Homework
A. Case Research
About the Taxpayer
Ellen is a single taxpayer who has grown bored with her job although she earns $80,000 in 2019. She lives in Tennessee. This state is your home state. She cannot afford to quit her job for financial reasons due to student loans, car payments, helping her parents, etc. When she leaves work she has free time on her hands, enough free time to make additional money. She learned that you are in a tax class in the MBA program at NCAT University and is soliciting your tax advice about starting a business.
About her proposed business
She wants to make a dry mix for cookies using her grandma's recipe. She plans to use her favorite recipes from grandma but plans to develop several new recipes on her own. She plans to make the dry mix in her apartment but will soon move into a house which she will call home. She wants to create and e-commerce business and sell on-line to any customer who would buy her mixes. Her aunt, who lives in North Carolina, will also help her make the mixes. The aunt plans to make the mixes in her home in Charlotte.
Questions
Your job is to respond to Ellen in common words as if you are talking to a friend.
• Income tax: What are the federal income tax implications to Ellen? Ex: What forms must she prepare and file, what is her tax rate, etc. You may have to create an assumption or projections about the net income from the business. From your own experience determine the average sales price of a box of mix, the cost of the ingredients, other costs such as shipping, setting up on-line advertisement, etc. and project a reasonable profit for her if she works about 15 hours per week on the project. It's up to you. Attempt to complete the appropriate tax form for the business.
Note: I am not looking for a perfect and completed tax form. I simply want to see if you can select the proper form given the type of business she decides to form and if you can insert selected basic information.
• What are the multistate income tax implications if she sells her product in her home state and five other states? The following are the states: California, Tennessee (Home state), Arizona, New Mexico, Oregon and Colorado.
You must look up the rules for state income tax apportionment and allocation bearing in mind the type of product, etc. Please cite your authority or better yet, provide a link so that I can go directly to the information for verification. The best way to present this info might be in a form of a well-developed chart.
• In reference to the states identified above, determine if she will have to collect and pay sales tax to those states in which she sold? What is the rate? Also, will she have to pay sales taxes on her purchase of raw materials used in her product? Cite authority properly. Use in-text citations for all references!!!!
Format your homework according to the give formatting requirements:
• The answer must be using Times New Roman font (size 12), double spaced, typed, with one-inch margins on all sides.
• The response also includes a cover page containing the student's name, the title of the homework, the course title, and the date. The cover page is not included in the required page length.
• Also include a reference page. The references and Citations should follow APA format. The reference page is not included in the required page length.