California Proposes Tax Rule for Sourcing Sales of Intangibles

The California Franchise Tax Board proposed adoption of long-awaited changes to its market-based sourcing rules for intangibles, such as asset management fees and government contracts, in a notice of proposed rulemaking published Friday.

The proposed regulation would amend the state’s existing rules for assignment of sales, other than sales of tangible personal property, for the purposes of apportioning business income under market sourcing, which focuses on where a customer receives the benefit of a service.

The regulatory project seeks to improve compliance and tax administration “through simplification of rules for assignment of sales and through creating specific rules for ...