CALIFORNIA

NEXUS YES NO

ACTIVITIES FOR CREATING INCOME TAX NEXUS
Part Year Nexus Taxed for Full Year X, taxpayer may petition for exemption.
Solicitation of Sales of Services (e.g., Architecture). X
For a Lessor, Occasional Use by Lessee of Rental Assets X
For a Lessor, Occasional Use by Lessee of Rented Mobile Property. X
Occasional Business Meetings at Customer’s Location in State. De minimis exception may apply.
Arranging Third-Party Installation or Maintenance of Tangible Personal Property Sold to In-State Customers. X
Occasional Training Classes/Seminars For Customer Personnel. X
Attendance at Trade Shows (fewer than 14 days per year). X
Licensing Trademark/Trade Name. X
Occasional In-State Delivery via Company-Owned Truck X
Regular In-State Delivery via Company-Owned Truck X
In-State Warranty Repair Performed by Unrelated Third Parties for No Charge X
Occasional Attendance at Technical/Training Seminars Sponsored by Unrelated Parties X
In-State Warranty Repairs Performed by Unrelated Third Parties For A Charge X
Occasional Board of Directors’ Meetings X
Sale/Licensing of Franchises X
Employees Working from Home Office, Performing Non-Solicitation Activities X
Leased Employees Providing Services to Another Company X
Ownership of Partnership Doing Business in State:
Limited Interest X
General Interest X
Ownership of Interest in LLC Doing Business In-State X
Providing In-State Consulting Services X
Business Ownership or Sale of Assets
Sale of Services X
Sale of Real Estate X
Own Real Estate X
Maintain Business Location X
Operate Mobile Stores X
Lease Tangible Property X
License Intangible Rights X
Licensing of Software X
Own Stock or Goods:
In Public Warehouse X
On Consignment X
Company Listed in Phone Book X
Performance of Business Activities by Company Personnel
Inventory Inspection By Salesperson X
Salesperson Sets Up Promotional Items X
Salesperson Takes Orders Only X
Company Car for Salesperson X
Repair and Maintain Taxpayer’s Products X
APPORTIONMENT FORMULAS
Generally Used Factors
Sales X
Property X
Payroll X
Does State Follow UDITPA? Yes, however not applicable to banks and financials and several other exceptions to UDITPA under Cal. Rev. & Tax Code Sec. 25137.
Are the Factors Weighted Equally? No, sales double weighted
SALES/USE TAX NEXUS
Broker-Arranged Rentals of Customer Mailing Lists to In-State and Out-of-State Vendors? X
Mailing Catalogs to In-State Consumers? X
Rentals of Customer Mailing Lists to Other In-State Vendors? X
Drop Shipment of Catalogs For Mailing in State? X
Arranging for Third-Party Installation or Maintenance of Tangible Personal Property Sold to In-State Customers? Under review
State Photographers and the Shipment of Vendor Products to State for Photographic Sessions? X
Using In-State Printing Companies that Store Printed Materials or Goods. X
In-State Printing Companies that Print Catalogs, with Occasional Visits by Vendor Personnel? Depends on facts
In-State Printing Companies that Print Catalogs, with No Visits by Vendor Personnel? Depends on facts
Purchasing Agents that Enter State to Buy Tangible Personal Property? X
Licensing of Software for Use in State? X
Has State Developed a Sales/Use Tax Nexus Questionnaire? X
Does State Have a Nexus Team? X
Does the Following Advertising Create Nexus?
Local Media? X
National Media? X
Satellite TV? X
Other Activities that Establish Nexus See Ca;. Rev. & Tax. Code § 6203
Attendance by a Sales Representative at a Two/Three Day Trade Show X
Telemarketing Activity into the State Depends
In-State Delivery via Company-Owned Vehicles 2 deliveries/month
Presence in State of Affiliated Entity X, if in-state entity acts as agent of out-of-state entity
Use of Telemarketing Firm With In-State Office X
Employee/Rep Provide Training to In-State Customers Under review
Employee/Rep Provide Troubleshooting to In-State Customers Under review
Occasional Attendance at Seminar Sponsored by Unrelated Party X
Special Nexus Provisions Regarding Attending Trade Shows Yes, not engaged in business in state if not engaged in convention and tradeshow activities for more than 7 days during a 12 month period and did not derive more than $10,000 of gross income in those activities in the prior year. However, retailers so engaged are liable for collection of the applicable use tax.
In-State Repairs Under Warranty Charged by Unrelated Third Party:
Separate Charge Depends
No Separate Charge Depends
Maintain/Use a Place of Business for:
Selling Tangible Personal Property X
Storing Tangible Personal Property X
Presence of Representative in State Who
Sells X
Delivers X
Mail-Order Catalog Sellers Maintain
Property or Solicitors In State X
Mail Communication In State X
Representative Leases Tangible Personal Property X
Independent Agents Solicit X
Unrelated In-State Office Exists X
Spillover Advertising from Neighboring States X
SALES/USE TAX RATES
State General Sales and Use Tax Rate 7.25%
State Has Approved:
Local Sales Tax X
Local Use Tax X
Percentage or Range of Rates
Local Sales Tax 1.25%
Local Use Tax 1.25%
Assessing Jurisdiction
Local Sales Tax City/County/Other Districts, which are most community coterminous with counties but which may be more than one county or less than a city
Local Use Tax City/County/Other
SALES/USE TAX ON COMPUTER CONSULTING AND SERVICES
Update of Canned Software X, if delivered in tangible form
Service Charge for Upgrade of System Software/Hardware Depends
Training of Customer Personnel X
Extra Copies of Operating and System Manuals X
Sales Tax Applies To:
System Design Depends on facts
Software Consulting (Including Sales of Software) X
Software Consulting (Not Including Sales) X
Hardware Consulting (Including Sales of Software) X
Hardware Consulting (Not Including Sales) X
Does Sales/Use Tax Apply to the Following Services?
Accounting X
Advertising Depends
Barber//Styling X
Computer Consulting X
Data Processing Depends
Landscaping X
Legal X
Mailing Lists X
Natural Gas X
Other Professional X
Allocated for Central Office Operations to a Subsidiary in State
TRANSACTIONS SUBJECT TO SALES/USE TAX
Incidental Sales and Services X
Intercompany Sales X
Licensing of Intangibles X
Rentals X
Sales for Resale X
Sales for Subsequent Lease/Rental Depends
Services Services that are not sales of tangible personality and are not required to purchase tangible personality are not taxable.
Storage Taxable unless excluded under § 6009.1
Sales of Tangible Personal Property X
Wholesale Sales X
Withdrawals from Stock or Inventory for Own Use X
TREATMENT OF S CORPORATIONS
Does State Recognize S Corporation Status? X
Are S Corporation Rules the Same As Federal? Yes, substantially similar, some variations
Does State Conform to New Federal Eligibility Rules? X
If Yes, Effective Date of Conformity 1/1/97
Does State Conform to Entity Classification of S Corporation Sub? X
If Yes, Effective Date of Conformity 1/1/97
Does State Tax Built-in Gains of Post-1986 Electing S Corporations? X
Does State Tax Excessive Passive Income of S Corporations? X
Does State Impose a LIFO Recapture Tax on S Corporations? Yes, payable in four equal installments
Can a Nonresident S Corporation Shareholder Carry Forward Non-Federal NOLs? X
Does State Require Filing of a Separate S Corporation Election? No, no but must notify FTB of federal election
Does State Require Withholding on Distributions by S Corporations To Nonresident Shareholders? NR
Does State Have Provisions for Block Filings for S Corporations? Yes, for nonresident shareholders. Shareholders elect to be included in group return.
Can an S Corporation Elect not to be Treated as an S Corporation for State Purposes? Yes, file Form 3560 by federal election due date.
Does State Impose Franchise Tax Based on Net Worth or Capital Stock? X
If Yes, Does State Conform to Federal Classification of S Corporation Subsidiary as a Division?

NA
Which of the Following Shareholder Conditions Must Be Met for State to Recognize S Corporation Status?
State Resident X
Agree to Pay Tax X
Other X
Is Shareholder Basis in S Corp. Stock Always the Same For State and Federal Purposes? No, different income, expenses and credits yield different basis.
ANALYSIS OF LLCS BY STATE
Existing LLC Act X
State Income Tax Classification of LLC Follows federal
Entity Level Tax on LLC $800 LLC minimum tax
Tax Form and Filing Available Form 568 due April 15
Composite Filing Available X
Annual Report Required Yes, due in anniversary month ($5 fee)
Other Tax Information In addition to the $800 minimum tax, an annual LLC fee is imposed based upon total income from all sources reportable to California (range from $500 to $4,000). Non-resident members may either (1) file a group non-resident return and pay California income tax; or (2) file a Form 3832 consenting to the jurisdiction of California. If any LLC member fails to sign Form 3832, the LLC is required to pay tax on the member’s distributive share at the highest marginal rate (11%).
REGISTRATION OF FOREIGN LLCS
LLC Act Specifically Recognizes Foreign LLCs Yes. § 17450
Statutory Registration Procedures Yes. § 17451
Initial Filing Fee Filing Fee: $70