If you live outside California, do all your work outside California, and have never set foot in the state, can California still tax your income? Since 2019, the answer has been yes — as long as your customers are there. That came from a case called Bindley, and the Franchise Tax Board (FTB) has relied on it ever since to tax out-of-state freelancers and sole proprietors.
A new California Court of Appeal decision pushes back. On this episode of SALTovation, Aprio’s Meredith Smith and Stacey (Roberts) Chamberlain talk with California attorney Michael Cataldo, founder of Cataldo Tax Law and a former FTB tax counsel, about what the ruling says, why the California Supreme Court may still have the final word, and where this thinking could go next for partnerships and S corporations. The takeaway for anyone who already paid California tax under the old approach: there is a deadline for filing a refund claim, so it is worth taking a look now. You may have a chance to get that back.