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S corp doing buisiness in Calif

Technical topics regarding tax preparation.
#1
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7
Joined:
19-Aug-2019 11:11am
Location:
phoenix
A Nevada S Corp is hiring employees (in excess of $50,000 salary) who will work at home in Calif selling products to non California customers mostly online.

Is this S Corp doing business in Calif subjecting the Corp to Calif S Corp filing and individual shareholders to individual income tax filing? Payroll is done by ADP.

Are the sales generated by the calif employees Calif source income? Or is the location of the customer determine source income

Thank you all for your insight

Mike
 

#2
JAD  
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1730
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21-Apr-2014 8:58am
Location:
California
I can't think of any theory that would support the position that the company wasn't doing business in CA. People in CA are working in the business....

California uses market based sourcing, so the service income and sales of intangibles are sourced to the state where benefit is received. But you are talking about the sale of tangible personal property, correct? The sale is sourced to the purchaser's state. I'm almost certain that CA has a throwback rule where if the sale to the other state is not taxed by the other state, the sale gets thrown back into CA's apportionment factor.

Don't forget to consider all of the other states. You have an online business, and we have new economic nexus rules. PL 86-272 does not provide fabulous simplification anymore.

Don't forget about the sales tax issues.
 

#3
Posts:
7
Joined:
19-Aug-2019 11:11am
Location:
phoenix
Jad:

Thanks for your reply. The company also maintains and updates various companies websites, mailing lists, customer service etc. for its customers. Is this online work done in Calif sourced to Calif.

Thanks again
 

#4
jon  
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802
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Location:
minnesota
How about the new category "economic presence"!!! One client has hired a company to monitor all sales against current State information. South Dakota Mayfair(?) sales over $100,000 annually you start paying tax at $100,001, and maybe pay until your annual goes under a $100,000? Are we having fun yet??
 

#5
JAD  
Posts:
1730
Joined:
21-Apr-2014 8:58am
Location:
California
The company also maintains and updates various companies websites, mailing lists, customer service etc. for its customers. Is this online work done in Calif sourced to Calif.

Please see above and other sources re market based sourcing of services. Revenue is sourced to where the benefit of the service is received. Again, consider throwback rule and sourcing/nexus/apportionment/taxation rules of states where benefit of service is received. Also, don't ignore Jon's comment about economic presence.
 


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