We provide IT services remotely to a small business in CA from another state. Does this mean we are doing business in California?
According to the California Franchise Tax Board (CFTB)'s Doing business in California article:
We consider you to be “doing business” if you meet any of the following:
- Engage in any transaction for the purpose of financial gain within California
- Are organized or commercially domiciled in California
- Your California sales, property or payroll exceed the following amounts:
Of all this, items 2. and 3. do not apply, but having trouble interpreting "within California": Does it mean physically being there or it applies to any kind of transaction (i.e., received remuneration for remote services rendered)?
The CFTB's other article, Help with doing business in California is more verbose, but just as vague:
You can still be doing business if you actively engage in a transaction in California for the purpose of:
- Financial gain
Partnerships, Limited Liability Companies (treated as partnerships) and S corporations
Partnerships and LLCs are considered doing business in California if they have a general partner or member doing business on their behalf in California. Likewise, general partners and members are considered doing business in California if the partnership or LLC, respectively, is doing business in California.
NOTE: We understand that answers on this site are personal opinions only, not legal advice, and we'll file taxes to err on the side of caution - but still interested how you would interpret this one.