California - Appeals court again upholds election to apportion income under Multistate Tax Compact 

October 2: A California appeals court today issued its second opinion for the taxpayer, concerning an election to apportion income to California using the Multistate Tax Compact’s evenly weighted three-factor formula. Gillette Co. v. Franchise Tax Board, A130803 (Cal Ct. App. October 2, 2012)

In Gillette Co. [PDF 65 KB], the court concluded that:


  • The Multistate Tax Compact is a valid multistate compact.
  • California is bound by the Compact and its apportionment election provision throughout the years at issue because California had not repealed the implementing statutory provisions or withdrawn from the Compact during the timeframe.

July 2012 decision—vacated

The state appeals court in July 2012 held that a taxpayer could apportion its income to California using the Multistate Tax Compact’s evenly weighted three-factor formula, despite statutory language mandating the use of a three-factor double-weighted sales formula for general corporations.


The court’s original decision was based entirely on federal law regarding interstate compacts and its view that when California became a signatory to the Multistate Tax Compact, it entered into a binding agreement that—absent repeal of the Compact in its entirety—required it to offer multistate taxpayers the option of using the Compact’s allocation and apportionment provisions. See TaxNewsFlash-United States: California: Appeals court upholds taxpayer’s election to apportion income using Multistate Tax Compact


The court vacated this decision in August 2012. See TaxNewsFlash-United States: California: Appeals court issues order for rehearing and vacates Gillette decision (election to apportion income using Multistate Tax Compact)

Today’s decision

In the new opinion, the court reiterated much of its original decision. In sum, the court again held in favor of the taxpayer and reversed the trial court’s dismissal of the case without leave to amend.

KPMG observation

Taxpayers may need to consider the impact of this decision for October 15th original return filings in all Compact full member states.



For more information, contact a KPMG State and Local Tax professional:


Doug Bramhall

(480) 459-3491


Scott Salmon

(202) 533-4202


John Harper

(213) 593-6704




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©2012 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.


The KPMG logo and name are trademarks of KPMG International.


KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever.


The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.


Direct comments, including requests for subscriptions, to us-kpmgwnt@kpmg.com.
For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at:

+ 1 202 533 4366

1801 K Street NW
Washington, DC 20006.