The California Supreme Court heard oral arguments in The Gillette Company v. Franchise Tax Board on October 6, 2015. In 2012, the California Court of Appeal (First District) upheld Gillette’s right to utilize the Multistate Tax Compact’s (Compact) equally-weighted apportionment formula to apportion net income for California corporation franchise and income tax purposes, despite California’s adoption of a double-weighted sales factor apportionment formula. The appellate court found that during the tax years at issue the state was a member of the Compact, which was a binding contract between the signatory states, and the subsequently enacted California provision that required taxpayers to utilize a double-weighted sales factor apportionment formula was invalid because it precluded taxpayers from making the election to use the equally-weighted apportionment formula, which was a key component of the Compact. The Franchise Tax Board subsequently filed a petition with the California Supreme Court to review the Court of Appeal’s decision, and the petition was granted on January 16, 2013. The Supreme Court’s opinion in the case is expected within 90 days from the date of oral arguments.
The Gillette Co. v. Franchise Tax Board, California Supreme Court, S206587, oral arguments, October 6, 2015