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Exam 16: Multistate Corporate Taxation

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Question 31

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For most taxpayers, which of the traditional apportionment factors yields the greatest opportunities for tax reduction?

A) Payroll.
B) Property.
C) Sales gross receipts) .
D) Unitary.

E) All of the above
F) B) and D)

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Question 32

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A use tax applies when a State A resident purchases:

A) A new automobile from a State A dealership.
B) A used automobile from the website of a State A dealership.
C) A new automobile from a State B dealership and then uses the car back at home in State A.
D) A new automobile that is purchased from an online seller.

E) All of the above
F) C) and D)

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Question 33

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

The property factor includes business assets that the taxpayer owns and those merely used under a lease agreement.

The sale of groceries to an individual probably is exempt from sales/use tax under the _________________________ rule.

Sales/use tax in most states applies to a restaurant meal.

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 State A headquarters to the State B office of the Federal Bureau of Investigation. In which states) will the sale be included in the sales factor numerator?

The individual seller of shares of stock in Facebook is liable for sales tax on the transaction.

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

A state sales tax usually falls upon:

The starting point in computing state taxable income generally is________________ .

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

Match each of the following items with the appropriate description in applying the P.L. 86-272 definition of solicitation. -Carrying a free sample of a product to the customer's premises.

A unitary group of entities files a combined return that includes all of the affiliates' income and apportionment data.

Under P.L. 86-272, which of the following transactions by itself would create nexus with a state?

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.

In the income tax apportionment formula, market-sourcing the sales factor means that:

You are preparing to make a presentation to a client who has some familiarity with state corporate income tax rules. At a general level, list for the client the principles of multistate tax planning.

An assembly worker earns a $50,000 salary and receives a fringe benefit package worth $15,000. The payroll factor assigns $65,000 for this employee.