allowed for the taxpayer. NOL adjustments are usually subtraction modifications, if they differ from federal NOL calculations.

Question 16

Most states begin the computation of corporate taxable income with an amount from the Federal income tax return.

Accepted Answer

Most states conform to the Internal Revenue Code and therefore use the federal taxable income as the starting point for computing state taxable income.

Question 17

Typically,sales/use taxes constitute about 20 percent of a state's annual tax collections.

Accepted Answer

The answer of Typically,sales/use taxes constitute about 20 percent of...

Question 18

Double weighting the sales factor effectively decreases the corporate income tax burden on taxpayers based in the state,such as entities with in-state headquarters.

Accepted Answer

Double weighting the sales factor would increase the weight given to sales, which may benefit companies with in-state sales and in-state headquarters, ultimately decreasing their corporate income tax burden.

Question 19

A typical U.S.state piggybacks its collections of the corporate income tax,by letting the Federal government collect and remit the corresponding tax to the state.

Accepted Answer

States independently administer and collect their own corporate income taxes, separate from the federal government. The IRS collects federal taxes, while state departments of revenue collect state taxes.

Question 20

If a state follows Federal income tax rules,the state's tax compliance and enforcement become easier to accomplish.

Accepted Answer

If a state follows Federal income tax rules, it can utilize the same forms, definitions, and procedures as the Federal government, making tax compliance and enforcement easier to achieve. Additionally, taxpayers are less likely to make mistakes or misreport information since they are already familiar with the Federal income tax system.

Quiz 24: Multistate Corporate Taxation