On December 31st, 2015, the California Supreme Court reversed the California Appellate Court’s ruling in The Gillette Company & Subs. v. California Franchise Tax Board. By unanimous vote, the California Supreme Court ruled that the California Franchise Tax Board could deny a taxpayer the right to use the standard, evenly weighted three-factor apportionment formula as adopted by the California legislature, and require a taxpayer to use a later-adopted three factor apportionment formula that includes a double-weighted sales factor.
Translated, companies based in CA will have more of their income treated as CA income for state income tax purposes. This is a long-contested issue, since the revised formula was first adopted by the state in 1993, and you may already be in compliance. If in doubt, consult your CPA for the specific impact on your business.
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