By Hanish Patel and Marc Simonetti

In a Chief Counsel Ruling, the California Franchise Tax Board (FTB) ruled that, for purposes of determining its sale factor, a financial information provider should source the sales of its information services based on where the taxpayer’s customer receives the benefit of the service, and not where the ultimate customer (the taxpayer’s customer’s customer) receives the benefit.  The taxpayer provides financial data—real-time stock quotes, company screenings and other market research data—to business entity customers that, in turn, use the data to manage portfolios and offer products to their own customers. Additionally, the FTB ruled that the taxpayer could identify and measure the location of the benefit received based on the relative computing power usages of its customers because the computing power correlated to the fees received for the service. Cal. FTB Chief Counsel Ruling No. 2015-02 (released Feb. 19, 2016).