{"id":4,"date":"2026-05-01T12:00:00","date_gmt":"2026-05-01T12:00:00","guid":{"rendered":"https:\/\/california.shuster.info\/?p=4"},"modified":"2026-05-01T12:00:00","modified_gmt":"2026-05-01T12:00:00","slug":"garcia-rojas-v-franchise-tax-board-unitary-business","status":"publish","type":"post","link":"https:\/\/california.shuster.info\/?p=4","title":{"rendered":"Garcia-Rojas v. Franchise Tax Board \u2014 Court of Appeal Reverses Summary Judgment, Says Single-Activity Sole Proprietor Is Not a Unitary Business"},"content":{"rendered":"
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\n
Case<\/dt>\n
Garcia-Rojas v. Franchise Tax Board<\/dd>\n
Court<\/dt>\n
1st District Court of Appeal, Division Three<\/dd>\n
Date Decided<\/dt>\n
2026-05-01<\/dd>\n
Docket No.<\/dt>\n
A172054<\/dd>\n
Status<\/dt>\n
Reported \/ Citable<\/dd>\n
Topics<\/dt>\n
Nonresident income tax, unitary business doctrine, summary judgment<\/dd>\n<\/dl>\n<\/div>\n

Background<\/h2>\n

Xavier Garcia-Rojas is a Texas-based radiologist who worked as an independent contractor for a California medical-imaging corporation called StatRad. He read scans from his Texas home using StatRad’s hardware and software, was credentialed in 28 states (including California), and earned roughly $300,000 to $410,000 a year between 2018 and 2020 as a sole proprietor.<\/p>\n

The California Franchise Tax Board demanded that Garcia-Rojas file California returns and pay California tax on a portion of his income. He paid and then sued for a refund in San Francisco Superior Court. The trial court granted summary judgment to the Board, ruling as a matter of law that Garcia-Rojas was operating a ‘unitary business’ under California Code of Regulations title 18, section 17951-4(c), which permits the state to apportion the income of nonresident sole proprietors who carry on such a business inside and outside California.<\/p>\n

Garcia-Rojas appealed.<\/p>\n

The Court’s Holding<\/h2>\n

The First District, Division Three, reversed. Reviewing the order de novo, the court held the Board never carried its burden of showing that Garcia-Rojas operated a ‘unitary business’ within the meaning of regulation 17951-4(c). The unitary business doctrine, the court explained, has a long-recognized meaning in California: it requires two or more<\/em> business entities that are commonly owned and integrated in a way that transfers value among the affiliated entities. Every California Supreme Court and Court of Appeal case the Board cited involved either a multi-entity enterprise or a corporation with multiple geographically separate operations.<\/p>\n

Garcia-Rojas, by contrast, was at most a sole proprietor engaged in one business activity (reading radiology images for one corporate client). The court emphasized that ‘there must be separate business activities to unite’ before the unitary doctrine can apply. The Board’s primary support \u2014 the Office of Tax Appeals’ decision in Appeal of Bindley<\/em> \u2014 was both non-binding and based on an analysis the court found ‘unconvincing’ because it ignored that threshold requirement.<\/p>\n

The court was careful to note it expressed no view on whether the Board could tax Garcia-Rojas under some different<\/em> legal theory; it held only that summary judgment under regulation 17951-4(c) was improper.<\/p>\n

Key Takeaways<\/h2>\n