Mar 16th 2011
California has adopted a new "doing business" standard beginning 1/1/2011 which will impact taxpayers, including corporations, pass-through entities and their owners. Owners of pass-through entities that did not have nexus before, may have nexus starting in 2011. Companies that are protected by P.L. 86-272, may be liable for the minimum tax. New Law For taxable years beginning on or after 1/1/2011, a taxpayer is doing business in California if it actively engages in any transaction for the purpose of financial or pecuniary gain or profit in California or if any of the following conditions are satisfied:
- The taxpayer is organized or commercially domiciled in California.
- Sales, as defined in subdivision (e) or (f) of R&TC 25120, of the taxpayer in California, including sales by the taxpayer’s agents and independent contractors, exceed the lesser of $500,000 or 25 percent of the taxpayer's total sales. For purposes of R&TC Section 23101, sales in this state shall be determined using the rules for assigning sales under R&TC 25135, R&TC 25136(b) and the regulations thereunder, as modified by regulations under Section 25137.
- Real and tangible personal property of the taxpayer in California exceed the lesser of $50,000 or 25 percent of the taxpayer's total real and tangible personal property.
- The amount paid in California by the taxpayer for compensation, as defined in subdivision (c) of R&TC 25120, exceeds the lesser of $50,000 or 25 percent of the total compensation paid by the taxpayer.