INTUIT ACADEMY TAX LEVEL 1 EXAM
SCRIPT SOLVED QUESTIONS AND CORRECT
ANSWERS GRADED A+
⩥ 2 fold nature of the commerce clause.
Answer: 1. Affirmative grant of power to Congress (explicit) 2.
"Dormant" or "negative" commerce clause (implied) that states cannot
unduly burden interstate commerce
⩥ No mention of 2 things in the commerce clause.
Answer: 1. No restriction on state powers 2. No mention of taxation
⩥ Commerce clause case with 4 prongs: name, state, year decided by
SCOTUS.
Answer: Complete Auto Transit v Brady - MS case 1977
⩥ Complete Auto decision says that a tax will survive a Commerce
Clause challenge if: (4 prongs).
Answer: 1. Is applied to an activity which has Substantial nexus with the
taxing state
2. Fairly apportioned,
3. Does not discriminate against interstate commerce, and
4. Is fairly related to the services provided by the state
,⩥ What should be focused upon because of Complete Auto decision?.
Answer: Practical effect, not drafting formalism
(Name of the tax, etc)
⩥ Describe 1st prong: Nexus.
Answer: Is there a state law that requires collection and does the
constitution NOT prevent it?
⩥ Bellas Hess v. IL, 1967 case significance (3).
Answer: Need physical presence. Found for the taxpayer. Called upon
Congress to make a nationwide nexus rule.
⩥ Quill Corp v. ND, 1992 case significance (3).
Answer: Need physical presence due to precedent under Bellas Hess.
Found for the taxpayer. Created the distinction between the Due Process
Clause and Commerce Clause nexus.
⩥ Difference between Due Process clause nexus and Commerce Clause
nexus per Quill:.
Answer: Due process clause nexus does NOT require a remote seller to
have a physical presence to have use tax collection responsibility; that
requirement exists for Commerce Clause nexus only. So, Quill had
nexus under the Due Process clause but not for Commerce clause.
,⩥ Commerce Clause physical presence requirement was called a.
Answer: Bright line rule
⩥ Quill decision again called upon Congress to.
Answer: Modify or completely eliminate the physical presence rule
⩥ Three characteristics of SD law found to be favorable under the
Wayfair decision:.
Answer: 1. Small seller exception: Seller's gross revenue from sales into
the state exceed $100,000, or The seller has at least 200 separate sales
into the state, 2. The law was to be applied prospectively, and 3) SD is a
full member of the SSUTA.
⩥ Is physical presence still relevant after the Wayfair decision? Why?.
Answer: Yes, because the economic nexus thresholds only apply to
sellers lacking a physical presence
⩥ Complete Auto - 2nd Prong - fairly apportioned ensures what?.
Answer: A state taxes only its fair share of an interstate transaction or
business
⩥ 2nd prong case - Jefferson Lines, OK 1995 - 4 learnings.
Answer: 1. "Apportion" does not always mean "divide",
, 2 "local incident" may be identified for services as analogy to sale of
TPP and may allow a state to tax 100% of an interstate service,
3. Tax must be internally and externally consistent, and
4. Taxation by multiple states is not necessarily unconstitutional.
⩥ Explain internally vs externally consistent.
Answer: Internally consistent is a hypothetical test that asks if every
state had the same tax would interstate commerce be at a disadvantage in
comparison to intrastate commerce. External consistency is more of a
math test to see of the tax reaches beyond the portion of the value that is
attributable to economic activity within the taxing state.
⩥ What is an important element of internal consistency?.
Answer: The availability of a credit for tax paid to another state.
⩥ 3rd prong of Complete Auto - not discriminate against interstate
commerce - forms of discrimination (2).
Answer: 1. Apparent on the face of the state taxing statutes, or
2. May be apparent only after analysis of their practical operation.
⩥ Fulton Corp v. Faulkner, SCOTUS 1996 (NC) applied what exception
to the 3rd prong? What 3 conditions are needed for exception to be
valid?.
SCRIPT SOLVED QUESTIONS AND CORRECT
ANSWERS GRADED A+
⩥ 2 fold nature of the commerce clause.
Answer: 1. Affirmative grant of power to Congress (explicit) 2.
"Dormant" or "negative" commerce clause (implied) that states cannot
unduly burden interstate commerce
⩥ No mention of 2 things in the commerce clause.
Answer: 1. No restriction on state powers 2. No mention of taxation
⩥ Commerce clause case with 4 prongs: name, state, year decided by
SCOTUS.
Answer: Complete Auto Transit v Brady - MS case 1977
⩥ Complete Auto decision says that a tax will survive a Commerce
Clause challenge if: (4 prongs).
Answer: 1. Is applied to an activity which has Substantial nexus with the
taxing state
2. Fairly apportioned,
3. Does not discriminate against interstate commerce, and
4. Is fairly related to the services provided by the state
,⩥ What should be focused upon because of Complete Auto decision?.
Answer: Practical effect, not drafting formalism
(Name of the tax, etc)
⩥ Describe 1st prong: Nexus.
Answer: Is there a state law that requires collection and does the
constitution NOT prevent it?
⩥ Bellas Hess v. IL, 1967 case significance (3).
Answer: Need physical presence. Found for the taxpayer. Called upon
Congress to make a nationwide nexus rule.
⩥ Quill Corp v. ND, 1992 case significance (3).
Answer: Need physical presence due to precedent under Bellas Hess.
Found for the taxpayer. Created the distinction between the Due Process
Clause and Commerce Clause nexus.
⩥ Difference between Due Process clause nexus and Commerce Clause
nexus per Quill:.
Answer: Due process clause nexus does NOT require a remote seller to
have a physical presence to have use tax collection responsibility; that
requirement exists for Commerce Clause nexus only. So, Quill had
nexus under the Due Process clause but not for Commerce clause.
,⩥ Commerce Clause physical presence requirement was called a.
Answer: Bright line rule
⩥ Quill decision again called upon Congress to.
Answer: Modify or completely eliminate the physical presence rule
⩥ Three characteristics of SD law found to be favorable under the
Wayfair decision:.
Answer: 1. Small seller exception: Seller's gross revenue from sales into
the state exceed $100,000, or The seller has at least 200 separate sales
into the state, 2. The law was to be applied prospectively, and 3) SD is a
full member of the SSUTA.
⩥ Is physical presence still relevant after the Wayfair decision? Why?.
Answer: Yes, because the economic nexus thresholds only apply to
sellers lacking a physical presence
⩥ Complete Auto - 2nd Prong - fairly apportioned ensures what?.
Answer: A state taxes only its fair share of an interstate transaction or
business
⩥ 2nd prong case - Jefferson Lines, OK 1995 - 4 learnings.
Answer: 1. "Apportion" does not always mean "divide",
, 2 "local incident" may be identified for services as analogy to sale of
TPP and may allow a state to tax 100% of an interstate service,
3. Tax must be internally and externally consistent, and
4. Taxation by multiple states is not necessarily unconstitutional.
⩥ Explain internally vs externally consistent.
Answer: Internally consistent is a hypothetical test that asks if every
state had the same tax would interstate commerce be at a disadvantage in
comparison to intrastate commerce. External consistency is more of a
math test to see of the tax reaches beyond the portion of the value that is
attributable to economic activity within the taxing state.
⩥ What is an important element of internal consistency?.
Answer: The availability of a credit for tax paid to another state.
⩥ 3rd prong of Complete Auto - not discriminate against interstate
commerce - forms of discrimination (2).
Answer: 1. Apparent on the face of the state taxing statutes, or
2. May be apparent only after analysis of their practical operation.
⩥ Fulton Corp v. Faulkner, SCOTUS 1996 (NC) applied what exception
to the 3rd prong? What 3 conditions are needed for exception to be
valid?.
