California Appeal Court Rejects FTB’s Unitary Business Theory Against Nonresident Sole Proprietor

The California Court of Appeals reversed the trial court’s grant of summary judgment in favor of the Franchise Tax Board, holding that the FTB failed to establish that a Texas radiologist operated a “unitary business” for California income tax purposes. The taxpayer, a Texas resident, worked as an independent contractor reading medical images for a California company from his home in Texas. The FTB asserted that the taxpayer operated a unitary business subject to California tax. The court held that the unitary business doctrine applies only when multiple business entities or separate business activities are involved and does not apply ...