Multistate Audit Technique Manual

CALIFORNIA FRANCHISE TAX BOARD Internal Procedures Manual Page 1 of 29Multistate Audit Technique Manual _______________________________________________________________________________ 1000 RELEVANT LAW Subsequent sections of this manual will cover specific, detailed aspects of the apportionment and allocation procedures applicable to multistate businesses. In order to set those rules into the proper perspective, this section of the manual is intended to provide an overall understanding of the framework of the California Bank and Corporation tax system as it relates to multistate businesses. In order for a state to have jurisdiction to tax a bank or corporation, that bank or corporation must have a minimum connection or "nexus" within the state. Since this is a prerequisite to tax, this section of the manual will begin with a discussion of nexus, followed by coverage of the additional jurisdictional limitations imposed by Public Law 86-272. Once jurisdiction to tax has been established, a discussion of the distinction between the California Corporate Franchise and Income taxes is the logical next step. The concept of commercial domicile and its affect on many of California's sourcing rules will then be introduced. Finally, the Revenue and Taxation Code provisions dealing with combination, apportionment and allocation will be identified and summarized. Reviewed: December 2002 The information provided in the Franchise Tax Board's internal ...