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Exam 16: Multistate Corporate Taxation

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Question 1

Multiple Choice

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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?

A) In all of the states, according to the apportionment formulas of each, as the U.S. government is present in all states.
B) $100,000 in A.
C) $100,000 in B.
D) $0 in both A and B.

E) B) and D)
F) B) and C)

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Question 2

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

A) True
B) False

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Question 3

Multiple Choice

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Bert 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. Bert's State M property factor is:

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

In determining a corporation's taxable income for state income tax purposes, which of the following does not constitute a subtraction from Federal income?

The benefits of a passive investment company typically include:

A state sales tax usually falls upon:

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:

Match each of the following items with the appropriate description, in determining whether sales/use tax typically must be collected a.Taxable b.Not taxable -Prescription drugs and medicines purchased by a consumer.

Cruz 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. 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. ​ Cruz's apportionable income assigned to C is:

Match each of the following terms with the appropriate description, in the state income tax formula. Apply the UDITPA rules in your responses -Treasury Bond interest income.

Match each of the following terms with the appropriate description, in the state income tax formula. Apply the UDITPA rules in your responses -State-level NOL.

Guilford Corporation is subject to franchise tax in State Z. The tax is imposed at a rate of 2.5% of the taxpayer's net worth that is apportioned to the state by use of a two factor (sales and property equally weighted) formula. The property factor includes real and tangible personal property, valued at net book value at the end of the taxable year. Sixty percent of Guilford's sales are attributable to Z, and $200,000 of the net book value of Guilford's tangible personal property is located in Z. Determine the Z franchise tax payable by Guilford this year, given the following end-of-the year balance sheet. ​

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?

Typically exempt from the sales/use tax base is the purchase by a symphony orchestra of printed music for its players.

Sales/use tax nexus is established for the taxpayer by the sales-solicitation activities of an independent contractor acting on the taxpayer's behalf.

When the taxpayer has exposure to a capital stock tax:

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

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

Match each of the following items with the appropriate description, in applying the P.L. 86-272 definition of solicitation -Purchasing ads that show up on search-result screens for internet browsers.