Ken’s Foods’ California Actions Create Income Tax Obligation

Salad dressing maker Ken’s Foods Inc.'s activities in California exceed federal protections from state income tax, the California Office of Tax Appeals ruled in a pending precedential opinion released Monday.

The Massachusetts company argued its limited business in California is protected from income taxation there by Public Law 86-272, a federal statute that prohibits states from imposing income taxes on out-of-state businesses that only solicit sales in the state.

The company’s employees in California regularly collected competitor samples, compiled customer information for product matching and product creation, and came up with new dressings and sauces. These activities establish a “nontrivial ...