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CA TAX ON Non-Resident CPAs

November 29, 2016 • Sharon Epstein • Log In to Post Comments

In the 12/1/16 Tax Letter there is a discussion regarding SE Services performed out of state for a CA client.  I thought there was an exception for filing a CA return (i.e. paying CA tax)  if the amount you received was (I think) 25% or less of your gross income for a "small" business.  I am a CPA in Oregon with clients in CA.  I do not perform any work on site in CA.  The gross fees are definitely less than 25% of my total gross fees.  Do I have a problem? 

Thanks, Sharon


Comments

I meant the CA fees are less than 25% of the Gross fees.

Sharon, I believe what you are referring to is the economic nexus thresholds for determining whether a taxpayer is doing business in California and must file a California return.  Under this rule for 2016, a taxpayer must file a California return if its sales (using the market based sourcing rules) exceed the lesser of $547,711 or 25% of the corporation’s total sales. This applies to corporations, LLCs, and other pass-through entities. But remember even if the revenues do not exceed these thresholds, the FTB may still find that you are "doing business" in CA and must file a return if you are "actively engaging in any transaction for the purpose of financial or pecuniary gain or profit in California." (R&TC Sec. 23101)  If you are a sole proprietor you must file a nonresident return if your income exceeds the California gross income or California AGI thresholds for the tax year.

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