California Sales Effect

[Golden Rocket]

Most of us are somewhat aware of the extreme stretches California is attempting to attach nexus or otherwise raise taxes
on out-of-state corporations.

This past year, California enacted a double-whammy which affects one of my clients. This corporation sells to federal govt
agencies within California to the extent that these agencies have insisted on a sales tax exemption. So the state knows
full well we are making sales to California entities.

For out-of-state corporations, as typical for most states, tax liability is determined by a "Three-factor formula" involving
percentage of 1)payroll 2)fixed assets and 3)sales are in that state divided by these same three factors everywhere.

The double-barrel thing: First California defines "Sales" as "Sales of Destination" rather than "Sales of Origin." This means
a company with no operation in California would still have sales if they were selling to entities within California.

Secondly, this year California removed the Payroll factor and Equipment factor from companies who have no such operations
within the state. This leaves Sales as the only factor, effectively TRIPLING the apportionment due to California.

My question: Can they do this and get away with it? Have any companies gone to court for relief??

[Black Bart]

No luck, eh GR?

Most of us are somewhat aware of the extreme stretches California is attempting to attach nexus or otherwise raise taxes
on out-of-state corporations.

This past year, California enacted a double-whammy which affects one of my clients. This corporation sells to federal govt
agencies within California to the extent that these agencies have insisted on a sales tax exemption. So the state knows
full well we are making sales to California entities.

For out-of-state corporations, as typical for most states, tax liability is determined by a "Three-factor formula" involving
percentage of 1)payroll 2)fixed assets and 3)sales are in that state divided by these same three factors everywhere.

The double-barrel thing: First California defines "Sales" as "Sales of Destination" rather than "Sales of Origin." This means
a company with no operation in California would still have sales if they were selling to entities within California.

Secondly, this year California removed the Payroll factor and Equipment factor from companies who have no such operations within the state. This leaves Sales as the only factor, effectively TRIPLING the apportionment due to California.

My question: Can they do this and get away with it? Have any companies gone to court for relief??

Oh well; maybe give it another shot/showing...

[Golden Rocket]

Bump It Up

Thanks for bumping this up, Bart. I DID hear from one of our esteemed colleagues who chose not to post it to the forum.

Apparently, we don't hear a lot in the rural south, but this was big news in California, and actually was passed by the voters. Called Proposition 39, which was apparently a slam-dunk for the state. The voting population was given the golden opportunity to increase taxes on parties other than themselves. An amazing thing happened...they voted for it!!

Propostion 39 might not be constitutional, even in California. Apparently there is a great deal of information available on Proposition 39.

[Black Bart]

Ha-ha.

...big news in California...Proposition 39...passed...The voting population was given the golden opportunity to increase taxes on parties other than themselves. An amazing thing happened...they voted for it!!...

I believe the late Senator Russell B. Long of Louisiana said it first and best: "Don't tax you, don't tax me, tax that fellow behind the tree."

[Golden Rocket]

Proof

Proof of what you say can be pulled from my driving record of some 45-50 years.

I have had 9 moving violations. 56% of them have come from out-of-state driving, and a minority of them
have come from Tennessee. I would estimate 85% (or more) of my driving has been in Tennessee.

2 Kentucky
1 Alabama
1 Georgia
1 Minnesota
5 out-of state citations versus only 4 from Tennessee.

I don't vote in the other states.

My wife is a homespun gal from the Georgia mountains, and she said it best when I was stopped in Kentucky
for driving 60 in a 40 mph zone:

Officer: "Mr. Jordan, you can't come up to our state and drive like this."
Mrs. Jordan: "Well he was getting OUTA yore state as fast as he could..."

The officer thought it was so funny he let me off. Otherwise I would have another one from Kentucky.