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Exam 24: Multistate Corporate Taxation

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Question 21

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

A) True
B) False

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Question 22

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A state sales/use tax is designed to be collected by the ________________ (seller/purchaser) of the product and then remitted to the state.

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Question 23

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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.

Birch Corporation sells computers to customers in most states via catalog and e-commerce. Its buildings and employees are all located in State X. This year, Birch is considering leasing computers to customers if preferred. Will this strategy change Birch's state tax obligations? Explain.

In the context of Federal and state corporate income taxation:

The use tax is designed to complement the sales tax. A use tax typically covers purchases made out of state and brought into the jurisdiction.

Leased property, when included in the property factor, usually is valued at________________ times its annual rental, even though the taxpayer does not own the asset.

Match each of the following items with the appropriate description, in applying the P.L. 86-272 definition of solicitation. a. More than solicitation, creates nexus b. Solicitation only, no nexus created -Operating a warehouse for inventory that is held in the state.

Given the following transactions for the year, determine Comp Corporation's D payroll factor denominator. State D has adopted the principles of UDITPA.

Match each of the following items with the appropriate description, in applying the P.L. 86-272 definition of solicitation. a. More than solicitation, creates nexus b. Solicitation only, no nexus created -Purchasing ads that show up on search-result screens for internet browsers.

In determining taxable income for state income tax purposes, interest income from another state's bonds typically constitutes a(n) ________________ modification.

A local property tax:

In most states, legal and accounting services are exempt from the sales/use tax base.

Trayne Corporation's sales office and manufacturing plant are located in State X. Trayne also maintains a manufacturing plant and sales office in State W. For purposes of apportionment, X defines payroll as all compensation paid to employees, including elective contributions to § 401(k) deferred compensation plans. Under the statutes of W, neither compensation paid to officers nor contributions to § 401(k) plans are included in the payroll factor. Trayne incurred the following personnel costs. Trayne's payroll factor for State X is:

A(n) ________________ business operates in concert with its affiliated companies. As a result, the affiliates' data are included in the parent's apportionment computations.

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

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

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.

With respect to typical sales/use tax laws:

Match each of the following items with the appropriate description, in applying the P.L. 86-272 definition of solicitation. a. More than solicitation, creates nexus b. Solicitation only, no nexus created -Training administrative personnel to use an update to ordering software.