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§ 25137-3. Franchisors--Allocation and Apportionment of Income.

18 CA ADC § 25137-3Barclays Official California Code of Regulations

Barclays California Code of Regulations
Title 18. Public Revenues
Division 3. Franchise Tax Board
Chapter 3.5. Bank and Corporation Tax (Refs & Annos)
Subchapter 17. Allocation of Income
Article 2.5. Uniform Division of Income for Tax Purposes Act
18 CCR § 25137-3
§ 25137-3. Franchisors--Allocation and Apportionment of Income.
Currentness
(a) Definition. The term “business of franchising” means a trade or business which includes the granting of a license by the taxpayer (franchisor) of a trademark, trade name or service mark, to market or use a product or service under such trademark, trade name or service mark in accordance with methods and procedures prescribed by the taxpayer.
(b) Apportionment of Business Income. Apportionment Factors. The property, payroll and sales factors of the apportionment formula for franchisors shall be computed pursuant to Sections 25128 through 25137 of the Revenue and Taxation Code and the regulations adopted pursuant thereto except as provided in this regulation.
(1) Payroll Factor. For purposes of determining the numerator of the payroll factor, compensation paid to traveling employees regularly providing administrative or advisory services at the franchisee's place of business shall be determined on the basis of the ratio which the time spent in performing such services in this state bears to the total time spent in performing such services everywhere.
(2) Sales Factor. For purposes of determining the numerator of the sales factor:
(A) The following receipts shall be attributed to the state in which the franchisee's place of business is located provided the taxpayer is taxable in such state:
(i) Fees received from the franchisee for national or regional advertising placed by the franchisor.
(ii) Fees received for providing administrative or advisory services.
(iii) Fees received for site investigation, selection, and acquisition of a place of business, or potential place of business, of the franchisee, or potential franchisee.
If the taxpayer is not taxable in the state in which the franchisee's place of business is, or would have been, located, the receipts shall be attributed to the state in which the principal office of the taxpayer's employee or employees performing such services is located, except that if such services are performed by an independent contractor the receipts shall be attributed to the state of the taxpayer's commercial domicile.
(B) Fees or royalties received for the use of the franchisor's trademark, trade name or service mark or the right to market a product or service shall be attributed to the state in which the franchisee's place of business is located if the taxpayer is taxable in such state. If the taxpayer is not taxable in the state in which the franchisee's place of business is located, the receipts shall be attributed to the state of the taxpayer's commercial domicile.

Credits

Note: Authority cited: Section 26422, Revenue and Taxation Code. Reference: Section 25137, Revenue and Taxation Code.
History
1. Editorial correction renumbering and amending former Section 25137(i) to Section 25137-3 filed 3-27-85; effective upon filing pursuant to Government Code Section 11346.2(d) (Register 85, No. 13). For prior history, see Registers 82, No. 46 and 82, No. 28.
This database is current through 5/24/24 Register 2024, No. 21.
Cal. Admin. Code tit. 18, § 25137-3, 18 CA ADC § 25137-3
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