In This Issue:
“Occasional Sales” and Single Sales Factor Apportionment in California; Upcoming Speaking Engagements; State Taxation of Financial Institutions; Applying the True Object Test to Determine the Taxability of Services; Involving Telecommunications; Economic Nexus Curtailed—Again; and New Incentives Replace California’s EZ Credits.
Excerpt from “Occasional Sales” and Single Sales Factor Apportionment in California -
For decades, California utilized a mandatory corporate franchise tax equally-weighted three factor apportionment formula of payroll, property and sales, thus assigning a 33% weight to the sales factor. In 1993, California double-weighted sales in the three-factor formula, increasing the weight of the sales factor to 50%. Recently, following a number of unsuccessful attempts over the years by the California Legislature to change the apportionment formula to mandatory use of single-factor sales, the California voters passed Proposition 39 at the November 6, 2012 General Election requiring, for taxable years beginning on or after January 1, 2013, corporate taxpayers to apportion using single-factor sales. Accordingly, with three possible exceptions, current California law relegates payroll and property factor issues to obscurity. For example, a taxpayer with all of its manufacturing capacity (i.e., 100% property) and all of its employees (i.e., 100% payroll) outside of California, but with all of its sales assigned to California, will have a 100% California apportionment formula.
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