A) Yes, it still collects sales tax on the purchase. (Sales tax is owed by the buyer, not the seller). B) The company would still owe CA tax on the revenue from

A) Yes, it still collects sales tax on the purchase. (Sales tax is owed by the buyer, not the seller). B) The company would still owe CA tax on the revenue from selling the phone. C1) California would disregard the IP royalty, so no deduction for the Delaware shenanigans. C2) Other states will grant the deduction...but tax the royalty on nexus grounds, and the subsidiary won't have apportionable expenses to offset the royalty income, resulting in a higher net tax burden for the corporate group .