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Question 1
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In the United States, corporations are subject only to taxes imposed by the federal government.

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Question 2
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The federal income tax deduction allowed for state income taxes paid decreases the cost of the state taxes.

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Question 3
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If a corporation with a 21% marginal federal income tax rate pays $20,000 state income tax, the after-tax cost of the state tax is $15,800.

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Question 4
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Multi-state businesses can reduce their overall tax cost to the extent they can shift income from a low-tax state to a high-tax state.

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Question 5
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A corporation is usually subject to tax by any state in which it engages in any business transactions.

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Question 6
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Article 1 of the U.S. Constitution, referred to as the commerce clause, prohibits state governments from using a tax to discriminate against interstate commerce.

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Question 7
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Article 1 of the U.S. Constitution, referred to as the commerce clause, prohibits a state from charging an extra 10 cent tax per gallon on gasoline sold to trucks with out-of-state license plates.

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Question 8
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According to Public Law 86-272, the sale of tangible goods to residents of a state is not sufficient to establish nexus in that state.

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Question 9
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If Gamma Inc. is incorporated in Ohio and has its commercial domicile in Cleveland, the state of Ohio has jurisdiction to tax 100% of Gamma's business income.

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Question 10
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Non-resident firms selling tangible goods to in-state residents can use P.L. 86-272 to avoid having income tax nexus in a state.

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Question 11
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The UDITPA formula for state income tax apportionment consists of three factors: sales, payroll, and profit.

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Question 12
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The UDITPA formula for apportioning income among states is based on four equally weighted factors.

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Question 13
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The sales factor in the UDITPA state income tax apportionment formula equals in-state sales divided by total sales.

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Question 14
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The sales factor in the UDITPA state income tax apportionment formula equals out-of-state sales divided by total sales.

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Question 15
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All states assessing an income tax use the same formula for apportionment purposes.

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Question 16
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The payroll factor in the UDITPA state income tax apportionment formula always includes executive compensation.

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Question 17
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Multi-State, Inc. does business in two states. Its apportionment percentage in state A is 63%. Its apportionment percentage in the other state can be no more than 37%.

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Question 18
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Luttrix Inc. does business in Nebraska (6% tax rate) and Colorado (3% tax rate). All other factors being equal, Luttrix will reduce state taxes if it constructs a new manufacturing plant in Colorado.

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Question 19
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The foreign tax credit is available only for foreign income, excise, value-added, sales, property and transfer taxes.

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Question 20
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International tax treaties generally allow a government to tax a non-resident firm that maintains a permanent residence in the treaty country.

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