Preview Extract
State Tax Services
TEST BANK, Chapter 8
Multiple Choice
Choose the best answer for each of the following questions:
1. Generally, local governments are authorized to impose taxes by the:
a. state statutory or constitutional provisions.
b. local ordinances or charters.
c. municipal regulations and codes.
d. county resolutions and bylaws.
Answer: a
Rationale:
Local governments derive their authority to impose taxes from state statutory or
constitutional provisions. These provisions delegate taxing authority to local jurisdictions
within the framework established by the state government.
2. Severance taxes are imposed on:
a. sale of real estate.
b. removal of natural resources from land or water.
c. sale of stocks.
d. all of the above
Answer: b
Rationale:
Severance taxes are levied on the extraction or severance of natural resources, such as oil,
gas, or minerals, from land or water within a taxing jurisdiction. These taxes are applied
to compensate the state or local government for the depletion of these resources.
3. Which of the following generally constrains the type of taxes imposed within a state?
a. U.S. Constitution
b. State Constitution
c. Federal Internal Revenue Code
d. All of the above.
Answer: b
Rationale:
The State Constitution serves as the primary constraint on the types of taxes that can be
imposed within a state. It outlines the powers and limitations of state government,
including taxation authority and provisions for the protection of individual rights.
4. Which of the following statements regarding the history of state and local taxation is
INCORRECT?
a. In the southern states, early taxes were based on import/exports.
b. State income taxes were introduced in the early 1900s.
c. State sales taxes were imposed before state property taxes.
d. States relied on property taxes for revenue before income taxes were introduced.
e. All of the above statements are correct.
Answer: c
Rationale:
State sales taxes were not typically imposed before state property taxes. Instead,
historically, states relied more heavily on property taxes for revenue before the
introduction of income taxes in the early 20th century.
5. Which statement is CORRECT regarding State sales taxes?
a. They were first imposed in the early 20th century.
b. New York had the first city sales tax.
c. They were first imposed in the early 19th century.
d. Only (a) and (b) are correct.
e. Only (b) and (c) are correct.
Answer: d
Rationale:
State sales taxes were first imposed in the early 20th century, and New York was indeed
among the first states to introduce a city sales tax. These taxes became increasingly
common as states sought alternative revenue sources beyond property taxes.
6. Which of the following clauses of the U.S. Constitution immunizes the Federal
government from taxation by the states?
a. Supremacy Clause
b. Commerce Clause
c. Due Process Clause
d. Equal Protection Clause
Answer: a
Rationale:
The Supremacy Clause of the U.S. Constitution establishes that federal law takes
precedence over state laws and constitutions. This principle prevents states from taxing or
interfering with the operations of the federal government.
7. Which two U.S. Constitutional clauses primarily control the states’ power to tax out-of
state individuals and entities?
a. Due Process Clause and Equal Protection Clause
b. Supremacy Clause and Commerce Clause
c. Commerce Clause and Due Process Clause
d. Supremacy Clause and Due Process Clause
Answer: c
Rationale:
The Commerce Clause grants Congress the authority to regulate interstate commerce,
while the Due Process Clause of the Fourteenth Amendment imposes limitations on a
state's ability to tax out-of-state individuals and entities by requiring sufficient minimum
contacts or nexus.
8. Which Federal Constitutional clause limits the territorial scope of a state’s taxing
authority based on “fairness” to tax?
a. Due Process Clause
b. Commerce Clause
c. Equal protection Clause
d. all of the above
Answer: a
Rationale:
The Due Process Clause of the Fourteenth Amendment ensures that state taxation is fair
and does not violate an individual's right to due process. This includes considerations of
whether the individual or entity being taxed has sufficient connections or nexus with the
taxing state.
9. Which Federal Constitutional clause states that Congress has the power to regulate
business with foreign nations and among States?
a. Due Process Clause
b. Supremacy Clause
c. Equal protection Clause
d. Commerce Clause
Answer: d
Rationale:
The Commerce Clause of the U.S. Constitution, found in Article I, Section 8, grants
Congress the authority to regulate commerce with foreign nations, among the states, and
with Native American tribes. This clause has been interpreted to limit state taxation that
unduly burdens interstate commerce.
10. Which of the following are criteria developed by the U.S. Supreme Court for
allowing a state to tax interstate commerce?
a. The tax only applies to businesses with a substantial nexus with the taxing state.
b. The tax burden is fairly apportioned.
c. The tax is related to the services provided by the state.
d. All of the above.
Answer: d
Rationale:
The U.S. Supreme Court has established criteria for state taxation of interstate commerce,
including requiring a substantial nexus with the taxing state, fair apportionment of the tax
burden, and a rational relationship between the tax and the services provided by the state.
These criteria ensure that state taxation does not unduly burden interstate commerce in
violation of the Commerce Clause.
11. The purpose of the Streamlined Sales and Use Tax Agreement is to:
a. prevent income taxation of interstate commerce if a company’s only business within a
state is solicitation of orders.
b. encourage states to model their tax structures after the Federal tax system.
c. phase out sales and use tax gradually.
d. simplify and modernize sales and use tax administration.
Answer: d
Rationale:
The Streamlined Sales and Use Tax Agreement (SSUTA) aims to simplify and modernize
sales and use tax administration by standardizing tax laws and administrative practices
across participating states. It does not specifically address income taxation of interstate
commerce but focuses on streamlining sales and use tax processes.
12. Tax statutes enacted by the state legislatures are signed by the:
a. President of the United States.
b. State Governors.
c. Commissioner of Internal Revenue.
d. Multistate Tax Commission.
Answer: b
Rationale:
State tax statutes are enacted by state legislatures and are signed into law by the
respective state governors. This process is similar to the federal level where federal tax
laws are enacted by Congress and signed by the President.
13. State revenue departments are:
a. administrative agencies responsible for interpreting and enforcing tax statutes.
b. legislative bodies responsible for enacting tax statutes.
c. branches of the Internal Revenue Service.
d. none of the above.
Answer: a
Rationale:
State revenue departments are administrative agencies tasked with the responsibility of
interpreting and enforcing tax statutes within their respective states. They are not
legislative bodies nor are they branches of the Internal Revenue Service (IRS).
14. Which of the following statements is CORRECT regarding State judicial systems?
a. State Supreme Court precedents apply to all states.
b. Most states have specialized tax courts.
c. Most states have a three-tier judicial system.
d. All of the above statements are correct.
Answer: c
Rationale:
Most states have a three-tier judicial system consisting of trial courts, appellate courts,
and a state supreme court. While state Supreme Court precedents carry weight within
their respective states, they do not universally apply to all states.
15. The Uniform Division of Income for Tax Purposes Act (UDITPA) was drafted for
which of the following purposes?
a. To help taxpayers understand nexus and business registration requirements.
b. To perform comprehensive audits of multistate businesses.
c. To create greater uniformity in the measurement of business versus nonbusiness
income.
d. All of the above.
Answer: c
Rationale:
The Uniform Division of Income for Tax Purposes Act (UDITPA) was drafted to create
greater uniformity in the apportionment and allocation of income for state tax purposes. It
aims to provide consistency in how states determine taxable income for businesses
operating in multiple jurisdictions.
16. The Multistate Tax Commission is an organization of state governments created to:
a. facilitate the proper determination of state and local tax liability of multistate
taxpayers.
b. simplify and modernize state sales and use tax administration.
c. facilitate the proper determination of Federal tax liability of multistate taxpayers.
d. All of the above.
Answer: a
Rationale:
The Multistate Tax Commission (MTC) is an organization composed of state
governments that aims to facilitate the proper determination of state and local tax liability
for multistate taxpayers. Its focus is on coordinating efforts among states to ensure fair
and consistent tax treatment across jurisdictions.
17. Which of the following statements best describes the National Nexus Program?
a. It is designed to avoid federal and state tax duplication.
b. It allows the Multistate Tax Commission to perform a comprehensive audit of a
business’s taxes for several states at one time.
c. It provides support to the states on identifying potential companies for referral to the
joint audit program.
d. None of the above.
Answer: c
Rationale:
The National Nexus Program provides support to states in identifying potential
companies that may have nexus within their jurisdiction for referral to the joint audit
program. It aims to assist states in enforcing their tax laws and ensuring compliance by
out-of-state businesses.
18. What effect does the Interstate Income Law (Pubic Law 86-272) have on state
taxation of out-of-state businesses?
a. It is the Supreme Court’s rule that a state cannot tax a business without minimum
contacts.
b. It allows joint audits of multistate businesses.
c. It prevents income taxation of interstate commerce if a company’s only business within
a state is solicitation of orders.
d. All of the above.
Answer: c
Rationale:
The Interstate Income Law (Public Law 86-272) prohibits states from imposing income
tax on businesses whose only activity within the state is the solicitation of orders for sales
of tangible personal property. This law provides protection to out-of-state businesses
engaging in certain limited activities within a state.
19. The All States Tax Guide, a special feature of RIA’s State and Local Tax service,
provides:
a. multistate charts that can cut across a variety of taxes and/or states.
b. the latest news on state tax developments.
c. a database consisting of all proposed legislation in full text.
d. a concise state-by-state analysis of all major taxes, with citations to state materials.
Answer: d
Rationale:
The All States Tax Guide offers a concise state-by-state analysis of all major taxes,
providing readers with detailed information on tax laws and regulations across different
jurisdictions. It aims to assist tax professionals and businesses in understanding their tax
obligations in various states.
20. RIA StateNet is:
a. a concise state-by-state analysis of all major taxes with links to state materials.
b. a database consisting of proposed and current state legislation.
c. the weekly state tax newsletter furnished with a Checkpoint subscription.
d. a feature that enables the creation of charts from various tax materials.
Answer: b
Rationale:
RIA StateNet is a database that contains information on proposed and current state
legislation, providing users with access to legislative updates and developments in state
tax law. It serves as a valuable resource for tax professionals and policymakers tracking
changes in state tax regulations.
21. Which statement best describes the State Tax Reporters?
a. Published by CCH, these publications provide detailed explanations, primary source
materials, and practical compliance guidance for each state.
b. Published by CCH, these publications contain all proposed federal and state tax
legislation.
c. Published by RIA, these reporters contain the latest news on state tax developments.
d. Published by RIA, these publications provide multistate charts comparing taxes in the
different states.
Answer: a
Rationale:
The State Tax Reporters, published by CCH, are known for offering comprehensive
coverage of state tax laws, including detailed explanations, primary source materials, and
practical compliance guidance tailored for each state's requirements. These publications
serve as essential resources for tax professionals navigating state tax regulations and
compliance.
22. The noted State Taxation treatise is:
a. authored by Tax Analysts.
b. published by CCH.
c. authored by Walter Hellerstein and published by BNA.
d. authored by Jerome R. Hellerstein and Walter Hellerstein and published by WG&L.
Answer: d
Rationale:
The noted State Taxation treatise, authored by Jerome R. Hellerstein and Walter
Hellerstein, is indeed published by WG&L (Warren, Gorham & Lamont). This treatise
provides authoritative insights and analysis into various aspects of state taxation law,
making it a widely recognized and relied-upon resource in the field.
23. Which statement about the Multistate Corporate Tax Guide is CORRECT?
a. It is published by CCH.
b. It contains an analysis of key corporate tax issues for all states and some localities.
c. Much of the information is collected through questionnaires completed by top state tax
officials.
d. All of the above.
Answer: d
Rationale:
The Multistate Corporate Tax Guide, published by CCH, indeed contains an analysis of
key corporate tax issues for all states and some localities. Moreover, much of the
information presented in this guide is collected through questionnaires completed by top
state tax officials, making it a comprehensive and reliable resource for corporate tax
professionals.
24. The Journal of Multistate Taxation and Incentives is published by:
a. CCH
b. BNA
c. Westlaw
d. WG&L
Answer: d
Rationale:
The Journal of Multistate Taxation and Incentives is indeed published by WG&L
(Warren, Gorham & Lamont). This journal offers specialized insights and analysis on
multistate taxation issues and incentives, catering to the needs of professionals navigating
complex tax environments across multiple jurisdictions.
25. Which of the following newsletters is published by Tax Analysts?
a. State Tax Today
b. Journal of Multistate State Taxation
c. StateNet
d. State Taxation
Answer: a
Rationale:
Tax Analysts publishes State Tax Today, providing timely updates and analysis on state
tax developments. This newsletter serves as a valuable resource for tax professionals
seeking to stay informed about the latest developments and trends in state taxation.
True or False
Indicate which of the following statements are true or false by circling the correct answer.
1. Most states constitutions do not permit operating the state at a deficit.
Answer: True
Rationale:
The statement is true. The constitutions of most states in the United States contain
provisions that prohibit operating the state at a deficit. These provisions are in place to
ensure fiscal responsibility and budgetary discipline, requiring states to balance their
budgets annually or biennially. Operating at a deficit would mean spending more money
than the state receives in revenue, leading to financial instability and potentially
unsustainable levels of debt. Therefore, state constitutions typically mandate balanced
budgets to promote fiscal stability and sound financial management.
2. The interpretation of the Commerce Clause’s limits on state taxation is based on the
case Quill Corp. v. North Dakota, which established four criteria for permissible state
taxation of interstate commerce.
Answer: False
Rationale:
The interpretation of the Commerce Clause’s limits on state taxation is based on the case
Complete Auto Transit, Inc. v. Brady, which established four criteria for permissible state
taxation of interstate commerce.
3. Because state constitutions limit types and rates of tax, state use alternative methods of
raising revenue, such as expanding the scope of nexus, increasing compliance, and
imposing substantial penalties.
Answer: True
Rationale:
The statement is true. State constitutions often impose restrictions on the types and rates
of taxes that states can levy. To compensate for these limitations and raise revenue, states
may employ alternative methods such as broadening the scope of nexus (the connection
between a business and a taxing jurisdiction), enhancing compliance efforts to ensure
taxes are collected accurately, and imposing substantial penalties for non-compliance.
These strategies allow states to generate revenue within the confines of their
constitutional tax limitations.
4. The Tax Foundation is an educational organization that prepares a tax climate ranking
for states in the United States.
Answer: True
Rationale:
The statement is true. The Tax Foundation is indeed an educational organization that
produces an annual State Business Tax Climate Index, which ranks states based on their
tax policies and competitiveness. This index evaluates factors such as individual income
taxes, corporate taxes, sales taxes, property taxes, and other elements of state tax systems
to provide insights into the business tax climates of different states. The Tax Foundation's
rankings are widely used by policymakers, businesses, and researchers to assess and
compare the tax environments across states.
5. All states “piggyback” their income tax provisions on the federal Internal Revenue
Code.
Answer: False
Rationale:
Some, not all, states piggyback their tax systems on the federal Internal Revenue Code.
6. The Federal Laws are the supreme laws in the United States and can trump state tax
laws.
Answer: True
Rationale:
The statement is true. According to the Supremacy Clause of the United States
Constitution (Article VI, Clause 2), federal laws, including federal tax laws, are
considered the supreme law of the land and take precedence over conflicting state laws.
This means that if there is a conflict between federal and state tax laws, federal laws
prevail, and states must adhere to them.
7. State tax research can be a challenge because each state organizes its tax code based on
different criteria and has a different numbering system.
Answer: True
Rationale:
The statement is true. State tax research can indeed be challenging due to the variation in
how each state organizes its tax code. States may organize their tax laws based on
different criteria, such as subject matter or tax type, leading to differences in structure and
numbering systems. As a result, tax researchers and practitioners must navigate these
differences when conducting research across multiple states, which can add complexity to
the process.
8. The process of dividing a multistate corporation’s tax base among the states in which it
does business based on several factors is called formula apportionment.
Answer: True
Rationale:
The statement is true. Formula apportionment refers to the method used by states to
allocate and apportion the taxable income of multistate corporations among the various
states in which they conduct business. This process typically involves applying a formula
that considers factors such as the corporation's sales, property, and payroll in each state to
determine the portion of income subject to taxation in each jurisdiction. Formula
apportionment is a widely used method for addressing the challenges of taxing multistate
corporations fairly and efficiently.
9. In most states, business income is allocated to a jurisdiction while nonbusiness income
is apportioned.
Answer: False
Rationale:
In most states, nonbusiness income is allocated to a jurisdiction while business income is
apportioned.
10. While Federal revenue bills constitutionally must start in the House of
Representatives, this is not a requirement in all state legislatures.
Answer: True
Rationale:
The statement is true. In the United States, federal revenue bills must originate in the
House of Representatives, as mandated by the Origination Clause of the U.S.
Constitution (Article I, Section 7). However, this requirement does not apply uniformly
to all state legislatures. While some states may have similar provisions, others may allow
revenue bills to originate in either chamber of the legislature or may not have specific
constitutional requirements regarding the origination of revenue bills.
11. In RIA Checkpoint’s state and local service, a researcher must select a state before
the options for entering a state citation search are available.
Answer: True
Rationale:
The statement is true. In RIA Checkpoint's state and local service, researchers must
indeed select a specific state before gaining access to the options for entering a state
citation search. This ensures that the search results are tailored to the laws, regulations,
and rulings applicable to the chosen state, allowing researchers to focus their inquiries on
relevant legal authorities and guidance specific to that jurisdiction.
12. When determining state taxable income, refunds of state income taxes are added to
the Federal taxable income when adjusting the difference between Federal and state tax
rules.
Answer: False
Rationale:
Refunds of state income taxes are deducted from the Federal taxable income when
adjusting the difference between Federal and state tax rules for state tax purposes.
13. The Joint Audit Program allows the MTC to perform a comprehensive audit of a
business’s taxes for several states simultaneously.
Answer: True
Rationale:
The statement is true. The Multistate Tax Commission (MTC) does indeed administer a
Joint Audit Program, which enables it to conduct comprehensive audits of a business's
taxes across multiple states simultaneously. This program allows for more efficient and
coordinated auditing processes, reducing the burden on businesses and ensuring
consistent compliance with state tax laws across jurisdictions.
14. The RIA feature “Compare It” enables the researcher to compare the tax treatment of
an item in one state to the treatment in another state or with the Federal treatment.
Answer: True
Rationale:
The statement is true. The "Compare It" feature in RIA enables researchers to directly
compare the tax treatment of specific items or topics across different states or with
federal treatment. This functionality allows users to quickly identify differences or
similarities in tax laws and regulations between jurisdictions, aiding in comprehensive tax
research and analysis.
15. BNA provides a State Tax Series of portfolios organized by individual state rather
than by state tax issues.
Answer: False
Rationale:
BNA’s State Tax Series of portfolios is organized by state tax issues, and you may need
to read several different portfolios to get thorough tax information for a particular state.
Short Answer
1. Why is state and local tax planning gaining importance recently?
Answer: The state and local tax environment is becoming increasingly complex and
challenging to navigate, due to the states’ expansion of their taxing systems. Tax
increases for state and local governments can be especially critical when the economy is
in a downturn because demand for state services goes up while revenues go down.
Taxpayers are therefore finding it more difficult to stay abreast of and comply with these
evolving state requirements. This environment presents many tax planning opportunities.
Businesses take the level of state and local taxation into consideration when deciding
how to organize their operations, such as where to locate a new plant or headquarters.
Thus, state and local tax planning and compliance have become important practice areas
for accounting and tax law firms.
2. What is the function of the Compare It feature in RIA? Briefly describe how it works.
Answer: The RIA feature, Compare It, enables the researcher to compare the tax
treatment of an item in one state to the treatment in another state or to the Federal tax
treatment. This makes it easy to compare the tax treatment of an item in multiple states,
and it eliminates the need to return to the list of documents when performing multiple
state searches. To use the feature, first locate the RIA explanation for the state and type of
tax you are researching. Then, click on “Compare It” and select the state you want to
compare it to. The Compare It feature is only available for explanatory materials, not
state primary sources.
3. “Federal and state constitutional provisions play a vital role in state taxation.” Explain
in brief.
Answer: Federal and state constitutional provisions play a vital role in state taxation.
Both limit the ability of states to tax their citizens and citizens of other states. The
primary Federal clauses limiting state taxation are the Supremacy clause related to the
hierarchy of tax law, and the Commerce and Due Process clauses related to the states’
power to tax out-of-state individuals and entities. State constitutions limit the rates and
types of taxes that can be imposed and generally require that state taxes have a public
purpose.
4. Briefly explain how the income of a multistate company is divided among the states in
which it conducts business.
Answer: Most states use a system of allocation and apportionment to divide up the
income of a multistate business conducting business in different states. Under this
method, certain types of income are traced directly to their geographic source and
attributed to that state. Other types of income are apportioned among the states in which
the corporation is doing business. With apportionment, a formula is used to approximate
the amount of business income that should be attributed to a particular state. In most
states, nonbusiness income is allocated to a jurisdiction while business income is
apportioned. Formula apportionment divides a multistate corporation’s tax base among
states by applying a fraction representing the ratio of in-state property, payroll, and sales
to overall property, payroll, and sales.
Essay Questions
1. What is the concept of ‘nexus’ as it relates to state taxation? Explain how it applies to
the states’ power to tax out-of-state individuals and entities.
Answer: For states to tax an out-of-state business, the business must have some “nexus”
or connection to the state. Nexus involves the amount and degree of business activity that
must be present before a state can tax an entity's income. If a taxpayer has nexus in a
particular state, the taxpayer must pay and collect taxes in that state. The concept of
“nexus” has been developed over time by the Courts, based on their reading of several
clauses of the U.S. Constitution, including the Due Process Clause and the Commerce
Clause.
Impacts of Due Process Clause on state taxes:
The Due Process Clause states that “...No state shall make or enforce any law which shall
... deprive any person of life, liberty, or property, without due process of law ...” Due
process is directed towards the fairness of governmental activities and is concerned with
whether a state tax, in practical terms, has a rational relationship to the opportunities,
benefits, or protections provided by the state. This ‘fairness’ test is satisfied when an outof-state entity ‘purposefully avails itself of the benefits of an economic market in the
foreign State.’ The Supreme Court has applied the Due Process Clause to limit the
territorial scope of a state’s taxing authority in interstate commerce cases. States have lost
cases in two key situations:
•
States seek to tax out-of-state businesses whose connections or nexus with the
state are not sufficient to satisfy the Due Process Clause.
•
The tax imposed does not fairly reflect the taxpayer’s activities in the state.
To be successful in applying a tax, states must prove that the business has more than a de
minimis connection to the state, and that the taxing base for the interstate enterprise
includes only amounts fairly apportioned to its activities within the state. The Due
Process Clause does not guarantee that the benefits received by an interstate enterprise
will have any direct relationship to the amount of taxes paid to that state. To be fairly
related to the services provided by a state, the tax need only be assessed in proportion to
the business’s activities within the state.The Due Process Clause does not require a
physical presence by the out-of-state entity for a state to have taxing jurisdiction. Thus,
an economic presence rising above a de minimis level is sufficient to tax under the Due
Process Clause. However, this same level of contact might not be sufficient to create the
substantial nexus within the state as required by the Commerce Clause.
Impact of the Commerce Clause on state taxes:
The Commerce Clause reserves to the federal government the power to regulate
commerce “with foreign nations and among the several states…” In Complete Auto
Transit, Inc., v. Brady, the Supreme Court established four criteria that must be met for a
state to tax an interstate business: the activity must have a substantial nexus with the
state, the tax must be fairly apportioned, the tax may not discriminate against interstate
commerce, and the tax must fairly relate to the services provided by the state. In a later
case, Quill v. North Dakota, the Supreme Court ruled that a taxpayer must have some
physical presence in the state to be required to collect the state’s use tax.Although many
court cases relating to nexus involved sales or use tax rather than income tax, most tax
specialists view sales tax nexus and income tax nexus as similar.
2. Describe the following special features of RIA’s State and Local Taxation service:
StateNet
Create-a-Chart
All States Tax Guide
Answer: a. StateNet is a database consisting of the full text of all proposed and current
enacted legislation in each state. For proposed legislation, the current status of bills can
be tracked through StateNet. This is extremely valuable when a proposed change in the
state tax law could have a major impact on the practitioner’s clients. Status reports for
legislative bills and ballot measures are furnished for each state. Within the Current
Calendars heading is the Effective Date Calendar database, which lists each state’s
legislative enactment conventions. For example, California’s effective date for newly
enacted legislation is the following January 1 or as provided in the Act, whereas South
Carolina is 20 days after the Governor’s approval, or as specified in the Act. Lastly,
current legislative calendars are reproduced in StateNet.
b. The Create-a-Chart feature facilitates the building of multistate charts that can cut
across a variety of taxes and/or states. These convenient summary charts can be exported
to a word processing or spreadsheet document. The product supports linking information
on the charts to controlling authority and/or RIA’s explanation paragraphs. These links
are maintained when the chart is exported. The practitioner can designate the type of tax
(income, etc.), a chart type (tax rates, starting point for computing taxable income, etc.),
and which states to include in the comparison. More than 100 chart types are offered in
Create-a-Chart.
c. The All States Tax Guide is a concise state-by-state analysis of all major taxes, with
citations to state primary source materials. The Guide covers interstate law, income
allocation and apportionment, uniform acts, and the Multistate Tax Commission. It offers
numerous tables, charts, and checklists for a variety of tax data, as well as calendars for
important reporting dates and monthly listings of recently-approved state and local tax
laws. The list of official state contacts makes it easy to find an address or phone number
for taxing authorities.
3. Compare the general characteristics of state tax systems to the Federal tax system.
Answer: States have generally modeled their tax structures on the Federal tax system. All
state tax models involve the three branches of government: legislative, executive, and
judicial. Tax statutes are enacted by state legislatures, and the state governor signs these
statutes into law just as the President does for Federal laws. State regulatory agencies
similar to the IRS issue regulations and rulings on tax matters and administer the tax law.
Finally, state courts hear cases regarding state tax matters.
However, there are differences in state tax models and the Federal tax system. With
regard to tax bills, the state legislatures pass bills amending and augmenting their state’s
taxing code. While Federal revenue bills must start in the House of Representatives, this
is not a requirement in all state legislatures. In fact, the jurisdictions of the state
legislative houses vary from state to state.
Once tax statutes are enacted, they must be interpreted and enforced. In most states, the
main administrative agency performing these duties is the Department of Revenue or
similarly-named agency. These agencies issue published regulations, rulings, and various
other authoritative pronouncements.
As in the Federal system, state courts hear disputes between taxpayers and the state
taxing authority. It is the courts’ duty to ensure that the administrative agencies do not
overstep their authority. Most state judicial systems are structured in a similar manner to
the Federal system. There often are three levels of courts: supreme courts, appeals
(appellate) courts, and trial courts. The functions of the three levels of state courts are
similar to the Federal courts’ functions; the names of the courts, however, are not
consistent across states.
Test Bank for Federal Tax Research
Roby B. Sawyers, Steven Gill, Debra Sanders, William A. Raabe, Gerald E. Whittenburg
9781111221645, 9781337282987, 9781285439396
