Multistate tax! - Spidell

Multistate tax webinar…help!

Log in to Post

Message Board Multistate tax webinar…help!

This topic contains 1 reply, has 2 voices, and was last updated by Sandy Weiner 10 months ago.

  • Author
  • #120241

    I took the multistate tax webinar and read the following:

    Retro Watches, Inc. is an Internet company based in Florida that sells retro watches to
    purchasers throughout the U.S. It sells over $1 million in watches to California customers.
    Although it may have “economic nexus” with California and is realizing a financial gain
    from California customers, its only connection with California is its sales of tangible
    personal property to California customers. As a result, under Public Law 86-272 it is not
    subject to California’s franchise tax. However, Retro still must file a franchise tax return
    and pay the minimum tax.

    I dont understand….if the company is protected under PL 86-272 why does it need to file the franchise TR and pay the tax?

  • #120294
    Sandy Weiner

    P.L. 86-272 does not provide protection against the $800 minimum tax because that amount is not imposed on a taxpayer’s “net income.” The minimum franchise tax is a set amount regardless of the taxpayer’s income. So a taxpayer has immunity from the tax above the minimum tax amount, but not the $800 minimum tax. See the Appeal of American Orthodontics, Inc. discussed in the caution box following the Retro Watches example.