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Exam 24: Multistate Corporate Taxation

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Question 21

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The sales/use tax that is employed by most U.S.states does not fall on all retail transactions. Identify at least five sales/use tax exemptions that states often allow, eliminating certain transactions from the tax base.

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Most state and local governmen...

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Question 22

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

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Question 23

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A service engineer spends 60% of her time maintaining the employer's productive business property and 40% maintaining the employer's nonbusiness rental properties.This year, her compensation totaled $90,000.The payroll factor assigns $54,000 to the state in which the employer is based.

Boot Corporation is subject to income tax in States A and B.Boot's operations generated $200,000 of apportionable income, and its sales and payroll activity and average property owned in each of the states is as follows. How much more (less) of Boot's income is subject to A income tax if, instead of using an equally-weighted three-factor apportionment formula, A uses a formula with a double-weighted sales factor?

Bobby and Sally work for the same employer, Wooster Manufacturing. Bobby manages the company's speculative investment portfolio, and Sally is a foreman in the factory. How are the salaries paid to Bobby and Sally treated in computing Wooster's payroll factor? Apply the general UDITPA rules.

You are completing the State A income tax return for Quaint Company, LLC.Quaint operates in various states, showing the following results. In A, all interest is treated as business income.A uses a sales-only apportionment factor.Compute Quaint's A taxable income.

Typically exempt from the sales/use tax base is the purchase of clothing from a neighbor's "garage sale."

Typically exempt from the sales/use tax base is the purchase of tools by a manufacturer to make the widgets that it sells.

In computing the property factor, property owned by the corporation typically is valued at its ____________________, but without adjusting for depreciation. or

In the broadest application of the unitary theory, the U.S.unitary business files a combined tax return using factors and income amounts for all affiliates:

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

The starting point in computing state taxable income generally is ____________________.

Net Corporation's sales office and manufacturing plant are located in State X.Net 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 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.Net incurred the following personnel costs. Net's payroll factor for State W is:

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

Indicate for each transaction whether a sales (S) or use (U) applies, or whether the transaction is nontaxable (N).Where the laws vary among various states, assume that the most common rules apply.All taxpayers are individuals.

A typical state taxable income addition modification is for the Federal income tax paid for the period.

Valdez Corporation, a calendar-year taxpayer, owns property in States M and O.Both M and O require that the average value of assets be included in the property factor.M requires that the property be valued at its historical cost, and O requires that the property be included in the property factor at its net depreciated book value. Valdez's O property factor is:

Typically, corporate income taxes constitute about 20 percent of a state's tax collections.

Parent and Junior form a unitary group of corporations.Parent is located in a state with an effective tax rate of 3%, while Junior's effective tax rate is 9%.Acting in concert to reduce overall tax liabilities, the group should:

State Q has adopted sales-factor-only apportionment for its corporate income tax. As a result, a ____________________ (larger/smaller) percentage of an out-of-state corporation's income is assigned to tax in the state.