• California FTB Rules That "On Behalf Of" Exception Does Not Exclude Third Party Costs When Performed by a Member of the Taxpayer's Combined Reporting Group
  • June 2, 2006
  • Law Firm: Sutherland Asbill & Brennan LLP - Washington Office
  • On May 3, 2006, the California Franchise Tax Board ("FTB") issued Legal Ruling 2006-02 which explains how to apply a Costs of Performance ("COP") analysis when sourcing receipts from sales of other than tangible personal property, in circumstances where a member of the taxpayer's combined reporting group performs services on behalf of the taxpayer. The Ruling is significant because it expands the FTB's formerly narrow interpretation of which expenses constitute "direct costs of the taxpayer."