Florida Challenges California’s Corporate Tax Formula at the Supreme Court

Whether or not the Court takes the case, Florida’s challenge puts the constitutionality of single-sales-factor formulas squarely in the national spotlight.

Florida has invoked the U.S. Supreme Court’s original jurisdiction to challenge California’s corporate income tax apportionment rule.

The complaint argues that California’s single-sales-factor formula and its exclusion of “substantial and occasional” property sales from the apportionment denominator are unconstitutional tariffs that shift tax revenue and investment from other states into California.

The dispute marks the first state-against-state tax case at the Court since New Hampshire v. Massachusetts (2021).

The Law in Play

At issue is California Code Regs. tit. 18, §25137(c)(1)(A), which directs corporations to apportion income to California based solely on in-state sales. The rule excludes receipts from one-time or extraordinary property sales if excluding them changes the denominator by 5% or more.

Florida claims this structure violates the Commerce Clause, the Import-Export Clause, and Due Process, arguing that it penalizes companies operating or manufacturing in other states. Ca…