William Hays Weissman, 118 Tax Notes State 613 (Dec. 1, 2025): examining Florida v. California, “which questions California’s tax approach of using a single sales factor combined with a special rule excluding certain sales”
The problem again is one of distortion and whether an automatic 5 percent kick-out rule is consistent with constitutional limitations on taxation. If a transaction produces business income, the default should be to include the sale in the apportionment formula, unless it is shown that inclusion is distortive. The special rule turns that burden on its head by embedding the distortion in the apportionment formula itself and then requiring the taxpayer to argue for inclusion of the sale. Rather, it would seem that the law requires the inclusion of the sale, and California should have to show that inclusion is distortive.
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