The paper "Distortions to Multinational Firm Organization" is a great example of a Macro and Microeconomics Case Study. When one is selling goods or products online it is important to know whether you do it as a source of income or as a hobby. If it is a hobby then it is not taxable while when it is a source of income, then it is taxable (Grounds 2003). One such law is the Amazon laws which effectively force larger out of state internet retailers to collect and pay sales tax. From the sale of old items, the two individuals that is Luke and Linda received income of $ 25,000 which is a huge sales (Janeba, 2005).
In the year 2016, they bought stock and sold them at a 210% profit margin indicating that this is not only a hobby but a serious business. According to Amazon law, some of the areas indicating that business is taking place include: - Significant commercial activity is taking place hence in 2016, we can say there is a significant commercial activity taking place in Linda and Luke business Purpose and intention of the said taxpayer in engaging in the activity.
This was so clear in 2016 after marking a huge profit in 2015, they intended to engage in business hence they should declare tax (Grounds 2003). An intention to make a profit from the activity. By declaring a sales margin of 210% is a clear intention to make profit hence they should pay tax Repetition and regularity of the activity: - since they did it in 2015 and continue to 2016, then they should declare tax for those two years (Grounds 2003) Activity is carried out on in a businesslike manner and systematic records are kept like in the case the stock is kept and sales records are kept this is enough to prove that business was taking place hence should declare tax(Janeba, 2005). The taxpayer has knowledge and skills which both are professionals hence they should pay tax (Janeba, 2005). In the case of Quill Corp.
v. North Dakota in all conditions, one most important factor is the physical presence of the business. The fact of the case is that the industry generated over $ 200,000,000,000 in sales in the year 1991.
All states that impose sales of tax on goods purchased within the state also impose a corollary use tax on goods purchased outside the state for use, storage or consumption within the state. The court decided that if the lack of physical presence of the consumer goods does not enable the taxpayer to pay tax. However, since Linda and Luke currently store goods within the state, they are liable to declare tax Question two Ordinary income can be defined as the income which is earned from the providing services or sales of goods that is inventory.
This category of income includes earning from the interest, wages, rents among others. Ordinary income is normally taxed at different rates depending on the amount of the income received by a taxpayer in a given tax year. For the case of Linda and Luke, the ordinary income can be calculated as Sales of goods = $38,000 Cogs = $16,000 Profit = $22,000 This is the taxable income from the ordinary income of the year 2016. In the case of Commissioner of Taxation v Stone, the high court ruled that the taxpayer that is Stone is an elite athlete who was in the business of throwing javelins for financial rewards.
Accordingly, the prize money received by the individual constitute income, likewise to the skilled designer who designs items for sale are a source of income and are taxable, therefore, the ordinary income from design are taxable income. In the case of Graham v Commissioner of Inland Revenue, the judges ruled that the taxpayer may still conduct business even if the motive is idealistic rather than mercenary hence this still qualified the income from sales of design item as taxable income.
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