Under economic nexus rules, companies are considered to be doing business in California if they meet any of the following conditions:
- Have property in California, with a value of $50,000 or 25% of total property, whichever is less.
- Have payroll in California, in the amount of $50,000 or 25% of total payroll, whichever is less.
- Have sales in California, in the amount of $500,000 or 25% of total sales, whichever is less.
Regardless of these new rules, if the company has sales of tangible personal property (TPP) that exceed $500,000 but its only presence in California is for solicitation of sales, it is still protected under Public Law 86-272, meaning that it does not owe tax on its California income; however, they are still required to file a California return and pay the minimum tax. If the sales are for services, there is no protection under Public Law 86-272, and the income will be taxed if they meet any of the conditions above.