I have a group that is forming a US business that will sell items to a foreign country. There are 4 people involved in 3 entities. Entity 1 is a CA LLC providing consulting and purchasing advice to Entity 2 which is a WA C-Corp that takes title and distributes to Foreign-Related Corp. CA is owned 100% by 2 CA individuals (CA 1 & 2). WA is owned by a Washington Individual (WA1) and a Foreign Corp (FC), there is no state income tax in WA. FC is owned 100% by NRAs.
I understand that a unitary business exists for CA requiring apportionment and expect the US apportionment to exceed 20%.
This would indicate that all of the income should be apportioned and a waters edge election will not prevent attribution of income from Foreign Corp.
Since there are no sales out of CA and the Commercial domicile of WA1 is not California, can I take the position that there is no CA source income other than an allocation of an arm's length consulting service fees.
Thank you