Section 23040 - Income from Sources Within this State(a) Except as provided in Chapter 17, "Income from sources within this State" includes income from, rentals of, or gains realized from the sale of real or tangible personal property located in this State, regardless of where the sale or transfer is consummated. The term also includes income from ownership, control or management of such property located in this State, even though the taxpayer is not carrying on a business in this State. Income from business or activities carried on in this State, and from stocks, bonds, notes, bank deposits and other intangible personal property having a business situs in this State, also falls within the purview of this term and is taxable under the law.(b) If a corporation has become derived from or attributable to sources both within and without this State within the meaning of section 25101, Revenue and Taxation Code, a portion of the income derived from the business is attributable to this State and as such constitutes income from sources within this State even though the corporation may have no offices or established place of business in this State. The portion of income attributable to this State shall be determined by apportionment or allocation as provided in Chapter 17.(c) Except as provided in Chapter 17, in the case of corporations organized under the laws of this State which have not acquired a commercial domicile elsewhere, and foreign corporations which have acquired a commercial domicile within this State, all income, with the exceptions noted, from interest on notes, bonds, accounts receivable and other indebtedness, regardless of where the debtors reside or the debts are contracted, interest on bank deposits, including deposits in banks located outside this State, royalties from patents or copyrights, regardless of where the patents or copyrights are used, dividends on stock of both domestic and foreign banks and corporations, and all other income from intangible personal property, including gains derived from the sale or other disposition of such property, is income from sources within this State, unless the property is so used in connection with a business carried on outside this State as to have acquired a business situs outside this State. Interest on bonds or other obligations of the United States and other income which this State is prohibited from taxing under the Constitution of this State or of the United States, is not subject to the tax imposed by Chapter 3.(d) Whether a foreign corporation has acquired a commercial domicile in this State so that all income from intangibles with the above exceptions is taxable as income from sources within this State, will depend upon the facts of each case. Generally, however, a corporation will be considered as having a commercial domicile here if its principal office or place of business is located in this State, or if its business is managed or controlled from within this State. (See also section 25120(b), Revenue and Taxation Code).(e) Except as provided in Chapter 17, in the case of foreign corporations which have not acquired a commercial domicile in this State, income from intangible personal property is income from sources in this State only if the property has a business situs here. Intangible personal property has a business situs in this State if it is employed as capital in this State or the possession and control of the property has been localized in connection with a business, trade or profession in this State so that its substantial use and value attach to and become an asset of the business, trade or profession in this State. For example, if a corporation pledges stocks, bonds or other intangible personal property in California as security for the payment of indebtedness, taxes, etc., incurred in connection with a business in this State, the property has a business situs here. Again, if a corporation maintains a branch office here and a bank account on which the agent in charge of the branch office may draw for the payment of expenses in connection with the activities in this State, the bank account has a business situs here.(f) As used in this regulation, "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) and "Chapter 17" refers to Chapter 17 of Part 11, Division 2 of the Revenue and Taxation Code (beginning with section 25101, Revenue and Taxation Code).Cal. Code Regs. Tit. 18, § 23040
1. Change without regulatory effect redesignating former section 23040(a) to section 23040 and amending section and 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 23040, Revenue and Taxation Code.
1. Change without regulatory effect redesignating former section 23040(a) to section 23040 and amending section and Note filed 4-2-2001 pursuant to section 100, title 1, California Code of Regulations (Register 2001, No. 14).