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SALT Test 1 > Test 1 Notes > Flashcards

Test 1 Notes Flashcards

1
Q

2 Major types of Tax

A
  1. Income Tax

2. Sales/Use Tax

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2
Q

No individual income tax

A 
Alaska
Florida
Nevada
South Dakota
Texas
Washington
Wyoming
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3
Q

Tax only dividend and interest income

A

Tennessee & New Hampshire

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4
Q

No corporate Income Tax

A

Nevada
South Dakota
Wyoming

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5
Q

No statewide sales tax

A 
Alaska
Delaware
Montana
New Hampshire
Oregon
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6
Q

Ga is a line 28 or 30 state

A

Line 30

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7
Q

State tax framework

A
  1. adjustments to line 20 or 30
  2. 2 Buckets: Business vs. Non-Business Income
  3. What is the apportionment %
  4. Apply apport. % to business income
  5. If non-business income applies to your state, then add it back = T.I
  6. State tax rate mult. by T.I.
  7. Tax Liability
  8. Any credits?
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8
Q

Common Adj: Add back

A
  1. Interest Income from state or municipal bonds
  2. State income tax paid
  3. Federal bonus depreciation
  4. Sec. 179 asset expensing
  5. Expenses related to state credits
  6. Royalty and Interest expense
  7. cancellation of indebtness income
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9
Q

Common Adj: Suubtract

A
  1. Interest on federal debt obligations: ex. US T-Notes
  2. State DRD: line 28 states only
  3. Federal Subpart F income
  4. NOL
  5. Sect 78 gross up income for deemed paid foreign taxes
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10
Q

Business income is apportioned or allocated

A

apportion among states

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11
Q

Non-business income is apportioned or allocated

A

allocated to state of domicile

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12
Q

UDITPA Sect. 1(a)

A

Business income = normal day-to-day operations

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13
Q

UDITPA Sect 1(e)

A

All income other than business income is non-business income

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14
Q

UDITPA Sect 1(e): Transactional Test

A

looks at frequency and regularity of transaction

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15
Q

UDITPA Sect 1(e): Functional Test

A

looks at the income producing products/asset & its relation to the business
i.e where did you get the money from

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16
Q

3 apportionment factors and equation

A
  1. property
  2. payroll
  3. sales
    “ in state / total “
17
Q

single sales factor

A

explain

18
Q

property rules factor

A
  1. All property owned or rented
  2. real & tangible property
  3. excluding intangible property (i.e. A/R & Marketable secur.
  4. Property valued at average original cost plus cost of additions & improvements
  5. Rented Property: 8 times annual rental cost
19
Q

Payroll factor sourcing

A
  1. some states exclude executive compensation

2. payroll to an employee in a no nexus state/ PL 86-272: state is included in the denominator

20
Q

Prorata

A

use the % of the product that was made in each of the states

21
Q

UDITPA Sect 17B

A

If income producing property is made in multiple states then use ALL or NOTHING

look to see where the highest % of the work is being performed

22
Q

Market Based

A

based on where the customer is

23
Q

Cost of Performance (COP)

A

source the sales of services where the work is being performed

Prorate or UDITPA Sect 17B: ALL or NOTHING

24
Q

Nowhere income

A

sales in a state, but not taxed

25
Q

2 Responses to nowhere income

A

Throwback Rule: if you have income in a state that isn’t being taxed, then throw it back to the home state

Throwout Rule: not being taxed, then throw it out of the denominator

26
Q

Due Process

A

Minimum connection/contact

27
Q

Commerce Clause

A

Physical presence and substantial nexus

28
Q

Temporary physical presence

A

just explain

29
Q

Affiliate nexus

A

just explain

30
Q

Attributional nexus

A

just explain

31
Q

4 Prong Test that must be met for CC on Income tax

A
  1. Substantial nexus
  2. Tax is fairly apportioned
  3. Tax doesn’t discriminate
  4. Tax is fairly related
32
Q

PL 86-272

A
  1. state can’t impose an income tax on any person
  2. mainly for companies that solicit sales
  3. orders must be shipped from outside the state
  4. applies only to income tax
33
Q

PL 86-272 Allowable Activities

A
  1. Conducting solicitation by using computer in state
  2. Salesmen drive company cars
  3. setting up display racks
34
Q

PL 86-272 Non-allowable activities

A
  1. collecting outstanding accounts: not furthering the sale
  2. Installing property in state
  3. Repair property in state
35
Q

State reporting methods

A
  1. state combines “Unitary” group reporting
  2. State separate reporting
  3. State consolidated

SALT Test 1 (2 decks)

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