California FTB Provides Non-California Businesses with Information on Income Apportioning

The complexity of California income tax laws for non-California businesses is not new. Whenever nonresident businesses have income sourced to California, California will assess income tax in many cases. Public Law (PL) 86-272 still exempts out-of-state businesses from California income tax if their California activities qualify. This generally means the business' only connection to California is that of soliciting orders for sales of tangible personal properties, in which the orders are sent outside of California for approval and filled from inventory maintained outside of California (and not shipped into California by the out-of-state business' own vehicles into California). Beginning with taxable years on or after January 1, 2013, all apportioning trades or businesses must assign sales of "other than tangible personal property" under the new market-based rules. Some industries will follow the special industry apportionment and allocation regulations.

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