Ruling Nº 2022-01 from the State of California, 2022

• Ruling Number: 2022-01
• Year: 2022
• Date: 25 March 2022
• Type of Document: Legal Ruling

STATE OF CALIFORNIA

FRANCHISE TAX BOARD

Legal Division MS A260

PO Box 1720

Rancho Cordova, CA 95741-1720

chair Betty T. Yee| member Malia M. Cohen| member Keely Bosler

March 25, 2022

LEGAL RULING – 2022-01

SUBJECT: Numerator Assignment of Gross Receipts from Sales of Services to Business

Entities.

ISSUE

What are the relevant considerations and proper analysis to determine the assignment of

gross receipts from the sales of services pursuant to California Revenue and Taxation Code

("R&TC") section 25136(a)(1) as supplemented by California Code of Regulations, title 18,

("Regulation") section 25136-2.

SITUATION ONE

Planner Corp, an event planning company, offers services to plan and coordinate corporate

events. Every year Box Corp, a box manufacturer located in State X, puts on a cancer charity

event. This year Box Corp enters into a contract with Planner Corp to plan a cancer charity

event in State Y. Planner Corp performs most of its work remotely in its office in State Z.

SITUATION TWO

Pharmacy Benefit Manager ("PBM") is a company that administers drug benefit programs for

employers, unions, government entities, and health plans. PBM is responsible for developing

and maintaining formulary, contracting with pharmacies, and negotiating discounts and

rebates with drug manufacturers. However, PBM's primary activity is the processing and

fulfillment of prescription drug claims.

PBM contracts with Health Company, a health plan provider. Health Company is

contractually obligated to provide pharmaceuticals to its members. PBM's primary receipts

from Health Company are from processing member claims and fulfilling delivery of

pharmaceuticals to members, whether directly sent to the member's home or picked up at a

pharmacy.

SITUATION THREE

Tracker Corp provides consulting services for companies looking to efficiently manage their

power consumption used in manufacturing. Tracker Corp is located in State X.

Manufacturing Corp enters into an agreement for Tracker Corp's services. Manufacturing