California: Guidance Issued on Filing 2019 Returns in light of Ongoing Market Sourcing Regulatory Project

On September 14, 2020, the California Franchise Tax Board issued a Public Service Bulletin to inform taxpayers that tax returns being prepared for tax years beginning during the 2019 calendar year are not required to use the proposed changes to CCR section 25136-2 . Recall, this is the regulation that sets forth market-based sourcing rules for sales of other than tangible personal property. The Bulletin notes that certain provisions of the proposed regulation are being revised in light of the July 2020 Interested Parties Meeting. During this meeting, there was discussion that the effective date of the regulation changes, once finalized, would be retroactive to January 1, 2019. However, the Bulletin notes that the “actual applicability date for the proposed revisions has yet to be finally determined.” Thus, tax returns prepared for the 2019 taxable year are not required to reflect the proposed revisions, but rather should follow the current version of CCR section 25136-2. For more information, please contact Gina Rodriquez  at 916-551-3132.