CA Franchise Tax Board working to clarify “Market Based Sourcing “ rules, just know having physical presence in the state is not required. It may be where the “ benefit is received “!
So you participate in an event in Las Vegas (Boxing) don't set foot in California and are paid based on pay-per-view revenue, you will/may owe California income tax based on the number of viewers in California. Just think of how many similar situations where this could apply!
Sales from services are in this state to the extent the purchaser of the service receives the benefit of the service in this state. Revenue and Taxation Code section 25136(a)(1). "To the extent" means that if a customer of a service receives the benefit of a service or uses intangible property in more than one state, the gross receipts from the performance of the service or the sale of intangible property are included in the numerator of the sales factor according to the portion of the benefit of the services received and/or the use of the intangible property in this state. Regulation section 25136-2(b)(8). The benefit of a service is received in the location where taxpayer's customer has either directly or indirectly received value from delivery of that service. Regulation section 25136-2(b)(1).
See Chief Counsel Ruling 2015-3 below:
Check out this video that provides a basic understanding of how market based sourcing works:
Through “ Interested Party Meetings “ FTB is working to clarify the rules. Check out the link below:
Advanced planning and an understanding of how California sources income has become more important than ever!
We can talk about it! email@example.com