Cal. Code Regs. Tit. 18, § 23101 - "Doing Business"-Defined

(a) Except as otherwise provided, every corporation "doing business" in this State is subject to tax under Chapter 2. "Doing business" is defined as "actively engaging in any transaction for the purpose of financial or pecuniary gain or profit." This includes the purchase and sale of stocks or bonds, endorsing the notes of a subsidiary corporation by a parent corporation and the leasing of real property by the parent corporation to the subsidiary and other tenants, and liquidating activities consisting of sales, rentals, collections on notes, etc. A foreign corporation which engages in a transaction for the purpose of financial or pecuniary gain or profit in California is considered "doing business" in this State whether or not the transaction is considered exclusively engaged in interstate commerce, and is therefore subject to tax under Chapter 2. However, if the only activities of employees of foreign corporations within this State engaging exclusively in interstate commerce are the solicitation of orders for goods to be shipped to customers in this State from points outside this State, the corporations are probably within the purview of Public Law 86-272 (15 U.S.C. Sections 381, et.seq.). Accordingly, such corporations would not be subject to either a tax measured by income imposed under Chapter 2 or the income tax imposed under Chapter 3. However, the corporation may be subject to the minimum tax imposed by section 23153, Revenue and Taxation Code.

(b) The mere receipt of dividends and interest by a corporation and the distribution of such income to its shareholders does not constitute "doing business." (See section 23102, Revenue and Taxation Code). The corporation, however, is subject to tax under Chapter 3 if its income is from California sources.

(c) As used in this regulation, "Chapter 2" refers to Chapter 2 of Part 11, Division 2 of the Revenue and Taxation Code (beginning with section 23101 of the Revenue and Taxation Code) and "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).

Notes

Cal. Code Regs. Tit. 18, § 23101

1. New section filed 12-13-60; effective thirtieth day thereafter (Register 60, No. 25).
2. Amendment filed 2-22-74; effective thirtieth day thereafter (Register 74, No. 8).
3. Change without regulatory effect amending section and adding 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 23101, Revenue and Taxation Code.

1. New section filed 12-13-60; effective thirtieth day thereafter (Register 60, No. 25).
2. Amendment filed 2-22-74; effective thirtieth day thereafter (Register 74, No. 8).
3. Change without regulatory effect amending section and adding Note filed 4-2-2001 pursuant to section 100, title 1, California Code of Regulations (Register 2001, No. 14).