At the November 6, 2012 general election, California voters approved temporary increases to the personal income tax and state sales and use tax rates and made the current elective corporation franchise and income tax single sales factor apportionment formula mandatory.
Personal Income Tax Rates
Proposition 30 increases the personal income tax rate for the 2012 through 2018 tax years. The current 9.3% rate (10.3% rate for taxable incomes over $1 million) will be raised by:
· 1% for single individuals with taxable incomes of $250,001 to $300,000;
· 2% for single individuals with taxable incomes of $300,001 to $500,000;
· 3% for single individuals with taxable incomes over $500,000;
· 1% for heads of household with taxable incomes of $340,001 to $408,000;
· 2% for heads of household with taxable incomes of $408,001 to $680,000;
· 3% for heads of household with taxable incomes over $680,000;
· 1% for joint filers with taxable incomes of $500,001 to $600,000;
· 2% for joint filers with taxable incomes of $600,001 to $1,000,000; and
· 3% for joint fi lers with taxable incomes over $1,000,000.
Sales and Use Tax Rates
Proposition 30 also increases the state sales tax rate by 0.25% for four years. Effective January 1, 2013, the standard statewide rate is increased from 7.25% to 7.50%.
Single Sales Factor Apportionment Formula
Proposition 39 requires that taxpayers use a single sales factor apportionment formula to apportion income from multistate tax activities to California, beginning with the 2013 tax year. Currently, taxpayers may make an annual election to use the single sales factor apportionment formula rather than the standard double-weighted sales apportionment formula based on property, payroll, and sales factors. Apportioning trades or businesses that derive more than 50% of their gross business receipts from one or more qualified business activities (agricultural, extractive, savings and loan, and banking or financial business activities) will continue to apportion their business income to California by multiplying such income by the equally-weighted three-factor formula.
Taxpayers will be required to use the market-based sourcing rules for purposes of sourcing sales of other than tangible personal property. Special sourcing rules are also adopted for cable companies that are part of a qualified combined reporting group that makes an investment of at least $250 million in qualified expenditures in California.