California Revenue and Taxation Code 25120
Section 25120, subdivision (a) includes both a transactional test and a functional test to determine what constitutes business income for purposes of the Uniform Division of Income for Tax Purposes Act (UDITPA).
In California, section 25120, subdivision (a) defines "business income" as "income arising from transactions and activity in the regular course of the taxpayer's trade or business and includes income from tangible and intangible property if the acquisition, management, and disposition of the property constitute integral parts of the taxpayer's regular trade or business operations."
"Nonbusiness income" is defined in section 25120, subdivision (d) as "all income other than business income." Nonbusiness income consisting of interest and dividends, or capital gains from the sale of intangible personal property, is allocable to California only if the taxpayer's commercial domicile is in this state. ( 25125, subd. (c), 25126.)