California Code of Regulations › Title 18 - Public Revenues › Division 3 - Franchise Tax Board › Chapter 3.5 - Bank and Corporation Tax › Subchapter 2 - The Bank and Corporation Franchise Tax › Article 1 - Definitions and General Provisions › Section 23101 - "Doing Business"-Defined

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
(a) Except as otherwise provided, every
					 corporation "doing business" in this State is subject to tax under Chapter 2.
					 "Doing business" is defined as "actively engaging in any transaction for the
					 purpose of financial or pecuniary gain or profit." This includes the purchase
					 and sale of stocks or bonds, endorsing the notes of a subsidiary corporation by
					 a parent corporation and the leasing of real property by the parent corporation
					 to the subsidiary and other tenants, and liquidating activities consisting of
					 sales, rentals, collections on notes, etc. A foreign corporation which engages
					 in a transaction for the purpose of financial or pecuniary gain or profit in
					 California is considered "doing business" in this State whether or not the
					 transaction is considered exclusively engaged in interstate commerce, and is
					 therefore subject to tax under Chapter 2. However, if the only activities of
					 employees of foreign corporations within this State engaging exclusively in
					 interstate commerce are the solicitation of orders for goods to be shipped to
					 customers in this State from points outside this State, the corporations are
					 probably within the purview of
					 Public Law
					 86-272 (15 U.S.C. Sections 381, et.seq.).
					 Accordingly, such corporations would not be subject to either a tax measured by
					 income imposed under Chapter 2 or the income tax imposed under Chapter 3.
					 However, the corporation may be subject to the minimum tax imposed by section
					 23153,
					 Revenue and Taxation Code.
(b) The
					 mere receipt of dividends and interest by a corporation and the distribution of
					 such income to its shareholders does not constitute "doing business." (See
					 section
					 23102,
					 Revenue and Taxation Code). The corporation, however, is subject to tax under
					 Chapter 3 if its income is from California sources.
(c) As used in this regulation, "Chapter 2"
					 refers to Chapter 2 of Part 11, Division 2 of the Revenue and Taxation Code
					 (beginning with section
					 23101
					 of the Revenue and Taxation Code) and "Chapter 3" refers to Chapter 3 of Part
					 11, Division 2 of the Revenue and Taxation Code (beginning with section
					 23501,
					 Revenue and Taxation Code).
1. New
						section filed 12-13-60; effective thirtieth day thereafter (Register 60, No.
						25).
2. Amendment filed 2-22-74; effective thirtieth day thereafter
						(Register 74, No. 8).
3. Change without regulatory effect amending
						section and adding NOTE filed 4-2-2001 pursuant to section
						100, title 1, California Code of
						Regulations (Register 2001, No. 14).
Note: Authority cited: Section
						  19503,
						  Revenue and Taxation Code. Reference: Section
						  23101,
						  Revenue and Taxation Code.