California Code of Regulations › Title 18 - Public Revenues › Division 3 - Franchise Tax Board › Chapter 3.5 - Bank and Corporation Tax › Subchapter 3 - Corporation Income Tax › Article 3 - Tax Credits › Section 23649-3 - Qualified Taxpayer

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
(See Section
						23649-0 for Table of
						Contents.)
(a)
In
					 General
. For purposes of Regulations 23649-1 through 23649-11,
					 inclusive, a qualified taxpayer is any taxpayer that is engaged in an activity
					 that is described in Division D of the SIC Manual. The determination of whether
					 a taxpayer is engaged in an activity that is described in Division D of the SIC
					 Manual shall be made under the rules and methods described in the SIC Manual,
					 1987 edition, herein incorporated by reference, and the rules in this
					 regulation on the basis of all of the facts and circumstances. Thus, for
					 example, a taxpayer is a qualified taxpayer where such taxpayer is engaged in
					 multiple business activities, one or more of which constitutes an activity that
					 is described in Division D of the SIC Manual. For purposes of the MIC, a SIC
					 Code assignment to a given taxpayer's activity made by any federal, state
					 (other than the Franchise Tax Board), regional, or local government agency
					 shall not be controlling.
(b)
Business Activities Treated as an Establishment.
The
					 determination of whether a taxpayer is engaged in an activity that is described
					 in Division D of the SIC Manual shall be made by reference in the SIC Manual.
					 If a taxpayer is engaged in one or more lines of business that is treated as an
					 establishment under the SIC Manual, and that establishment is properly
					 classified in Division D of the SIC Manual, then the taxpayer is a qualified
					 taxpayer. In contrast, if a taxpayer is only engaged in business activities
					 that are properly classified in any division or divisions of the SIC Manual
					 other than Division D of the SIC Manual, then the taxpayer shall not be treated
					 as a qualified taxpayer.
(1)
Establishment
. For purposes of this section, the term
					 "establishment" shall mean an economic unit (as distinguished from subunits
					 such as departments), generally at a single physical location, where business
					 is conducted or where services or manufacturing or other industrial operations
					 are performed. For example, a factory, mill, store, hotel, movie theater, mine,
					 farm, ranch, bank, railroad depot, airline terminal, sales office, warehouse,
					 or central administrative office would each be treated as an establishment.
					 There are two types of establishments under the SIC Manual, auxiliary
					 establishments and operating establishments.
A.
Activities Conducted at Different
					 Physical Locations.
Business activities conducted at different
					 physical locations shall generally be treated as separate establishments. Thus,
					 for example, if a taxpayer manufactures clay tiles in Los Angeles and operates
					 a retail tile store in Tarzana, each of these activities would be generally
					 treated as a separate establishment.
B.
Activities Conducted at a Single
					 Physical Location.
Where distinct and separate business activities are
					 performed at a single physical location (such as construction activities
					 operated out of the same physical location as a lumber yard), each activity
					 shall be treated as a separate establishment where all of the following are
					 satisfied:
1. No single industry description
					 in the SIC Manual includes such combined activities;
2. Separate reports are prepared on the
					 number of employees, their wages and salaries, sales or receipts, property and
					 equipment, and other types of financial data, such as financial statements, job
					 costing, and profit center accounting; and
3. Employment in each such economic activity
					 is significant (as defined in subsection (b)(4)).
Where all of the requirements in subsection (b)(1)B. of
						this regulation are not satisfied, then all of the activities conducted at that
						location shall be assigned a single SIC Code based upon the principal activity
						being conducted at that location. For example, where there are five distinct
						and separate business activities being conducted at a single physical location
						and none of those activities meet all of the requirements of subsection
						(b)(1)B. of this regulation, that location would properly be assigned a single
						SIC Code representing the principal business
						activity.