On May 20, 2025, California’s Franchise Tax Board (“FTB”) released changes to the proposed regulations (“Draft Regulations”) that would amend the rules regarding market-based sourcing for sales other than sales of tangible personal property. This is the latest step by the FTB in the long-running process toward formally adopting the amendments first approved in 2016, which we described in a September 2024 blog post when FTB released an updated draft of the amendments.
These latest changes include a change to the effective date of the proposed regulations from taxable years beginning on or after January 1, 2025 to taxable years beginning on or after January 1, 2026. Additionally, the changes include revisions to methods to overcome certain presumptions and to substantiate the location where the benefit of a service is received. The revised Draft Regulations retain the changes that clarify that the location of the benefit of service is presumed to be received in California when the service relates to real property in the state, tangible property in the state, intangible property used in the state, and individuals present in the state.
FTB will accept written comments regarding the new modifications until June 5.
[View source.]
