A California corporation franchise and income tax regulation has been adopted that addresses the market-based sourcing rules for sales of other than tangible personal property when taxpayers elect for taxable years beginning after 2010 to use the single sales factor formula to apportion their business income. These sales are considered to be in the state if the taxpayer’s market for the sales is in the state. Sales from services are assigned to California to the extent the purchaser of the service receives the benefit of the service in California. Sales from intangible property are assigned to California to the extent the property is used in California. Sales from the sale, lease, rental, or licensing of real property are in California to the extent the real property is located in California. Sales from the rental, lease, or licensing of tangible personal property are in California to the extent the property is located in California. Special rules allow for the reasonable approximation of information under certain circumstances, such as when the necessary data of a smaller business cannot be developed from financial records maintained in the regular course of business. Numerous definitions and examples are provided, and the sales factor provisions set forth in other apportionment regulations are incorporated by reference, with appropriate modifications.
Reg. 25136-2, California Franchise Tax Board, effective March 27, 2012
