Smithfield, Apportionment, and the Limits of Single Sales Factor: A Discussion of California's Most-Watched SALT Cases

In the latest GeTtin' SALTy podcast episode, host Nikki Dobay welcomes new Greenberg Traurig colleague John Ormonde, a shareholder in the firm's State and Local Tax Practice. The centerpiece of the episode is a detailed inside look at the Smithfield Foods case, which John identifies as one of the most significant California apportionment decisions in recent memory - and which observers at the Federation of Tax Administrators have called perhaps the single most important case on apportionment for the foreseeable future. John breaks down the two distinct issues before the court. The first issue concerns whether Smithfield qualified as an agricultural business under California Revenue and Taxation Code Section 25128, entitling it to three-factor apportionment rather than single sales factor apportionment. The second - and more broadly applicable - issue involves alternative apportionment under Section 25137, California's codification of Section 18 of UDITPA, which has counterparts in more than twenty states. Nikki and John also preview two additional pending California matters. The NTU case, currently on appeal, challenges the retroactive application of Revenue and Taxation Code Section 25128.9, which modified the apportionment factors in ways that effectively eliminated the use of gross receipts as historically understood. The episode also touches on Garcia-Rojas v. Franchise Tax Board, in which the California Court of Appeal held that a sole proprietor performing services for a California customer was not engaged in a unitary business and therefore could not be subjected to market-based sourcing under the UDITPA-derived regulation - a decision now before the California Supreme Court on FTB's petition for review. The episode closes with a lightly competitive debate over World Cup allegiances, with both Nikki and John ultimately landing on Mexico.