Multistate Audit Technique Manual

CALIFORNIA FRANCHISE TAX BOARD Internal Procedures Manual Page 1 of 5Multistate Audit Technique Manual _______________________________________________________________________________ 0500 TERMS AND DEFINITIONS The following terms are used extensively in all phases of multistate audits, and in many cases the terms are statutorily defined. The field auditor should develop a working knowledge of these terms and definitions. Abbreviations Used • MATM: Multistate Audit Technique Manual • MAPM: • Multistate Audit Procedures Manual • SBE State Board of Equalization Allocation Allocation is the assignment of nonbusiness income to a particular state (CCR §25121(a)(3)). Apportionment Apportionment is the process by which business income is divided between states by the use of a formula containing apportionment factors (CCR §25121(a)(2), MATM 7000). Apportionment Formula An apportionment formula is a formula composed of a property factor, a payroll factor, and a sales or revenue factor. The formula calculates the percentage of business income, which is derived from or attributable to sources within this state (R&TC §25128, MATM 7000). Business Activity Business activity refers to transactions and activity occurring in the regular course of a particular trade or business of a taxpayer (CCR §25121(a)(4)). Business Income Business income is income arising from transactions and activity in the regular course of the taxpayer's ...