California rarely stays quiet for long. In this episode of the SALTovation podcast, Aprio's Meredith Smith and Stacey Roberts Chamberlain welcome back Michael Cataldo of Cataldo Tax Law to make sense of a slew of California tax developments. Two questions run through the conversation: how much of a multistate company's income California gets to tax, and to which purchases — including software subscriptions — the state can now apply sales tax.
Along the way, the group discusses a court decision that lets a taxpayer step away from California's single sales factor, asks whether the state's apportionment rules still measure where business activity really happens, and unpacks a new ruling on when a trust beneficiary becomes taxable. The episode ends with discussion around a change that practitioners have watched for years: California is preparing to tax software as a service, with Colorado headed in the same direction. Learn what that means for multistate taxpayers and why more software and services could be pulled into the tax base once the state sees the revenue it generates. New to the series? Start with episode one, California Loses Case for Nonresident Filing (The Bindley Rule).
Key Takeaways:
● Alternative apportionment can be a path away from distortion. Based on the ruling in the Smithfield case, a capital intensive taxpayer, with most of its property and payroll outside California, could make an argument that a sales-only approach does not fairly represent California activity and request alternative apportionment
● The substantial and occasional sales throwout rule can create outsized results when a business is sold, since gain tied to research, development, and goodwill built outside California may be apportioned by ordinary in-state sales alone.
● California is expected to begin taxing all prewritten software, regardless of delivery method, in 2027, with Colorado moving in a similar direction. Further, larger purchasers may have additional permitting due to a have a self-remit requirement.
● Proactive SALT advice is available. If companies cannot justify a full-time in-house specialist, outside SALT advisors can help companies mitigate risk.
Timestamps
00:00 - Intro and California Check-In
01:19 - Alternative Apportionment in Focus: The Smithfield Case
09:19 - Origins of Apportionment: UDITPA, Moorman, and the Single Sales Factor
13:41 - Substantial and Occasional Sales: When a Business Sale Changes Everything
19:52 - Taxing Non-Grantor Trusts: Legal Ruling 2026-1 and Contingent Beneficiaries
23:38 - The Unitary Business Principle: NextEra Energy at the OTA
26:19 - California SaaS Taxability: Pre-Written Software and the 2027 Shift
28:29 - Colorado Follows Suit: Bradley-Burns and Destination Sourcing
30:47 - Why You Need SALT Advice
Connect:
● Website: https://www.aprio.com/business-tax/state-local-tax-salt-consulting/
● Meredith Smith on LinkedIn: https://www.linkedin.com/in/meredith-smith-047aa13/
● Stacey (Roberts) Chamberlain on LinkedIn: https://www.linkedin.com/in/stacey-chamberlain-90072b5/
● Michael Cataldo on LinkedIn: https://www.linkedin.com/in/michael-cataldo-aaa9205/
● Colorado Tax Law Website: https://cataldotaxlaw.com/
● Subscribe on your favorite podcast app.
Disclaimer: The SALTovation podcast is provided for general informational purposes only and does not constitute legal, tax, or accounting advice. State and local tax rules can be complex and change frequently, and outcomes may depend on your specific facts. Listeners should consult a qualified advisor before acting on any information discussed in this episode.
#Aprio #SALT #SaaSTaxability #MeredithAndStacey #AccountforAnything #TaxPodcast #SALTovation #StateTax #TaxPolicy #TaxCompliance #California #Apportionment #SingleSalesFactor #Smithfield #CDTFA
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