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[LO 3] Compare and contrast the
rules for where domiciliary and non-domiciliary businesses must file state
income tax returns.
[LO 3] Lars operates Keep Flying, Incorporated, a
used airplane parts business, in Laramie,
Wyoming. Lars employs sales agents that visit
mechanics in all 50 states to solicit orders.
All orders are sent to Wyoming
for approval. All parts are shipped via
common carrier. The sales agents are
always on the lookout for wrecked, abandoned, or salvaged aircraft with rare
parts because they receive substantial bonuses for removing these parts and
shipping them to Wyoming. Discuss the states where Keep Flying has
income tax nexus.
[LO 3] Explain changes in the U.S. economy which
have caused P.L. 86-272 to become partially obsolete and provide an example of
a company that P.L. 86-272 works well for and an example of a company that it
does not work well for.
[LO 3] Climb Higher is a distributor of high end
climbing gear and is located in Paradise,
Washington. Climb Higher’s sales personnel regularly
perform the following activities in an effort to maximize sales:
Carry swag (free samples) for
distribution to climbing shop employees.
Perform credit checks on new
customers to reduce delivery time the first time merchandise is ordered.
Check customer inventory for proper
display and proper quantities.
Accept returns of merchandise
for defective goods.
Higher’s sales activities that are protected and unprotected under the Wrigley Supreme Court decision.
[LO 3] Describe a situation where it would be advantageous
for a business to establish income tax nexus in a state.
[LO 3] States are arguing for economic nexus;
provide at least one reason for and against the validity of economic nexus.
10. [LO 3] Explain the difference
between separate return states and unitary return states.
11. [LO 3] Explain the rationale
for the factors (functional integration, centralization of management, and
economies of scale) used to determine whether two or more businesses form a
unitary group under the Mobil decision.
12. [LO 3] Compare and contrast
why book/tax and federal/state adjustments are necessary for interest income.
13. [LO 3] Compare and contrast
the differences between how business and non-business income are divided among
states for a multi-state business.
14. [LO 3] Discuss differences
between the treatment of government sales and dock sales for the sales
15. [LO 3] Most states have
increased the weighting of the sales factor for the apportionment of business
income. What are some possible reasons?
16. [LO 3] Compare and contrast
federal/state tax differences and book/federal tax differences.