Calif. Sourcing Rules Ready To Drop, But Questions Remain

In this Law360 article, Eversheds Sutherland Partner Tim Gustafson discusses the near completion of a key set of market-based sourcing rules for California. The rules are an update to California’s approach to sourcing receipts from the sale of services and intangible property. However, substantial questions about their application and administration remain.

The effective date on the updated rules is January 1. However, practitioners are primarily concerned with whether these rules have already been implemented or not.

"It is something we are seeing in the field. We have been seeing FTB auditors apply the draft amendments for prior years. There is a regulation on the books. And it's not these amendments,” Tim notes. Tim also adds that he thinks retroactive application is happening in part because the amendments have been under review for so many years. Along with the issue of retroactivity, parts of the amendments such as cascading rules have been a point of concern for many.

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