Retailers and manufacturers seeking to evaluate the potential applicability of The California Transparency in Supply Chains Act to their businesses should make certain that they are aware of recent changes in the California Revenue and Tax Code. Specifically, Section 23101 of the Revenue and Tax Code was amended in a way that creates a more expansive definition of "doing business" in the state for taxable years beginning on or after January 1, 2011.
As discussed in previous posts, the transparency legislation will go into effect on January 1, 2012 and applies to retail sellers and manufacturers doing business in California that have annual worldwide gross receipts exceeding one hundred million dollars. These companies will be required to disclose their efforts, if any, to ensure that their product supply chains are free from slavery and human trafficking. The transparency legislation states that "doing business in this state" shall have the same meaning as set forth in Section 23101.
As revised, Section 23101 states that a retailer and manufacturer may be found to be "doing business" in California if its sales in California exceed the lesser of $500,000 or 25 percent of its total sales. The manufacturer or retailer need not have a physical presence in California for sales to count as California sales. Retailers and manufacturers located outside California should evaluate the effects of these changes and the extent to which their businesses may now be subject to the transparency legislation’s disclosure requirements.