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Exam 24: Multistate Corporate Taxation

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Question 61

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The starting point in computing state taxable income generally is .

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Federal ta...

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Question 62

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

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Question 63

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Almost all of the states assess some form of consumer-level sales/use tax.

In conducting multistate tax planning, the taxpayer should:

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.

Troy, an S corporation, is subject to tax only in State A. On Schedule K of its Federal Form 1120S, Troy reported ordinary income of $2,000,000 from its business, municipal bond interest of $150,000, taxable interest of $150,000, and charitable contributions of $300,000. A does not recognize S status, but it does follow the Federal provisions with respect to the determination of taxable income for a corporation. Determine Troy's A taxable income.

In states, a(n) election permits a multinational corporation to elect to limit the reach of the state's taxing jurisdiction to activities occurring within the boundaries of the United States.

Match each of the following items with the appropriate description, in determining whether sales/use tax typically must be collected. -A garment purchased for wear at an office job.

A state sales tax usually falls upon:

Simpkin Corporation owns manufacturing facilities in States A, B, and C. A uses a three-factor apportionment formula under which the sales, property and payroll factors are equally weighted. B uses a three-factor apportionment formula under which sales are double-weighted. C employs a single-factor apportionment factor, based solely on sales. Simpkin's operations generated $1,000,000 of apportionable income, and its sales and payroll activity and average Property owned in each of the three states is as follows. $\begin{array}{lrrrr} & \text { State A } & \text { State B } & \text { State C } & \text { Totals } \\\text { Sales } & \$ 400,000 & \$ 800,000 & \$ 300,000 & \$ 1,500,000 \\\text { Payroll } & 100,000 & 150,000 & 50,000 & 300,000 \\\text { Property } & 200,000 & 200,000 & 200,000 & 600,000\end{array}$ Simpkin's apportionable income assigned to B is:

General Corporation is taxable in a number of states. This year, General made a $100,000 sale from its A headquarters to a customer in B. This activity is not sufficient for General to create nexus with B. State A applies a throwback rule, but State B does not. In which state(s) will the sale be included in the sales factor numerator?

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 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.

Typically, a sales/use tax is applied to a retail sale of ____________________ property.

Typically exempt from the sales/use tax base is the purchase of lumber by a do-it-yourself homeowner, when she builds a deck onto her patio. This exemption is known as the "homestead rule."

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

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.

In international taxation, we discuss income sourcing rules and the permanent establishment doctrine. In multistate taxation, an analogous term might be the "ultimate destination concept." Define this term, and identify at least two of the most important exceptions to the general rule.

General Corporation is taxable in a number of states. This year, General made a $100,000 sale from its A headquarters to a State B office of an agency of the U.S. government. General has not established nexus with B. State A does not apply a throwback rule. In which state(s) will the sale be included in the sales factor numerator?

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