Cal. Code Regs. Tit. 18, § 25134 - Sales Factor
(a)
Sales Factor. In General.
(1) Section
25120(e) defines
the term "sales" to mean all gross receipts of the taxpayer not allocates under
sections 24124 to 25127, inclusive. Thus, for the purposes of the sales factor
of the apportionment formula for each trade or business of the taxpayer, the
term "sales" means all gross receipts derived by the taxpayer from transactions
and activity in the regular course of such trade or business. The following are
rules for determining "sales" in various situations:
(A) In the case of a taxpayer engaged in
manufacturing and selling or purchasing and reselling goods or products,
"sales" includes all gross receipts from the sales of such goods or products
(or other property of a kind which would properly be included in the inventory
of the taxpayer if on hand at the close of the income year) held be the
taxpayer primarily for sale to customers in the ordinary course of its trade or
business. Gross receipts for this purpose means gross sales, less returns and
allowances and includes all interest income, service charges, carrying charges,
or time-price differential charges incidental to such sales. Federal and state
excise taxes (including sales taxes) shall be included as part of such receipts
if such taxes are passed on to the buyer or included as part of the selling
price of the product.
(B) In the
case of cost plus fixed fee contracts, such as the operation of a
government-owned plant for a fee, "sales" includes the entire reimbursed cost,
plus the fee.
(C) In the case of a
taxpayer engaged in providing services, such as the operation of an advertising
agency, or the performance of equipment service contracts, research and
development contracts, "sales" includes the gross receipts from the performance
of such services including fees, commissions, and similar items.
(D) In the case of a taxpayer engaged in
renting real or tangible property, "sales" includes the gross receipts from the
rental, lease, or licensing the use of the property.
(E) In the case of a taxpayer engaged in the
sale, assignment, or licensing of intangible personal property such are patents
and copyrights, "sales" includes the gross receipts therefrom.
(F) If a taxpayer derives receipts from the
sale of equipment used in its business, such receipts constitute "sales." For
example, a truck express company owns a fleet of trucks and sells its trucks
under a regular replacement program. The gross receipts from the sales of the
trucks are included in the sales factor.
(2) In some cases certain gross receipts
should be disregarded in determining the sales factor in order that the
apportionment formula will operate fairly to apportion to this state the income
of the taxpayer's trade or business. See Regulation 25137(c).
(3) In filing returns with this state, if the
taxpayer departs from or modifies the basis for excluding or including gross
receipts in the sales factor used in returns for prior years, the taxpayer
shall disclose in the return for the current year the nature and extent of the
modification.
If the returns or reports filed by the taxpayer with all states to which the taxpayer reports under the Uniform Division of Income for Tax Purposes Act are not uniform in the inclusion or exclusion of gross receipts, the taxpayer shall disclose in its return to this state the nature and extent of the variance.
(b) Sales Factor: Denominator. The
denominator of the sales factor shall include the total gross receipts derived
by the taxpayer from transactions and activity in the regular course of its
trade or business, except receipts excluded under Regulation
25137(c).
(c) Sales Factor:
Numerator. The numerator of the sales factor shall include gross receipts
attributable to this state and derived by the taxpayer from transactions and
activity in the regular course of its trade or business. All interest income,
service charges, carrying charges, or time-price differential charges
incidental to such gross receipts shall be included regardless of the place
where the accounting records are maintained or the location of the contract or
other evidence of indebtedness.
Notes
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