{"id":351626,"date":"2026-06-08T14:27:10","date_gmt":"2026-06-08T14:27:10","guid":{"rendered":"https:\/\/www.newsbeep.com\/us-ca\/351626\/"},"modified":"2026-06-08T14:27:10","modified_gmt":"2026-06-08T14:27:10","slug":"court-of-appeals-in-california-determines-no-unitary-relationship-exists-for-a-sole-proprietor","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/us-ca\/351626\/","title":{"rendered":"Court of Appeals in California Determines No Unitary Relationship Exists for A Sole Proprietor"},"content":{"rendered":"

Background<\/p>\n

Xavier Garcia-Rojas (\u201cGarcia-Rojas\u201d) is a radiologist who lived in Texas during the tax years in question. During this time, he was an independent contractor for Stat Radiology Medical Corporation (\u201cStatRad\u201d). StatRad would send Garcia-Rojas imaging studies collected at the medical facilities in California and other states, and Garcia-Rojas would read the images and provide reports from his home in Texas.<\/p>\n

StatRad required Garcia-Rojas to have a medical license in 28 states, including California, and would pay his licensing fees, except for his Texas medical license. StatRad gave Garcia-Rojas hospital privileges in each state, and provided him with the necessary hardware and software, a California mailing address, an e-mail address, training on the software, and California malpractice insurance.<\/p>\n

Garcia-Rojas received payment each month for the images he reviewed, and he received a Form 1099, reporting his nonemployment compensation, which he reported on his Schedule C, Profit or Loss from Business (Sole Proprietorship).<\/p>\n

At the request of the Franchise Tax Board (\u201cFTB\u201d), Garcia-Rojas filed California income tax returns for tax years 2018 through 2020 and then requested a refund. Garcia-Rojas ultimately sued and the trial court granted the FTB\u2019s motion for summary judgment ruling that as a matter of law \u201cGarcia-Rojas \u201coperated \u2018a sole proprietorship which carries on a unitary business\u2019\u201d and was thus subject to taxation under regulation 17951-4(c).\u201d The trial court concluded he \u201ccarried on as a unitary business\u201d because he \u201cran the same type of business or functionally integrated enterprise in California and elsewhere,\u201d his \u201cconduct within and without California was not so separate and distinct to qualify as separate business\u2026,\u201d and he \u201cused StatRad\u2019s software and other resources in the same manner notwithstanding which state report he worked on.\u201d\u00a0<\/p>\n

Decision of the California Court of Appeals<\/p>\n

The Court of Appeals determined that the trial court erred in granting the summary judgment because the FTB did not demonstrate that Garcia-Rojas carried on a unitary business. In doing so, the Court determined there was no precedent holding a single person or sole proprietorship engaged in one business activity to be considered a unitary business. The Court noted that historically the unitary business theory applied to multiple business entities that are commonly owned and integrated, not a sole proprietor that was engaged in one business activity and received compensation from one corporation. To the contrary, the Court found that Garcia-Rojas did not operate a unitary business but rather was operating a sole proprietorship engaging in one business activity. The Court of Appeals remanded the case for further proceedings.<\/p>\n

How Forvis Mazars Can Help<\/p>\n

This case shows one of the myriad of ways that states will attempt to subject out-of-state taxpayers, be they corporate, pass-through, or individual, to tax in the state. To the extent that you conduct business outside the borders of your home state, especially if you\u2019re serving customers remotely, we can help you determine what your liability to other states may be.<\/p>\n","protected":false},"excerpt":{"rendered":"Background Xavier Garcia-Rojas (\u201cGarcia-Rojas\u201d) is a radiologist who lived in Texas during the tax years in question. During…\n","protected":false},"author":2,"featured_media":351627,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[7,9,8],"class_list":["post-351626","post","type-post","status-publish","format-standard","has-post-thumbnail","category-california","tag-california","tag-california-headlines","tag-california-news"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/posts\/351626","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/comments?post=351626"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/posts\/351626\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/media\/351627"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/media?parent=351626"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/categories?post=351626"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/tags?post=351626"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}