California - gross receipts from a broker-dealer's trading activity are included in the sales factor, alternative apportionment does not apply to intrastate distortion

June 2012

Overview

In a Chief Counsel ruling, the California Franchise Tax Board concluded that gross receipts, as opposed to net gains, resulting from a non-financial Broker-Dealer's principal security trading activity should be included in the California sales factor. The FTB also found that intrastate apportionment (the relative share of the group's California activities that is conducted by each taxpayer member of the group) is not a proper subject for alternative apportionment distortion relief under CRTC ยง 25137.

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