Tax News
Index Brackets for Doing Business in California

In our September 2012 Tax News, we released the 2012 state tax brackets for Personal Income Tax. Brackets are “indexed” each year by adjusting them to reflect changes in the California Consumer Price Index (CPI). For taxable years beginning on or after January 1, 2012, the conditions for determined “doing business” also have been “indexed” by California’s CPI.

This year, the inflation factor increased 1.9 percent.

Also required to be indexed are the threshold requirements of California Revenue and Taxation Code (R&TC) Section 23101 which defines doing business in California. The new indexed amounts for tax years beginning on or after January 1, 2012, are:

Taxpayer’s Threshold

Old Amount

Indexed Amount

Property

$50,000

$50,950

Payroll

$50,000

$50,950

Sales

$500,000

$509,500

R&TC Section 23101 as modified now provides that if a taxpayer satisfies any of the following conditions, they are doing business in California:

  • The taxpayer actively engages in any transaction in California for the purpose of financial or pecuniary gain or profit.
  • The taxpayer is organized or commercially domiciled in California.
  • If the taxpayer’s sales, as defined in subdivision (f) of R&TC Section 25120, including sales by the taxpayer’s agents and independent contractors, exceeds the lesser of $509,500 or 25 percent of the taxpayer's total sales.
  • The taxpayer’s real and tangible personal property in California exceeds the lesser of $50,950 or 25 percent of the taxpayer's total real and tangible personal property.
  • The amount paid in California by the taxpayer for compensation, as defined in subdivision (c) of R&TC Section 25120, exceeds the lesser of $50,950 or 25 percent of the total compensation paid by the taxpayer.
Furthermore, when we determine the amount of the taxpayer’s sales, property, and payroll for doing business purposes, we include the taxpayer’s pro rata share of sales, property, and payroll from partnerships, LLCs treated as partnerships, and S corporations.

Back to January 2013 Tax News