A New Election Makes California Less Taxing on Technology Companies
Starting in 2011, California provided a potentially major tax break for businesses with multistate operations; the new law allows multistate businesses to make a single sales factor election. This election assigns income to California based upon the California marketplace for the company’s goods or services instead of assigning income to the location of a company’s employees and assets, as occurs under the standard allocation method. This change can make a major difference in a company’s California tax burden that could be influenced by choices available under the election. Taxpayers have some latitude to determine a market-based sourcing that is not as simple as the label suggests. Only companies that are thoughtful in their marketplace will maximize the benefit they can receive from this new opportunity. Those that do not carefully consider the options may be stuck with a higher tax burden for future years, as the method chosen may not be changed.
WTAS Managing Director, Eric Anderson, leads the San Francisco Bay Area state and local tax practice of WTAS. He focuses on income tax planning and compliance, sales and use tax transaction planning, mergers and acquisitions, franchise tax matters, and administrative tax controversies. Anderson has extensive experience with unitary tax planning, business and nonbusiness issues, and entity structuring to manage multistate tax liabilities.
Bloomberg BNA. Daily Tax Report.
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