My client is a Minnesota S-corp that does business in California. In any given year 0% to 24% of their income has been apportioned to California (most recently in 2017, 24%). In 2017 the S-corp ceased business and sold all their assets. The S-corp is a services company providing consulting services. 98% of the sales proceeds were allocated intangibles/goodwill. The other 2% was to fixed assets located outside CA.
None of the S-corp shareholders are CA residents, but they have filed non-resident returns as required each year based on the CA apportioned income in the respective year. Does the S-corp (and therefore the non-resident shareholders) owe CA state taxes on the sale proceeds of the intangible assets related to cessation of the business? I understand the answer depends on whether the intangibles have CA business situs. Is there a test to determine if each of the intangibles (goodwill, non-compete, customer lists) have CA business situs?