Q: Hi my company in Japan is thinking about establishing a rep office in CA. Wondering if we need to pay tax in this case?
If we do, how does it work? Does it work the same for both federal and state law? If we do not, then do we need to fill out any form claiming that we are not participating in any business activity or? Thank you.
A: Hi. The company would have to register with California as a foreign entity (foreign means entities outside of California, not just the U.S.). As a result, $800 minimum Franchise Tax to California per year would be due. Also, any activity conducted in California will result in income tax liability for both California and the IRS. There may be offsets due to foreign tax paid and exclusions, but now I'm getting outside the scope of this question. I hope this helps.
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