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I just formed a Wyoming S-Corp and haven't filled out my…

I just formed a Wyoming...
I just formed a Wyoming S-Corp and haven't filled out my 2553 form yet.I currently live in CA, but plan to establish my nexus in WY. I have an office lease that I'm signing in WY this week before I complete the 2553, so that I can elect myself from that state.I don't mind the $800 foreign corporation tax here in CA, but that's the only tax I want to owe the state of CA.In order to establish my nexus, is the 2553 with me using my WY address a sufficient action, or should I just start over with a fresh corporation?
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Answered in 25 minutes by:
3/6/2018
Chad EA, CDFA®, CFP®
Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional
Category: Tax
Satisfied Customers: 2,609
Experience: IRS Licensed Enrolled Agent, CDFA ® CFP ®, MBA
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Hello!

A business may have a nexus in more than one state, which is an evolving issue online retailers are experiencing difficulties with currently.

For example, if you were an amazon affiliate and amazon stored your inventory in Washington, you would have a business nexus in Washington and would be responsible to collect and pay sales tax to the state of Washington for the items you sold in Washington.

The 2553 form is used to elect to be taxed as an S Corp and does not necessarily in itself determine your sole business nexus.

California will still consider you "doing business in California" if you are the owner of the S Corp who is incorporated in Wyoming, but have an office or payroll employees in CA.

___

Revenue and Taxation Code (R&TC) section 23101

A taxpayer is doing business in California if it actively engages in any transaction for the purpose of financial or pecuniary gain or profit in California or if any of the following conditions are satisfied

  • For the conditions above, the sales, property, and payroll of the taxpayer include the taxpayer's pro rata or distributive share of pass-through entities. "Pass-through entities" means partnerships, LLCs treated as partnerships, or S corporations.

https://www.ftb.ca.gov/businesses/Doing-Business-in-California.shtml

Who does the new law affect?

  • Out-of-state corporations
  • LLCs
  • Pass-through entities (partnerships, S corporations, LLCs treated as partnerships) and their partners/shareholders/members that have property, payroll, or sales in California

"if a taxpayer is considered doing business in California either under R&TC Section 23101(a) or (b), it still has a filing requirement and will be subject to the minimum tax, because that tax is not computed based on net income and therefore is not subject to the protections of PL 86-272[1]"

Please let me know your follow up questions.

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Chad EA, CDFA®, CFP®
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Category: Tax
Satisfied Customers: 2,609
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