California – Mandatory Single Sales Factor Apportionment Formula Bill Passed

SALT Report 1683 РThe California General Assembly passed a bill that, if enacted, will require most multi-state taxpayers to use a single sales factor formula to apportion their business income when determining their corporate franchise and income tax liabilities.  Under the current system, taxpayers may choose whether to use a double-weighted sales four-factor apportionment formula or a single sales factor apportionment formula.
According to the terms of the bill, AB 1500, taxpayers engaged in certain industries such as agricultural, savings and loans, banking and financials would be exempt from the single sales factor apportionment requirement and would continue to use their current apportionment formula.

Other taxpayers may elect to use the current double-weighted sales factor formula as long as their tax liability, before credits, would not be less than if they had used the single sales factor apportionment method.

This bill also revises the rules that determine whether a taxpayer is doing business in California, and revises the provisions that determine whether sales other than tangible personal property occur in the state, specifically sales that involve cable systems or networks.

This bill now advances to the California Senate and will become operative only if AB 1501, which establishes a middle-class scholarship program, is chaptered.

For Further Information:

California Assembly – AB 1500