The sales amount of the fee base under the first alternative fee calculation is the total amount of sales included in the California numerator of the sales factor for the current year . However, the sales amount does not include gross receipts from the sale of real property and improvements thereto or the sale of the stock of a subsidiary unless that activity occurs as a regular part of the taxpayer's business. Note 8 Intercompany sales to members of the water's-edge group will be eliminated and therefore excluded from the sales amount. To compute the fee base under the first alternative fee calculation , it would obtain its property and payroll amounts from the California numerator of the two factors on its 1986 California tax return. The sales amount would be obtained from the current year's California numerator of the sales factor.
C are unitary and file on a combined report basis.
A and C are California taxpayers which elected to file on a water's-edge basis. B's only activity in California is solicitation of sales. B does not have property or payroll in California and is exempt from taxation under Public Law 86-272. Under FTB Notice 90-3, sales generated by B to California customers will be included in the numerator of the sales factor for the computation of California apportionment percentage. Although B is included in the water's-edge combined report, it is not a California taxpayer and, therefore, is not required to pay the annual fee.