Cite as: 512 U. S. 298 (1994)
Opinion of the Court
filed California franchise tax returns based on 1970-1973 income, it reported the income earned from its foreign operations on a separate accounting basis. Essentially, Colgate maintained that the Constitution compelled California to limit the reach of its unitary principle to the United States' water's edge. See supra, at 306. The Tax Board determined that Colgate's taxes should be computed on the basis of worldwide combined reporting, and assessed a 4-year deficiency of $604,765.8 Colgate paid the tax and sued for a refund.
Colgate prevailed in the California Superior Court, which found that the Federal Government had condemned worldwide combined reporting as impermissibly intrusive upon the Nation's ability uniformly to regulate foreign commercial relations. No. 319715 (Super. Ct. Sacramento Cty., Apr. 19, 1989) (reprinted in App. to Pet. for Cert. in No. 92-1839, pp. 88a-102a). The Court of Appeal reversed, concluding
8 Colgate offered the following figures, using a water's edge approach:
Water's edge California Income Taxable Formula Business Franchise Year Income Percentage Income Tax
1970 $25,652,055 9.31920% $2,390,566 $167,340 1971 27,520,141 9.01730% 2,481,574 173,710 1972 32,440,358 9.21640% 2,989,833 227,227 1973 36,554,060 8.88730% 3,248,669 269,640 No. 319715 (Super. Ct. Sacramento Cty., Apr. 19, 1989) (reprinted in App. to Pet. for Cert. in No. 92-1839, p. 85a).
Under California's worldwide combined reporting method, the computations were:
Worldwide California Income Taxable Formula Business Franchise Year Income Percentage Income Tax
1970 $ 91,566,729 4.42075% $4,047,936 $283,356 1971 108,177,612 4.12017% 4,457,101 311,997 1972 123,779,352 4.03444% 4,993,803 379,529 1973 151,585,860 3.71812% 5,636,144 467,800 Id., at 84a.
309
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