Is this really unique to California? He had 100% of his employees in California. (100% of 1, but still.) I'm having a hard time imagining that no other state in America would consider that "doing business in the state."
For most East Coast rural areas, NY & DC have been the traditional bogeymen, not california. The mountain west is much more within Cali's sphere of influence so-to-speak.
https://www.fitsnews.com/wp-content/uploads/2020/01/map11.jp...
So yeah, sure an obvious counter example is of W-2 employees at a FAANG are smart and wealthy, but many of them don't bother to look and have few ways of lowering their taxes, but people playing around with capital have plenty of ways.
This leaves a poorer class of people (in California and all across the country) that make too little to actually be encumbered by California taxes and also are not doing anything to trigger compliance measures on themselves while merely imagining its high taxes, and a richer class of people that can route around it like always and enjoy everything attractive about California.
I make a lot of money, pay a lot in taxes, and do not have "obvious ways of routing around it" outside of a mega-backdoor roth.
Basically, if the FTB decides to throw the book at you, you are toast.
So expense everything because you're building something revenue producing and spending towards that, trade 1256 contracts more often instead of just random stocks/ETFs willynilly (ie. $SPX options instead of $SPY options, because you actually know what you're trading), tax loss harvest aggressively, borrow against assets to begin with, spend the borrowed or outside capital on the expensable things (you owe whoever you borrowed from - eventually - but not the government, and in some cases can deduct the interest as well). Spend more than you earned that year and you have no tax to pay, achievable via having savings or outside capital to spend. Boost up assets in tax deferred and tax exempt accounts, the usual. Its easy to stagger the tax events across years, such that there is always a counteracting force mitigating taxes during that current year.
The government makes an incentive to transact in certain ways, the velocity of transactions is more important for the economy than taxes, when you fail to do that the government takes a cut of the remainder. (This is true of income and some other taxes, while other forms of taxes support very specific programs directly, and are much smaller)
The state needs small business rules with simple forms, push button compliance and exemptions for interstate commerce.
The alternative is that most small firms live in the informal sector or do things wrong, not b/c they are bad actors but b/c compliance is hard.
People like to use the IRS as a political punching bag and it makes zero sense to me. Their job is to explain the code Congress wrote in terms laypeople can understand, design the forms, collect and process the returns, send notices, and take enforcement actions when cheaters try to flout the law. People who don’t like getting taxed or are frustrated at the complexity of the revenue code should take it up with Congress, not the IRS.
As a side note, it’s also incredibly weird that some very vocal people have a problem with the IRS, yet are staunch defenders of police, even though the IRS has never beaten up or killed a single person for breaking the law.
I haven’t lived in California for two years, yet I still have to pay them taxes on RSUs that are vesting this month. It’s insane.
California has a pretty advanced FTB and catches and alerts on these.