Happy Hippos (HH) is a manufacturer and retailer of New England crafts headquartered in Camden, Maine. HH provides services and has sales, employees, property, and commercial domicile as follows:

	Happy Hippos In-State Activities
State	Sales	Employees	Property	Services	Commercial Domicile
Connecticut
Maine
Massachusetts
New York
Rhode Island
Vermont

Happy Hippos sales of goods and services by state are as follows:

	Happy Hippos Sales
State	Goods			Services			Total
Connecticut	$	78,231		$	52,321		$	130,552
Maine		292,813			81,313			374,126
Massachusetts		90,238						90,238
New York		129,322						129,322
Rhode Island		98,313						98,313
Vermont		123,914			23,942			147,856
Totals	$	812,831		$	157,576		$	970,407

HH has federal taxable income of $282,487 for the current year. Included in federal taxable income are the following income and deductions:

• $12,000 of Vermont rental income.
• City of Orono, Maine, bond interest of $10,000.
• $10,000 of dividends.
• $2,498 of state tax refund included in income.
• $32,084 of state net income tax expense.
• $59,234 of federal depreciation.

Other relevant facts include:

• Assume that the New York sales are to a single customer who is a retailer and can provide a valid New York re-seller's certificate.
• Maine state depreciation for the year was $47,923, and Maine doesnt allow deductions for state income taxes.
• The employees present in Connecticut, Massachusetts, and Rhode Island are salespeople who perform only activities protected by Public Law 86-272.
• Assume that each of the states is a separate-return state.

HHs payroll is as follows:

Payroll
State	Wages
Connecticut	$	94,231
Maine		392,195
Massachusetts		167,265
Rhode Island		92,391
Vermont		193,923
Total	$	940,005

HHs property is as follows:

Property
State	Beginning			Ending			Rented
Maine	$	938,234		$	937,652
Vermont		329,134			428,142		$	12,000
Total	$	1,267,368		$	1,365,794		$	12,000

1. Determine the states in which HH has sales tax nexus, assuming these states have passed Wayfair legislation.

2. Determine the states in which HH has income tax nexus.

Transcribed image text