California – Inflation Adjusted Nexus Thresholds

SALT Report 2000 – In the most recent issue of Tax News, the California Franchise Tax Board announced the inflation-adjusted property, payroll, and sales factor nexus thresholds.  The new rates will be used to determine whether a multistate corporation is doing business in California and must file a corporation franchise tax return.

For tax years beginning on or after January 1, 2012, the property factor threshold is increased from $50,000 to $50,950, the payroll factor from $50,000 to $50,950, and the sales factor from $500,000 to $509,500. Taxpayers must include their share of sales, property, and payroll income derived from partnerships, LLC’s treated as partnerships, and S corporations to determine the total amount of the taxpayer’s sales, property, and payroll for business purposes.

The newsletter also addresses proposition 39 which repealed the annual single sales factor apportionment election for multistate taxpayers when computing their corporation franchise tax liability and made the use of single sales factor apportionment mandatory for all but those taxpayers required to use the equal-weighted, three-factor apportionment formula.

For Further Information:

California Franchise Tax Board – Tax News